I agree that what it costs to make a bicycle, from raw materials and labour is a small fraction of what the customer pays, but are you talking about working at a local bike shop? Who has to make money over the distributor. Or are you talking about working at a distributor who has to make money over the manufacturer, or are you talking about working for the manufacturer who has to make money over the raw materials, R&D and labour?
It's fact to say that not all shops get goods at the same cost price. Some shops which don't buy in bulk (in order to reach maximum discounts) pay more for goods at cost than what internet stores like Chain Reaction Cycles sell at.
Very high volumes is the obstruction. You need a lot of capital to buy in bulk and there's a lot more risk in doing so (as opposed to ordering goods when a customer needs them).
If a shop orders just one XTR derailleur from a local supplier (ie: they are not parallel importing) then that shop will not get that derailleur cheaper than the shop who buys a truck load of XTR derailleurs. It would be fair to say then that that shop which doesn't stock a lot of goods can't sell stuff as cheap as the shop which has a large margin to play with.
I thought that would have been common sense? Bunnings for example have nothing but huge buying power, big profit margins allow them to reduce prices and move a lot of stock quickly. That killed a lot of smaller hardware chain stores. Maybe the bike shop you work at also has a lot of buying power, which gives them a great discount rate which enables them to have such a huge profit margin over other shops which have a much smaller profit margin?
Internet stores also do not pay rent, or service bicycles. I love internet stores, because they're so cheap, but I also put a lot of value in having a local bike store too.
No shit - hence why I'm wondering why nobody (except online shops, which realistically only cater to the high-end anyway) has bothered creating a supermarket-chain style thing, where stuff is sold cheap in huge quantities with LOW MARKUP. Melbourne Bicycle Centre were the closest thing to this that I knew of. Of course the shop has to make money, but from the consumer's point of view, I don't CARE how much money the shop makes, I just want it as cheap as possible. The fact is that most shops are marking things up about 100% (on average) over what they paid for them, and the distributors anywhere from 20% to 100% over what they paid. This means that what it costs to land the item is often between about 25-40% of what the consumer pays - and you wonder why it's so cheap to buy online? The extra 60-75% of the retail cost that you're paying for is going to the transportation and storage of the stuff by the distributors and retail outlets. Some items (ie complete bikes) require assembly, but most things are sold exactly how they come out of the box. If you actually know what you want, the majority of the cost is what manufacturing types would call "non-value-adding". You're paying more, but you're not receiving more for your money. Many of us, particularly purchasers of high end gear, just don't need someone else holding our hand when it comes to picking out a new cassette or installing the thing, so having someone around to do it anyway is just paying someone to perform a redundant task. It's inefficient and wasteful, hence why internet shops that don't offer you that advice or that pretty merchandising layout or anything but the product you want and a means to transport it, manage to cut back the costs. I'm just not sure why nobody else has taken that aspect to a "live" medium, ie in-store retailing.
Now I know half a dozen distributors are gonna jump in here and go "hey we don't mark our stuff up that much" - the high end stuff never sees as much markup as the average everyday bikes + accessories, and of course the markup varies significantly from distributor to distributor. I also realise most of them aren't making huge money, but then that's your choice of business practices, not mine.
Where I work has very high margins on some stuff, and typical (ie also still high IMO) margins on others. Some stuff we do buy in bulk, some stuff we don't (esp typical customer orders). Not everything is eligible for bulk discounts anyway.
Also, the notion that internet stores don't pay rent is pretty hilarious. Do they sit out in the middle of the ocean or something? Everyone pays rent.
Goldcross, Anaconda, and Bike Hubs are sort of along those lines... but all three of those sell (among other things) exclusive/home brands which are imported specifically for them and as such, are bought in bulk and have higher profit margins moreso than lower prices. Goldcross are cheap, but they're not THAT cheap.
And its all somewhat off the point that this thread is nothing but an Advertisement, unpaid, and growing rapidly in exposure.
True - that thread was closed and this somewhat productive discussion split from it.
