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  1. #1
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    Dealer Cost vs Retail Price

    How much mark up is there on a typical upper end bike? Curious, I know the dealers need to keep the lights on but I'm just wondering how much they really make on a bike deal. My guess is 30% am I close?

  2. #2
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    You don't want to know.

    (I don't know)
    Jason
    Disclaimer: www.paramountsports.net

  3. #3
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    Margins are pretty low on bikes. 20% is pretty much the average on high-end bikes. The margin is much, much higher at the low-end. A bike shop might make as much from the sale of an entry-level mtb as from a high-end road bike. The difference is that the guy who buys the roadie will also buy the $150 helmet, the $300 pedals, the $90 jersey, $150 shorts, and will be in the shop again in five months for a pair of $80 tires -- all of which carry mich higher margins than the actual bike.

    the best way to negotiate when buying a bike is not to get a cut on the price of the bike, but to haggle over the prices of all the other little things...

  4. #4
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    With the exception of complete bicycles, retail is typically based on a 100% markup. That $80 dollar tire cost the shop $40.

    Most products in a shop come from distrubters (QBS, BTI, etc.), which sell at a markup from what they pay to the manufacturer. I have no idea what this margin is, but A wild guess is 20%. (more volume requires lower profit per unit...)

    When I worked at Bike shops (1998-2004) we were able to "Employee Purchase" directly from many manufacturers at a substantial discount below wholesale. This meant parts would cost us about 30% of retail. Sometimes less. Those were the days!

    This being said, don't think shop owners are getting rich. They operate in a seasonal atmosphere with a lot of overhead costs. Especially with competition from online retailers, we should feel lucky that brick and mortar bike shops still exist! It's a rough industry and many do it for the love, not the money.

    As said above, any haggling would best be left to discounted accessories at time of bicycle purchase.

    Support your LBS when you can please!

  5. #5
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    Quote Originally Posted by Pritchett View Post
    As said above, any haggling would best be left to discounted accessories at time of bicycle purchase.
    Definitely agree with this. Most of the guys I have seen and worked with in bike stores are there for the love of cycling and the lifestyle. Certainly not to get rich!

    Quote Originally Posted by Pritchett View Post
    Support your LBS when you can please!
    Look after them and they will look after you. Especially when it comes to emergencies or labour.

  6. #6
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    i talked to my lbs guy that said he was in about $975 for a bike that retails for $1600. He would have had it marked closer to $1400 though

  7. #7
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    Quote Originally Posted by Sean831 View Post
    i talked to my lbs guy that said he was in about $975 for a bike that retails for $1600. He would have had it marked closer to $1400 though
    That's a 64% markup. Most OEM's give price breaks to shops that move more product. A shop that sells thousands of X brands bike's will pay slightly less for them than a smaller shop that moves less than a hundred of X brands bikes per year. I can't remember if this is based on number of bikes, or total $$$ sales volume.

    Either way, the largest margin I've seen available for complete bikes was 40%. Times may have changed, or I may be remembering incorrectly.

    Even at 64% markup, after overhead costs are taken into account, that's very little money.

    Our small shop required around $1300 in sales a day to break even. That doesn't sound like much, but it is.

    Where shops make the most money is in service and repair. The guy behind the counter probably makes less than $10/Hr... but he can change a tube in 3 minutes and charge you $5 to $13. (yes... people will pay $13 dollars for you to swap a tube...)

    That's how shops survive. Thank god for the lazy/incompetent.

  8. #8
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    Quote Originally Posted by Sean831 View Post
    ...He would have had it marked closer to $1400 though
    Also, I remember that some OEM's will not allow a shop to display a price lower than the MSRP on current model year bikes. This is done to keep things fair for smaller shops.

  9. #9
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    Quote Originally Posted by Pritchett View Post
    Where shops make the most money is in service and repair. The guy behind the counter probably makes less than $10/Hr... but he can change a tube in 3 minutes and charge you $5 to $13. (yes... people will pay $13 dollars for you to swap a tube...)

    That's how shops survive. Thank god for the lazy/incompetent.
    I was always amazed at the sheer number of lazy people out there! Or too afraid to get their hands dirty. Either way, we made quite a bit of money that way!

  10. #10
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    Well...

    The rrp on my local shop's bikes is roughly 100% across the board (I asked the owner).

    But that's the rrp, bikes hardly ever sell for full price these days. Even latest models seem to need something off the recommended price to shift.

    People like buying on finance and credit cards now too, so quite often a bike sold at 'full price' has great chunks taken out of the mark up right from the moment of sale. Bikes sold on interest free finance deals, percentage gets taken by the finance company and then the shop might not see most of the money for a month (or 3, 6... year).

    People who walk in with cash in hand tend to get discounts too. They might get as much as 10-15% off a brand new bike, but it's cash in the till and product out the door. Quite often a cash sale with a hefty discount works out more profitable than someone paying full price but on 24months finance (and you can forget about discounts when mentioning the F word).

    Once the dust settles, the actual mark up he gets varies from close to 100% on the little kids bikes, to 60-40% on proper bikes with the narrower end of that centred on the most expensive models.

    God it's complicated selling stuff to people.

  11. #11
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    Quote Originally Posted by Fix the Spade View Post
    Well...

    The rrp on my local shop's bikes is roughly 100% across the board (I asked the owner).

    But that's the rrp, bikes hardly ever sell for full price these days. Even latest models seem to need something off the recommended price to shift.

    People like buying on finance and credit cards now too, so quite often a bike sold at 'full price' has great chunks taken out of the mark up right from the moment of sale. Bikes sold on interest free finance deals, percentage gets taken by the finance company and then the shop might not see most of the money for a month (or 3, 6... year).

    People who walk in with cash in hand tend to get discounts too. They might get as much as 10-15% off a brand new bike, but it's cash in the till and product out the door. Quite often a cash sale with a hefty discount works out more profitable than someone paying full price but on 24months finance (and you can forget about discounts when mentioning the F word).

    Once the dust settles, the actual mark up he gets varies from close to 100% on the little kids bikes, to 60-40% on proper bikes with the narrower end of that centred on the most expensive models.

    God it's complicated selling stuff to people.
    Exactly, I don't think I've ever paid full retail for the bikes I've got through an LBS, usually about 25% less as I pay cash...

  12. #12
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    Support your LBS. Please. In my area, these are the guys sponsoring races, supporting advocacy groups, providing assistance with MTB 101 classes, they organize group rides, etc. The prices they have are sometimes in the park with online prices and other times they are higher but I pay them. Why? Because they are a small shop with big passion. Actually, in my area it is true that all of the bike shops give back and help the passion grow. I support them because they support us.

    All the fluffy stuff aside, the mark up here varies depending on demand. On parts and accessories, however, it seems to be almost always 100%. Like mentioned by someone else. It is in the parts and accessories categories that the LBS is truly making money. On some mid-level to higher end bikes I've noticed that the cost of the components was much more than the retail price of the whole bike.

  13. #13
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    Do most lbs haggle on prices? The two I have been to seemed like they were set on price and I didn't even think about offering a lower price.
    Last edited by screaminz2002; 08-05-2011 at 05:43 AM.

  14. #14
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    Anyone who has this knowledge and shares it openly on an online forum is an @$$hole. Shame on you people. Independent bike shops have a hard enough time keeping the doors open with all the online retailers these days. Don't make their job harder.

  15. #15
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    Quote Originally Posted by Mr. Blonde View Post
    Anyone who has this knowledge and shares it openly on an online forum is an @$$hole. Shame on you people. Independent bike shops have a hard enough time keeping the doors open with all the online retailers these days. Don't make their job harder.
    I can do simple math. Please don't turn this into some sort of a personal issue with me but I contend that what you want to remain concealed is obvious to most. It doesn't take a genius to know that the wheels I was charged $260 were marked up 62.5% since I found the same online for about $160. Did I care? No. Why? The service rocks! And, as I stated before, they fuel the local passion.

    But I agree that our shops have a hard time making sales... well, that's why my favorite shop is moving to Main Street... We have a large MTB community. We have a large trail system in our area and are surrounded by other great trail systems. The boutique like shops that don't open up to the community and are simply trying to sell high dollar bikes without real service are the ones being hit hard by the online retailers. Why? Because we can do without the high and mighty attitude and can bypass the snob that says you must have a Fox fork because a Reba is just a wanna be...

    Anyways, I understand what you are saying and I respect my local shops. That is why I have not posted their names. I have gotten the same review of the local shops from most of the people I talk to. I make it a point for my friends, family, and coworkers to visit all the shops and find out where they want to spend their money and why. I try to educate them when they return to me and say, "I saw this online cheaper." I have not had one person buy a bike online. I have had almost all of my friends and riding buddies support their LBS even though we are all able to repair our own bikes. I posted what I posted earlier in an attempt to help people make the connection between the price they pay for goods and the service they receive in addition to fueling the local economy and biking community.

    Of course, being that common sense isn't common, it is clear that some will simply take the fact that they are paying more for certain things at their LBS and spend their money online. So be it. Have you noticed how the advertisements on this very forum are usually listing prices that our LBSs cannot even come close to in order to make money? If I were to have purchased everything I did over the last year from the online shops listed on MTBr.com and not from my LBS I would be about $300-400 richer right now. But I am not. Again, because I appreciate what a LBS does for the community, what they provide me with, and the local economy.

    Sincerely,

    Ricardo

    P.S. I appreciate the fervor with which you responded and I share in your intensity when it comes to defending my local bike shops. I make it a point to make an argument any time I hear someone recommend that they go online and purchase this or that.

  16. #16
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    Quote Originally Posted by Mr. Blonde View Post
    Anyone who has this knowledge and shares it openly on an online forum is an @$$hole. Shame on you people. Independent bike shops have a hard enough time keeping the doors open with all the online retailers these days. Don't make their job harder.
    One word comes to mind....hypocrite. I'm sure when you bought your last car, camera, ipod, computer, etc. that you didn't even consider doing research on the 'net.' Just because one knows what the actual costs to products are does not mean that you can find a store to sell it at the price you want.

    I'm not in the retail industry but I know a LOT about it and how it works. I still support my LBS however I can. Very rarely do I buy something online if my LBS has it. I do purchase clothing online because my shop does not stock some brands I prefer. I've referred many, many people to them. Last month that resulted in over 7K in sales that they would not have seen.

  17. #17
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    Quote Originally Posted by Mr. Blonde View Post
    Anyone who has this knowledge and shares it openly on an online forum is an @$$hole. Shame on you people. Independent bike shops have a hard enough time keeping the doors open with all the online retailers these days. Don't make their job harder.
    Why is it my responsibility to keep anyone's doors open?

  18. #18
    mikeb
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    Quote Originally Posted by Dangeruss View Post
    Margins are pretty low on bikes. 20% is pretty much the average on high-end bikes. The margin is much, much higher at the low-end. A bike shop might make as much from the sale of an entry-level mtb as from a high-end road bike. The difference is that the guy who buys the roadie will also buy the $150 helmet, the $300 pedals, the $90 jersey, $150 shorts, and will be in the shop again in five months for a pair of $80 tires -- all of which carry mich higher margins than the actual bike.

    the best way to negotiate when buying a bike is not to get a cut on the price of the bike, but to haggle over the prices of all the other little things...
    good god in heaven, i've been out of the loop that long? three hundred dollar pedals? are the bearings titanium too?

  19. #19
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    Quote Originally Posted by 2Slo4U View Post
    One word comes to mind....hypocrite. I'm sure when you bought your last car, camera, ipod, computer, etc. that you didn't even consider doing research on the 'net.' Just because one knows what the actual costs to products are does not mean that you can find a store to sell it at the price you want.

    I know a LOT about the retail industry and I still support my LBS however I can. Very rarely do I buy something online if my LBS has it. I do purchase clothing online because my shop does not stock some brands I prefer. I've referred many, many people to them. Last month that resulted in over 7K in sales that they would not have seen.
    What? What does doing research before a purchase have to do with openly publishing dealer costs on an open forum? The two are in no way analogous. You clearly have no idea what people do with this information. I have watched groups of roadies with large influence in the local scene come in, knowing cost, and literally strong arm small shops into giving them huge deals. People knowing cost is one of the biggest bs issues bike shops deal with on a regular basis. Also: the little assumption about online prices representing cost is WAYYYYY off base. Online dealers often get distributor pricing, part out completes, and buy in massive quanitities. To top it off they often lose money on some of their deep sales. It's all about economics of scale. The online price might be half of what the ibd pays. I live a city with a VERY strong local buying ethic. I eat at local restaurants and buy local food for 95% of my meals these days. I want bike parts I go into my favorite shop (Carolina Fatz), tell them what I want, wait patiently, make their job as easy as possible, and plop down the plastic without even discussing the exact total. Maybe even bring some good beers. Know what happens? I get treated VERY fairly. If you don't then your shop sucks.

  20. #20
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    "I have watched groups of roadies with large influence in the local scene come in, knowing cost, and literally strong arm small shops into giving them huge deals."

    these are the real a$$holes.

  21. #21
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    "I have watched groups of roadies with large influence in the local scene come in, knowing cost, and literally strong arm small shops into giving them huge deals."

    these are the real a$$holes.

  22. #22
    mikeb
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    "I have watched groups of roadies with large influence in the local scene come in, knowing cost, and literally strong arm small shops into giving them huge deals."

    these are the real a$$holes.

  23. #23
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    Quote Originally Posted by rebel1916 View Post
    Why is it my responsibility to keep anyone's doors open?
    If this is the way you think don't ever walk through the door.

    No it's not your responsibility to keep somebody in business. But that doesn't mean you should work them over on price or abuse there knowledge and service. If you want to buy stuff dirt cheap on line that's fine but ask the black hole that is the internet your questions and don't even think about walking into your LBS when your looking for a warranty.

  24. #24
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    Quote Originally Posted by Mr. Blonde View Post
    Anyone who has this knowledge and shares it openly on an online forum is an @$$hole.
    why?

    Plenty of other industries operate successfully with this type of transparency. Sales of automobiles, gasoline, many other commodities and the entire lending industry for example. In fact, any publicly traded corporation is required to operate on this principle.

    Are the blogs who tear apart a new Apple computer, then estimate the cost of the components to post online a$$holes? Do you think Steve jobs loses any sleep over these activities? No. Because anyone who isn't an idiot realizes that many other factors contribute to the actual profit made from any sale. Manufacturers invest in overhead, R&D, Engineering, infrastructure, etc. Retailers invest in various operating costs, including rent, utilities, marketing, etc.

  25. #25
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    Quote Originally Posted by Mr. Blonde View Post
    Know what happens? I get treated VERY fairly. If you don't then your shop sucks.
    How do you know you're being treated fairly unless you have some idea of the dealer cost? Without that, you have no reference point to compare against. Kinda goes against the "don't disclose the dealer cost" argument.
    Contact information: http://about.me/marpilli

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