Will 2012 bikes be cheaper given the strong $A?

[slowK]

Thanks for the replies - so much of economics is human behaviour analysis.

Well, went looking today at a couple of shops; one said 2012 bikes (Giants) wiil be about 5% cheaper, another Scott dealer also said prices will be down for 2012. Some good deals around on 2011 stock pending availability.

 

[flamin'trek]

So the new models are cheaper? The masses will be satisfied, they've been told in the media they are getting ripped off, retailers will adjust prices down a tad 'everyone's happy ... prices down, margins still high. Joe public has been too well trained.

Those who know will move to online and get it at a lower price.

They say that wages are lower in the US (at least min wage), so is the weekly wage to bike cost ratio similar here in Aus? If it's cheaper to buy stuff, like eveything is supposed to be in the US, and they don't earn as much are they effectivly paying the same as us. 1 day wages for a cheap bike, several weeks for a good bike?

 

[jheeno]

I don't think bike shops in Australia will manage to stay open if they were to compete with USA or online prices.
Shops simply won't be able to sell enough bikes to make a profit in comparison to the size of the market in America.

People mention minimum wage in America.
Yes thats true.
A waitever in America will have an hourly rate of $2-4 USD but they make their money in tips.
When I was in Vegas, the shuttle bus driver was getting $20-50 per bus trip. I estimated he makes 4 trips an hour so thats easily $40-200 per hour just on tips.

 

[Sammy86]

Lets get real does anyone belive there is a significant difference in manufacturing cost between Deore and XTR - I am sure XTR is more expensive to manufacture but the difference is certainly less than the difference at the retail end - either in dollar or percentage terms.

Probably a little bit off topic for this thread but what about R&D costs? Do you think they're spending the same time/money on designing these, a hell of a lot more engineering would be going into the XTRs. still I agree that the price difference is huge.

 

[Nmag]

R&D cost?? You can't believe that marketing crap can you?

It's what people are willing to pay.

 

[MARKL]

R&D cost?? You can't believe that marketing crap can you?

I reckon the XTR R&D budget would be dwarfed by the XTR marketing budget!

 

[Tomas]

Lets get real does anyone belive there is a significant difference in manufacturing cost between Deore and XTR - I am sure XTR is more expensive to manufacture but the difference is certainly less than the difference at the retail end - either in dollar or percentage terms.

You'd be surprised. I've certainly been suprised many many times when reviewing costings. Some things (the final few percent which generally makes or breaks the product - surface finishes, the final few grams, tolerances, bla bla) are often the most costly stages of the production. Not uncommon for expensive bits to be low margin either (low volumes = increased cost of production).

Think how many deore cranksets go out vs. XTR? A uber large amount of any production method is the fixed cost in establishing tooling, production lines etc. All im saying is, it's not as simple as 'omg we're getting ripped'. It's really, really not.

 

[pharmaboy]

Think of motor vehicles. Their price has not dropped for imported vehicles, even though exchange rates have improved.

Stability and sustainable pricing levels is an issue that all importers need to consider.

If they drop prices this year, and exchange rates fall next year they will suffer a huge drop in sales due to prices increasing later.

how pricing changes depends mostly on the impact parallel importing has between markets - cars are protected by import and compliance legislation that essentially means only the authorised importer gets to set the price.

bikes however are open slather and we can all import a bike relatively easy. Some manufacturers treat aus customers realtively the same as US customers - eg Giant. others, treat aus customers as opportunities to make a greater margin - eg santa cruz, intense, and to a lesser extent specialised.

Same thing in electronics - sony thinks it is a premium brand in aus, while it competes on price in the US with panasonic - for cars, bmw competes in the US directly with VW, honda etc, here, they price themselves way above these brands and go for perceived value and far greater margins.

So what was my point - its not bikes per se, but individual brands.

having just got back from hawaii, the various worldwide brands relatively rip aussies off by market positioning. either buy said products online overseas or not at all - but buying a crap 3 series bimmer in aus for $100k or $150 for a ralph loren polo shirt, again merely advertises either your stupidity or need for acceptance ;D ;D

Besides best price is always achieved by buying the outgoing model at the right time of year IMO - its the 30% discount that makes the diference not the 5% of exchange rate price reduction.

 

[Sammy86]

Nmag, I've got no reason not to believe it. Do you think companies spend the same time developing low end product vs their high end products?

It may be marketing, development, low batch volume, fancy colours or whaterver else they can spend your money on, but I am confident there there would be higher cost involved for the high end components if you look at the total product lifecycle. It all adds up.

However I still agree with you that they are going to make as much profit as possible, and charge as much as they think we are going to pay.

 

[Shane-O]

In many industries, R&D can run about 6-10% of revenue... I haven't looked, but you can usually pull the numbers out of the financials in the annual report for public companies. I'm sure you could dig this up in the investors section of some of the larger bike bits co's. You'll also find marketing expenses, but sometimes locked into MG&A which includes lots of other costs.

I'd expect both value add and a small cost reduction in 2012. The domestic market in places like the US has taken a pounding with high unemployment and lower disposable income - some of that will flow into Aus to retain revenue, but I'm sure they'll also try and hold margins to make up for lost profit elsewhere.

Having said all that... you never know what the future may hold. If you can afford it, go buy something cool and enjoy a few more months of riding it!

S.

 

[Bjorn]

There is one thing that I haven't seen mentioned in terms of high end vs low end product costs. With Shimano, this years XTR is next updates XT. So if Shimano are recouping all of their R&D on a given XTR part within the life cycle of the model then by the time it is released as an XT part they can sell it for far less as there is next to zero R&D cost involved. Of course, as mentioned by others, there is a smaller volume of high end sold, so the R&D cost is higher per unit.
I'd also agree with the people who are saying that when I buy XTR I'm shelling out for perceived value as well as actual value. There is a marketing theory that if you sell stuff cheap, people wont believe it's of as higher quality as its more expensive competitor.
I think the price we pay would reflect all of these factors.
Of course none of this bears on why we have such high prices compared to some other markets. I'd say that a lot of that comes down to unit price to the distributor. Big markets get a cheaper unit price than small markets. This is an operating procedure that will hopefully change as the world continues to change.

 

[Shane-O]

High end parts rely on margin... low volume, high margin. Low(er) end has to rely on volume... high volume, lower margin (like FMCG's). R&D is a balance of innovaion and fast/easy/cheap derivatives. R&D is not always about innovation - its also about reducing costs by improving processes, and DFM/DFA (design for manufacture, design for assembly). Volume is king when it comes to cost - no 2 ways about it.

Too much wine, too much bla bla... sorry.

S.

 

[aceblueheeler1992]

why would they be cheaper. Small market, people are already buying their products (beg the question of what there revenue/units sold are this year compared to other years, excluding GFC era as that is obvious) so why would they lower if they are selling. Unless they drop the price enough to warranty a fair few increase % of bike sales it wouldn't benefit them at all. Sure some people are unhappy, but yet there products still get sold..

 

[aceblueheeler1992]

Better yet, it doesn't matter about unit sales (there are exclusions/exceptions), I will give an example. Car prices. Look over the years, have car prices gotten cheaper? No, if anything stayed same or increased. xr6, hilux, other run of the mills all remained there fairly expected rrp over the years, even in GFC. apart from gfc era, sales have probably been the same. If it's not broke , why fix it?

 

[Shane-O]

Car imports and taxes are highly regulated... these days, you can buy a bike over the internet and have it arrive at your door in the post a few weeks later... and it gets easier and easier to do this every day (free shipping etc).

Retail are struggling in Aus. People are saving way more than ever, and not spending as much. All retail are dropping prices in an effort to maintain prices - its price elasticity. The lower the price, the more you sell.

These 2 factors, on top of the stronger $A, will likely result in achieved prices dropping slightly on average. I doubt it will be as dramatic as many people are hoping though.

S.

Oh - except if you're buying a carbon frame or components... better buy them now otherwise Julia might put the prices up soon!!

 

[Nmag]

Our goal is to pick the item and price we are willing to pay for. My last rear derailleur (XTR) was about $130 delivered in box (bargain). But, still I think XT is a better price (i think they were $70) for what you get, the price for XTR does really jump. But that's the fun of it, we have the choice.

We do have a choice, and I'm happy for that!!

 

[Ivan]

Oh - except if you're buying a carbon frame or components... better buy them now otherwise Julia might put the prices up soon!!

at $20 bucks per ton, I don't think it's going to add much onto a 3kg Carbon frame. In fact, you should get some tax back for participating in carbon capture and storage.

 

[Shane-O]

at $20 bucks per ton, I don't think it's going to add much onto a 3kg Carbon frame. In fact, you should get some tax back for participating in carbon capture and storage.

Oh yea - now you're talkin! Maybe we could get some carbon offset rebates..??

 

[rearviewmirror]

I send my AUD where it has the most buying power. Sometimes the US, but mostly the UK. If I can import my products from the US for almost half the price of the local retailers then I don't feel too sorry for the local distributors or shops.

 

[Australia]

All retail are dropping prices in an effort to maintain prices - its price elasticity. The lower the price, the more you sell.

I'm going to put it out there and say price elasticity doesn't mean whatever you think it means.