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Groupset tiers a scam?

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Groupset tiers a scam?

Old 09-11-19, 11:01 AM
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Originally Posted by noodle soup
At the retail level, the profit margin is much smaller on high-end bikes and components.
As an example, a few weeks ago a kid bought a $300 GT mountain bike with disc brakes, His front wheel got taco-ed in a wreck, and he needed to replace the wheel.

https://activewheel.myshopify.com/pr...SABEgJMHfD_BwE

Retail on the wheel was $108 from Dorel. Dealer cost was $23

We replaced the wheel for no charge.
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Old 09-11-19, 11:05 AM
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Originally Posted by Dean V
I guess calling in a "marketing strategy" would be a more diplomatic thing to call it.
But I just can't see the difference in value or cost of production between say a 105 and Dura Ace groupset.
Sure when you start using Ti (cassettes) or carbon it will cost more to produce, but overall with modern machinery and production methods I can't really see much of a difference.
Dura Ace is clearly not designed or intended for peasants
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Old 09-11-19, 11:13 AM
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Originally Posted by Chi_Z
Dura Ace is clearly not designed or intended for peasants
Right.

No ordinary bottles with Dura Ace. Bidons only.

And Rapha, although Castelli is permitted on weekdays after Labor Day.

It's about self respect.


-Tim-
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Old 09-11-19, 11:17 AM
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Originally Posted by RShantz
Porsche v. Toyota
I need nothing "better" than Toyota and 105.
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Old 09-11-19, 02:44 PM
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Originally Posted by Dean V
I just can't see the difference in value or cost of production between say a 105 and Dura Ace groupset.
This is a good thing! If you can't tell the difference you can happily stick with the lower level components and save lots of $ over your cycling years.
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Old 09-11-19, 03:31 PM
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Originally Posted by shelbyfv
This is a good thing! If you can't tell the difference you can happily stick with the lower level components and save lots of $ over your cycling years.
I am not saying there is no difference, but that I am sure that a DA groupset does not cost Shimano 3 or 4x the amount to produce than 105.
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Old 09-11-19, 03:51 PM
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Originally Posted by noodle soup
At the retail level, the profit margin is much smaller on high-end bikes and components.
Yeah, but retail isn't all that relevant here - I don't suppose anyone has inside knowledge on the profit margins at the wholesale level...
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Old 09-11-19, 03:55 PM
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Originally Posted by Dean V
I am not saying there is no difference, but that I am sure that a DA groupset does not cost Shimano 3 or 4x the amount to produce than 105.
You lack an understanding of economics then. The goal is not to sell an equal number each groupset.
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Old 09-11-19, 04:04 PM
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Originally Posted by noodle soup
At the retail level, the profit margin is much smaller on high-end bikes and components.
Between the two of us, you are in the know more, so not challenging- just clarifying here...

So a $12000 bike has a smaller margin than a $450 bike?

An entry level Trek fx1 has a higher margin than a Trek SLR(pick one)?

If the fx1 costs $300 and sells for $450, the margin is 33%.
So an SLR must cost over $8k to the dealer.


But even then, it seems a bit like a useless number because even if the margin is higher on cheaper bikes, the operating costs for each are the same(rent, salary, utilities, etc). Add all the carrying costs in for both and it's a different story, right?

Just surprising.
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Old 09-11-19, 04:07 PM
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Originally Posted by noodle soup
At the retail level, the profit margin is much smaller on high-end bikes and components.
Just curious, how does the gross profit compare to the gross margin for these examples? They take up the same amount of shelf space (in theory).
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Old 09-11-19, 04:38 PM
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Originally Posted by Kimmo
Yeah, but retail isn't all that relevant here - I don't suppose anyone has inside knowledge on the profit margins at the wholesale level...
That’s correct, and I suspect that no one here knows the profit margins of the big 3 component manufacturers.
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Old 09-11-19, 04:40 PM
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I don't think group set tiers are a scam. I know everytime I look at the cost of a new high end group set, it brings real tears to my eyes. I also have to get a tissue and blow my nose. Nothing scamy about that.
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Old 09-11-19, 06:03 PM
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Originally Posted by seedsbelize
I need nothing "better" than Toyota and 105.
Hopefully I didn't insult you or anyone - not my intention. I just meant his question is similar to any comparison between mid-level and top tier items. Some will see the benefit of the top-tier stuff while others will not.
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Old 09-11-19, 06:23 PM
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Originally Posted by RShantz
Hopefully I didn't insult you or anyone - not my intention. I just meant his question is similar to any comparison between mid-level and top tier items. Some will see the benefit of the top-tier stuff while others will not.
I don't think you offended anyone.

I can't afford to drive a Ferrari, but I can afford Dura Ace Di2.

If I could afford a Ferrari, I'd probably drive a Toyota, and have an insane collection of bikes.
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Old 09-14-19, 05:38 AM
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Originally Posted by mstateglfr
I own and have ridden 105 from the early 90s, early 00s, late 00s, and mid-late 10s.
I also own and have ridden Ultegra from the late 90s when it was 600tricolor, early 90s when it was 600Ultegra, late 90s when it was 9sp, and current late 10s.

I cant figure how either is more or less durable than the other. Both seem to work perfectly fine in all iterations thru the years. The 105 certainly seems to have the longevity of Ultegra, and even if it isnt exactly the same, it lasts as long as many riders will ever want(the life of their bike).

The internet is full of examples of people using 105 for decades without issue.
.
Well, no, it's not. Parts don't last decades unless those decades are spent riding 100 miles a year.

I haven't had 105 parts make it past the 15,000 mile mark, myself, whereas I've had multiple groups of Ultegra (shifters and derailleurs) go well into the upper 20s.

So aside from your hyperbole, I guess your post regresses to the point of your anecdote differing from mine. Neat.
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Old 09-14-19, 11:20 AM
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Originally Posted by rubiksoval
So aside from your hyperbole, I guess your post regresses to the point of your anecdote differing from mine. Neat.
Unless there is some longterm study, all of this is one person's observations differ from another person's observations.
Neat.
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Old 09-14-19, 12:11 PM
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Originally Posted by rubiksoval
Well, no, it's not. Parts don't last decades unless those decades are spent riding 100 miles a year.

I haven't had 105 parts make it past the 15,000 mile mark, myself, whereas I've had multiple groups of Ultegra (shifters and derailleurs) go well into the upper 20s.

So aside from your hyperbole, I guess your post regresses to the point of your anecdote differing from mine. Neat.
To add an anecdote, my 105 has 21,509 miles since I started recording, with a few thousand miles earlier. I've replaced chains, cassettes, cables and probably prematurely, one chain ring. At a rate of more than 100 miles a year, though less than many BFers. I don't see any indications that this same 105 won't keep working for another 20,000+ miles.
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Old 09-14-19, 12:18 PM
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Originally Posted by Athens80
To add an anecdote, my 105 has 21,509 miles since I started recording, with a few thousand miles earlier. I've replaced chains, cassettes, cables and probably prematurely, one chain ring. At a rate of more than 100 miles a year, though less than many BFers. I don't see any indications that this same 105 won't keep working for another 20,000+ miles.
Confused here.. you're saying you've had to replace half of your groupset, but you don't any indications it won't keep working for another 20k miles? IOW parts do wear out
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Old 09-14-19, 12:42 PM
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Originally Posted by Sy Reene
Confused here.. you're saying you've had to replace half of your groupset, but you don't any indications it won't keep working for another 20k miles? IOW parts do wear out
You're aware that chains and cassettes are consumables, like cables and bar tape. They have to be replaced on every bike with every groupset. (Some of the chains were DuraAce, fwiw. I just bought what was cheapest at the time.) They are also not half of a groupset anyway, certainly not in terms of cost.

The 105 shifters and derailleurs and crankset are all fine. I did switch the Tektro brakes for Ultegra, and they're fine too. None show any problems from wear.
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Old 09-14-19, 01:21 PM
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Originally Posted by Sy Reene
Just curious, how does the gross profit compare to the gross margin for these examples? They take up the same amount of shelf space (in theory).
That's always a fun armchair exercise. In reality stocking any high dollar component is a fools errand.

A friend and customer of mine has been looking at new high end bikes. S-Works or Moots is his current dilemma. In the shop I just do service so I could care less which is why he is always asking me for an opinion. "You know I have told the guy there that I am buying one or the other and honestly it seems like he couldn't care less. He seems to hate spending time talking to me and would much rather go talk to the family that just came in looking at $800 bikes."

"That's because those customers will convert to a sale with much less work than hand holding your handwringing over your bike and the margins on those $800 bikes result in an actual money to the bottom line. "

High dollar parts in this industry are little more than an extremely risky money moving activity with little to no net gain.
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Old 09-14-19, 01:27 PM
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Whats more the high dollar parts are only there to be attractive to a certain customer and that customer is really just going to buy them online.

The real customers that do want to buy those kind of things and they don't want to ever do any work themselves can be easily serviced within a day as almost any part is 1 day away via a wealth of distributor options.
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Old 09-14-19, 03:29 PM
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Originally Posted by Psimet2001
Whats more the high dollar parts are only there to be attractive to a certain customer and that customer is really just going to buy them online.

The real customers that do want to buy those kind of things and they don't want to ever do any work themselves can be easily serviced within a day as almost any part is 1 day away via a wealth of distributor options.
Is this still the case with SRAM and now Shimano actually instituting more effective global price controls? I would also there really aren't that many folks interested in actually putting all the parts on the bike, so if you want to upgrade or build a bike, there might be somewhat more recent uptake in volume of people doing this more fully thru the LBS that sells the frameset brand they want?
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Old 09-16-19, 10:19 AM
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Originally Posted by Sy Reene
Is this still the case with SRAM and now Shimano actually instituting more effective global price controls? I would also there really aren't that many folks interested in actually putting all the parts on the bike, so if you want to upgrade or build a bike, there might be somewhat more recent uptake in volume of people doing this more fully thru the LBS that sells the frameset brand they want?
Not sure exactly what you're asking or saying. In our shop more people are buying high end components through the shop instead of online BUT due to the immense number of variants now almost no one is stocking anything in the shop. Everything is ordered for the customer and delivered next day.

There's just no reason to ever put anything high dollar on the shelf. If someone wants it I order and deliver next day. If they don't like that because they can do it themselves then so be it. I understand and it doesn't hurt my feelings. I didn't get into this business to try and get every component sale in this area. Even with better pricing controls the margins are still not really worth it. Buy it yourself and bring it to me and I will make money on the install. That's where my expertise is.

Most shops aren't trying to "compete" in that regard anymore. I had another shop owner in here the other day. He was going on about a new series done by Vosper over at BRAIN. "Rob, I decided right then and there that enough was enough. I stopped caring about who was selling what for what and went around and re-priced everything in the shop to be what I needed it to be in order to do well as a business. It's the best thing I ever did. The real customers haven't even noticed a difference and some have told me they are happy to see me selling things at prices I need in order to survive. Fact is people are going to buy from you because they want you around or they aren't. You can't fight it either way."

Another great example: tires. I sell the cheapest level of tire and then top end tires. On cheap tires I sell piles. someone comes in with a 50 yr old Schwinn and they need new tires. Each tire is roughly a $20 bill. No one even remote bats an eye. That's a basic unit of commerce - $20 bill. Margins on that are roughly 90%. Meanwhile someone comes in for the latest and greatest "Fz12000" tire and I'm going to net out a few bucks or about 10%-15% tops. What's more - those customers buying the nice tire are the ones that are going to hang in my shop for 2 hours talking to me about gear and riding. Taking all of the information they can from my brain and keeping me from really doing anything else. While i like those people and they are my people it doesn't make for a good business model. It starts to begin to describe why non of us care much about nailing that top end component sale. It's not about that.

So back to the thread: is there much of a difference in tiers? Yes. Saying there isn't just kind of ignores the reality. The real question is whether you notice enough of a difference to "justify" the price difference to yourself. To state there is no difference is incorrect though.

There is nothing better than riding really nice DuraAce that is tuned well. Is Ultegra great? Absolutely. Can 105 get the job done? Of course. With SRAM it gets muddier. Red - meh. Force? Sure. Rival? in most cases. Apex.....like Tiagra and Ultegra had a baby. There's just not much of a functional difference in the SRAM lineup at all. Big weight and material differences though. Sometimes huge differences.
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Old 09-16-19, 11:26 AM
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Originally Posted by RShantz
Porsche v. Toyota
Exactly. The Toyota is cheaper, more reliable, and has higher resale value.

Last edited by djs42; 09-16-19 at 11:36 AM.
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Old 09-16-19, 11:41 AM
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Originally Posted by noodle soup
That's not how it works.
I also doubt the 'trickle down'. Ultegra has never looked like D-A, no matter how long you wait.
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