Internet claims another LBS

[Avincent52]

Originally Posted by djg21

Maybe if it Amazon's pricing policy is predatory, i.e., it is selling at unsustainably low margins to drive competitors from the market so it can later capture "monopoly rents" by raising prices once the competition is gone. There is a lot of competition out there, and this would b a difficult theory to prove.

Isn't that Amazon's long game? Why else would they consistently operate at a loss or very close to it despite their huge market share?

A Slate writer argued that Amazon is essentially functioning as a charitable enterprise, with investors subsidizing consumers. When I got a $100 price adjustment on a $200 pair of Sennheiser headphones at Best Buy, that's only a slight exaggeration.

http://www.ibtimes.com/amazon-nearly...m-care-1513368

Many posters have argued that Bethel Cycle should make their profits on wrenching and bike fit and fitness and coffee and trips. Not sure about the coffee, but a look at the website suggests they're doing all the other things at a very high level (like a "camp" in the French Alps.)

IMHO once they stop selling "bikes and the parts that go on them" for a profit they've ceased to be a bike shop.

I've never been to Bethel Cycle, but from looking at the website it does look like the shop owner made a very serious effort and it's sad when that isn't enough to sustain a business.

(This from their website.)

Bethel Cycle has evolved.... In the spring of 2011 we moved into Bethel's historic old train station. The revitalization of the vacant train station has been much more than creating a cool - hip retail space. The reason was deeply rooted in creating a center, a focal point, for the local cycling community. The Bethel "cycling depot" is a place where cyclists are welcome to meet, visit and hang out.

Bethel Cycle is a strong advocate for cycling and the sport. We have a thriving club Bethel Cycle Sport and our staff loves to share the camaraderie of cycling together with our customers. The pinnacle of this is our Bethel Cycle French Alps Camp. We promote and sponsor local rides, races and cycling events.

To be frank, Internet Sales has made it hard for shops like us to survive This past year 4 local shops have shut their doors. I urge you to preserve the tradition and culture of cycling by supporting your local bike shop.

[djg21]

Originally Posted by Avincent52

Isn't that Amazon's long game? Why else would they consistently operate at a loss or very close to it despite their huge market share?

A Slate writer argued that Amazon is essentially functioning as a charitable enterprise, with investors subsidizing consumers. When I got a $100 price adjustment on a $200 pair of Sennheiser headphones at Best Buy, that's only a slight exaggeration.

http://www.ibtimes.com/amazon-nearly...m-care-1513368

Could be, but is there a likelihood of success? What is the likelihood that Amazon could drive all other internet vendors (and brick and mortar sellers) from the market so it can raise its prices to anticompetitive levels? Then, what barriers to entry would prevent new competitors from entering the market in such a scenario and putting downward pressure on prices?

I'm cynical, but I don't see it happening. Eventually, Amazon will need to produce revenue to the extent it is not now. If it's pricing model is not sustainable, it will go out of business before it eliminates competition enough to raise prices to monopoly levels. In the meanwhile, the lower prices are good for consumers.

There is no easy answer to your question and it is all theoretical.

[Avincent52]

Originally Posted by djg21

Could be, but is there a likelihood of success? What is the likelihood that Amazon could drive all other internet vendors (and brick and mortar sellers) from the market so it can raise its prices to anticompetitive levels? Then, what barriers to entry would prevent new competitors from entering the market in such a scenario and putting downward pressure on prices?

I'm cynical, but I don't see it happening. Eventually, Amazon will need to produce revenue to the extent it is not now. If it's pricing model is not sustainable, it will go out of business before it eliminates competition enough to raise prices to monopoly levels. In the meanwhile, the lower prices are good for consumers.

There is no easy answer to your question and it is all theoretical.

Regardless of the ultimate reason (and I'm not sure Amazon even knows) I do think that Amazon's pricing has the effect of lowering prices and margins to an unsustainable level for many brick-and-mortar retailers and I wonder why no one seems to see this as a problem.

It's like the question of why candidates and their PACS pay millions to campaign for POUTS, a job that pays $400,000 a year.

(Like the joke in The film The American President.
POTUS: Why don't you work for me?
Lobbyist: Because you can't afford me
POTUS: How much do you make?
Lobbyist: More than you.)

[benb]

Amazon actually loses money on all this stuff (bikes, retail). They did just recently close a quarter where retail turned a profit but it was something insane like $4 million profit on many billions in revenue.

It's all propped up by Amazon Web Services, which is astoundingly profitable. (In general software/computer services have profit margins that would make the bike industry's head explode.)

[binxnyrwarrsoul]

Originally Posted by e-RICHIE

Was Greg still in downtown Bethel?
The note mentioning the Depot made me wonder if they moved.

Same area, moved two blocks to the old train station. Very cool shop. Shame.

[shovelhd]

Amazons profit is in AWS.

[djg21]

Originally Posted by Avincent52

Regardless of the ultimate reason (and I'm not sure Amazon even knows) I do think that Amazon's pricing has the effect of lowering prices and margins to an unsustainable level for many brick-and-mortar retailers and I wonder why no one seems to see this as a problem.

It's like the question of why candidates and their PACS pay millions to campaign for POUTS, a job that pays $400,000 a year.

(Like the joke in The film The American President.
POTUS: Why don't you work for me?
Lobbyist: Because you can't afford me
POTUS: How much do you make?
Lobbyist: More than you.)

But the fact that Amazon's pricing is unsustainable by its brick and mortar competitors is not in an of itself problematic. Amazon arguably is outcompeting its competitors. That is what all businesses aspire to do. The question is whether Amazon can monopolize a given market by means of a predatory pricing policy!

[redir]

[QUOTE=txcid05;1865468]I feel their pain. The problem isn't the internet per se, it's also got much to do with the distributors. They have practically pushed out smaller orders like those of mom and pop shops. In fact, many manufacturers don't even want to be in smaller shops. They would rather have larger $20k orders, than several $2k orders.

I understand what%2

[kmla320]

Same one different owner

[slidey]

For those interested, there was a good discussion a couple of weeks back: http://onpoint.wbur.org/2015/11/04/a...mmerce-economy

And, yes - Amazon has a profit-making division that no other retailer has, or likely will have, AWS.

[binxnyrwarrsoul]

Originally Posted by BobbyJones

Absolutely right. Greg should've looked into the whole coffee / bike shop combo from the get go!

There's an artisan coffee house nearby and TWO Starbuck's in/near Bethel. Greg was a very knowledgeable, passionate owner. I've supported the shop, patronized it and have had a lot of work done there including having wheels built by a former mechanic. Some of the best handbuilts I've ever ridden. Why did he close, that's a question you'd have to ask him. Oh and I live in Bethel and don't work for IBM and I'm not a banker etc. Bethel isn't defined by Wikipedia, come visit, then you'll get the gist. The local demo had little to do with this. Again a true shame, the shop and Greg will be missed.

[cfox]

I live 5 minutes from the place, and while it's a shame it's closing, I'm not surprised. They were a very race oriented shop, and did TONS to promote the local racing scene/culture, but at the same time, the staff was very dismissive and standoffish if you weren't part of the local crowd. As much as the local racers loved the place, they had a reputation for pretty crappy service for your average schmo. Unfortunately, the internet is a candy store of savings for the exact customer they were trying to cultivate. Racer dude has a hard time passing up half price parts, while average schmo is heading to Ridgefield to buy a $1,000 Felt for his 8yr old (Ridgefield Bike Co. can't keep enough fancy kids bikes in stock). And average schmo will be bringing that Felt back every time the tire pressure is low. I think a race oriented shop with knowledgeable customers is a tough go in the internet age.

[Seramount]

Originally Posted by cfox

...the staff was very dismissive....they had a reputation for pretty crappy service for your average schmo.

and there you have it...

shops that act like they're doing the customer a favor by working on their bike create their own destiny.

[bigbill]

The closest shop to me is more than an hour away. Factor in that all my stuff is campy, that shop can't do anything for me anyway. There is a place for shops, especially in service, but they have to service all kinds of bikes and drivetrains. The locals all ride SRAM or Shimano and are willing to hop in their cars and drive 90 minutes to have a broken cable replaced. I fix a lot of local bikes and keep stuff like cables, housings, tires, and chains in my garage. When I order parts, I usually add in some stuff the locals will need. I just charge them a few bucks over what I paid.

I wish there were good shops everywhere, but the direction that cycling has gone in the past decade has promoted just a couple of brands that don't speak to each other. Along with that is service aligned to a brand and dinosaurs like me that ride steel bikes end up doing our own work. I need a shop for headsets and occasional wheel issues. I need to learn wheels.

[thunderworks]

I don't know anything about this shop other than what I've read in this thread. I have no opinion about either the skills or deficiencies, if any that the store brought to the market place they served.

I do however, have some perspective on the retail bike business. I owned a bike shop for over twenty years. My store was successful in its market. I earned a good living from the store and it supported 11 employees at its peak.

The store was a broad spectrum store. We served the serious enthusiast, offering "pro" level frames and bikes. We also served the entry level buyer, offering beginning price points. . . We organized rides for our customers, promoted sales and events, treated everyone who walked in the door as a potential revenue generator.

We made money in the middle part of the market - People who wanted safe, fun, reliable bicycles, but who weren't necessarily "bikies." We did not sponsor racers or athletes who wanted discounts. We did not promote races. We promoted "rides" that encouraged a broad cross section of people to ride their bikes.

We had an excellent service department. We charged a lot for our work, but stood behind it with a satisfaction guarantee.

Bottom line to me is that I think there is still a place for the LBS in our culture, but I believe that the economics are such that the money is made in the middle of the spectrum that is not represented by your typical forumite. They are not shoppers on Ribble. They are not pro bike buyers. The high end, fun hardware niche is not consistently profitable. While a shop might want to represent that niche of the industry because it's fun and it keeps employees interested and happy, the money is made elsewhere. . .specifically the non tech-savvy, service dependent buyer.

All of the above, just my opinion . . .