When LBS margin is too much to support it

[paulney]

This will probably get flamed to hell, but still. I went to a very reputable LBS, which has been mentioned numerous times on these boards. Wasn't looking for anything specific, but never been there before, so wanted to just check it out.

The shop is indeed very nice, and I've read on the boards that it's famous for parts. I asked them for their price on XT brakes. Their margin is $40-50 depending on the best deal from Jensen's. Hmmm.... Then I try a few shorts on, and like one particular pair. Guess what? Their margin is again $40-45.

I understand they need to pay higher rent fees, pay their sales people, maintain inventory, yada-yada. But isn't a $40-50 margin too much?

[rideit]

Uhh, no. Margins on average for hard goods are 40% above wholesale. So that would depend on their purchasing price, ultimately.
What was their final price?

[paulney]

Uhh, no. Margins on average for hard goods are 40% above wholesale. So that would depend on their purchasing price, ultimately.
What was their final price?

$170-ish for the XT. Shorts were around $109.

[snowdrifter]

Seems normal on the XT Brakes, LBS buys at cost, sells at retail/msrp.

[rideit]

Clothing margins are typically keystone, so yeah, that is about right.
What are you determining to be their 'margin'? do you know their wholesale costs?
And can you calculate their overhead?
I am not sure that you are using the term correctly.

Just so you know, oftentimes shops can't even BUY stuff at wholesale as cheaply as you can find it at the internet distributors.

[paulney]

Clothing margins are typically keystone, so yeah, that is about right.
What are you determining to be their 'margin'? do you know their wholesale costs?
And can you calculate their overhead?
I am not sure that you are using the term correctly.

Probably not. What I meant is that if there's a bulk purchasing cost of X, online retailer sells at X + Y, and LBS sells at X + Y + $40 - $50.

Of course I can't calculate their overhead and wholesale costs, but to the end consumer what's of importance to me is the end price. I can see that the end price is $40-$50 then the best deal available to me.

So, the question is: when is added cost becomes too much to support your LBS.

[chairthruster]

"So, the question is: when is added cost becomes too much to support your LBS. "
My 0.02. I guess for you the answer is about $40 to $50.

For me, building a relationship with and supporting a good LBS is not dictated by single purchases, but rather the long haul. Spending a premium over the best web deal from time to time can help start that relationship, which in my experience can grow pretty quickly into nice discounts, help on a moment's notice for repairs, and free service for occasional drop ins for quick "I'd rather a shop do this with the right tools" tasks like headset install etc. Which in turn leads me to help promote them as a great shop, and buy bikes from them etc.. you can always have a chat with them too, see if they are willing to offer some discount... "any chance giving the price a haircut if I buy these brakes and shorts"? this can always be done in a nice way in my opinion... money doesn't grow on trees for anyone, us or the shop, so its an understandable question.

[rideit]

The problem is that the 'bulk purchasing' price (wholesale) is not a constant in that equation. It depends on other factors, such as quantity ordered.
For example, a small shop might order 10 sets of XT brakes for open stock, Jenson/Pricepoint will/can order 1000.
If you don't value the shop, don't shop there, but understand why they go out of business when/if they do.

[vaked]

nbda.com/articles/want-to-start-a-bike-shop-pg70.htm Is the reality of owning a bike shop.

"the average bike dealer’s profit is less than 5% at year’s end -- about $25,000 for an average size store of $500,000 in annual sales."

Most LBS owners make less than minimum wage when you consider how many hours they work. There are usually better prices online because online sellers can warehouse in cheaper locations and skimp on the customer service. Most LBS are up and running because the owners and employees love what they do, it is definitely not a business you get into for the profits.

[StuLax18]

A lot of the cheaper online stuff is last year models/styles that they pick up in bulk for cheap. That's why you'll see it say they have like 100 pairs of one type of shorts.

[cohenfive]

i expect to pay msrp for parts and soft goods at a lbs. if they charge more than msrp i get ticked and don't buy, but anything at msrp or below seems fair to me. they are entitled to earn a living, and if i don't want to pay the price i buy online...but for some things (mostly parts pertaining to service) i don't mind if i am getting good service.

[StuLax18]

Personally, I hate waiting for stuff to come in the mail, so I will buy things at an LBS since I can get it right then.

[X-FXR]

Did you ask about if I purchased both the part and the shorts if they'd be able to work on the price? I've done this with my local shop and never have been refused.... Bicycle Emporium

[vaked]

Also there is a ethical aspect to helping your LBS. The Shops in my area (Auburn) spend a lot of time grouping volunteers to build/rebuild trails and to plan rides.

I am more than happy to spend a little extra in a shop that takes time to keep MTB'ing legal and safe in my city

[twowheelmotion]

40% is Keystone. Selling a brand for more or less than msrp, is (usually) against the outlines of a dealer contract. So if you run a bike shop, and you decide to sell XT for 10% above cost just beacuse you feel like it, and your competitor is still selling the same part at 40%, your supplier, I.E. Shimano, Continental etc, would not approve.
LBS generally only really make money off repairs (labor) and really the premise for selling parts/clothes is 100% customer service. The idea is: Have the LBS reapair your bike, with the needed parts supplied by the LBS, pick up a pair of shorts while you are there, maybe a tube, whatever. That's the average business model. Figuring in the overhead of a shop in a high rent area is impossible. Maybe the owner of the shop owns the building, or rents from his Grandma, or something. It's a big world, there is lot's of options.

If you factor in the internet, which many will agree, killed the LBS we all used to know and love, you are talking a whole other unregulated (practiaclly) zone of commerce. Most parts are off of old stock that wont be sold. So if you are on online dealer, you bought a bike of less desireable quality and nobody buys the bike, the parts are still worth a good price. Words like "take off" and "OEM" will come into play on the web. I'm sure you get it.

My advice, since I watched my family struggle for years in our family bike shop, is to walk into your shop, and just be nice. Same goes for any shop. If they have never seen you before, intorduce yourself, ask questions even if you already know the answer. I know personally I used to love it when I felt like my knowledge was important. However, most of the time, people that ride, and fix their own bikes could pretty much care less what I had to say.

Much like most times on mtbr... lol.. Carry on-

[dirtvert]

While it's great to score an online deal, it's a hassle when you have problems and/or need to return something (btw- I have a large Uvex helmet that I will let go for cheap!).

But it's invaluable to be able to walk into your LBS that you have a relationship with and get solid prompt service, professional advice, the occasional deal--and probably some local knowledge.
(wink, wink)

[twowheelmotion]

When all else fails. Bring your LBS beer.

When that fails, bring better beer....

[solidfish]

I might be wrong but dont LBS usually make most of their income on services, not goods? I may purchase emergency parts from an LBS, such as a broken spoke or missing skewer, but for regular items, I think most people get it online or at larger retailers. Who doesnt want to save money?

I think one could support their LBS by giving positive feedback to others or online, and of course, by using their services. I rarely see people shopping for clothes or parts at my LBS, but their service waiting list is like 2 weeks out...

[Axe]

I have recently been ordering bits and pieces from Germany. It was like twice cheaper than local retail - before tax and with no import duties. And they usually do not have stuff I need in stock anyway. Than time and gas to actually visit'em.

I do not feel like I am obliged to support any particular business, and since I almost never use LBS service, it is an easy choice where to shop. Whereever it is cheaper.

[dirtvert]

^^ twowheelmotion- I can't believe I forgot to mention beer! It's the lubricant that makes the entire bike industry run smoothly.

[paulney]

Before this spirals into "you are the reason LBS die", just wanted to let you know: I do support my other LBS. I bought 3 bikes there for the whole family, I bring my bike in there for service, I bought various items from them from helmets and glasses to spare tubes and accessories. Clearly I paid more than online, but it wasn't by that much, and I was more than happy to support.

I was just surprised by the difference in prices in this other shop that I've never seen before, but heard so much about.

[twowheelmotion]

I know!! lol..

Well, there goes my concentration for the rest of the day-

mmmmmmm beeeeeer..

[rideit]

I didn't really mean for it to come out like that, exactly.
But...I owned a shop in Driggs, Id, for years, and never made a dime...but I DID spend 15 years building trail when I should have been at the shop.
Now, if only I had gotten paid for all of the trailbuilding....I did get an award this year, though.

[rensho]

I'm with Cohenfive on this one. I want/do support the LBS, but I hate it when they mark the price up above retail. It seems like the majority of my shops do.

[Stalk]

Rule is simple, do business as you please (online or not) as long as it works for you. If LBS is what you looking for all good, but feeling obligated to buy one way or another is just crazy. If LBS lives it means there is customer base that agree with what its doing, or it will die. Either way its owner responsibility to workout model that works in locality not yours.
If you like convenience of LBS but only disagree on price, pick another LBS. If no such exist, you just figured cost of convenience.
It reminds me auto dealer who starts with "We are the best in business", well I typically reply I'm looking for the worst that gives me lowest price. Great thing is to have all choices.