Gray Market Bicycle Parts

[RedRider]

I am reposting this from Travis' Facebook page. He owns Just Riding Along Bike Shop in Maryland.


Gray Market Bicycle Parts
by Travis Evans on Thursday, December 8, 2011 at 6:35pm

First off, I have tagged many people on this note in order to gain attention. Please "untag" yourself as you see fit. I don't mean to offend anyone. I'm not singling anyone out here, I just thought you might find the subject interesting. Also, please share this note with whomever you please. Thanks.



Yesterday I posted that JRABS will have a new "corking policy": "There will be a 20% surcharge for the initial or re-installation of items purchased through eBay stores or overseas discounters. This fee will not apply to items purchased through any U.S. dealer with a legitimate store front." This posting has stirred up much controversy, which I think is good. This policy will be in effect from this point forward. I will also be adding this line: "we will offer a 10% discount on installation for products that are purchased through us".



Businessdictionary.com defines Gray Market as: Genuine branded goods (called 'gray goods') sold outside of an authorized sales-territory (or by non-authorized dealers in an authorized territory) at prices lower than being charged in authorized sales territories (or by authorized dealers).



Anytime a U.S. consumer purchase products from dealers such as Chain Reaction Cycles & Total Cycling in Ireland, or ProBikeKit.com in the U.K. is buying gray market merchandise. Unfortunately the laws in Europe are quite different, as are the channels of distribution. It has nothing to do with the value of the Dollar vs. the Euro. European bicycle shops buy directly from the manufacturer. U.S. shops buy from a distributor. The distributor buys from either the manufacturer or an importer. Not only is there a mark-up for this "middle man", there are also shipping costs and import tariffs. Instead of charging MSRP, or slightly below it, the aforementioned dealers (and others) have decided that instead of making a good margin on a few products, they would rather make less margin on many products, in order to get there name out. These dealers are able to sell products for far less than U.S. retailers; and in many cases, less than what we can buy the products for from our distributors.



The majority of the time, the consumer has no idea what's going on. They just see that the price is less from these gray-market suppliers and think that it's a great deal. I don't really blame them, as it does look like a good deal.



The most common manufacturer to fall victim to this practice is my favorite bicycle components manufacturer, Campagnolo. As you may know, being a Campy Pro Shop is something that I'm proud of and passionate about. To learn more about Campagnolo, and there current situation in today's global climate, you can go here: http://www.bicycling.com/news/featured-stories/italian-job



Everyone knows that the global economy is in great trouble, and jobs are scarce. As some of you may know, I have had to lay off John and Chad, and it's just me here now, trying to keep JRABS in business through the winter. Almost every day I have some sort of gray market product come through here, usually from consumers who have trusted me to work on their bikes for years. I have been doing this since 1986, and even as a little kid before that I was doing mechanical work on bikes for my friends. Basically, it's safe to say that I know what I'm doing. However it's very difficult and frustrating to have these products brought in to me every day when I am just trying to stay in business. To this day, I have not brought home one dime from work since I opened the store in on my 38th birthday (9/13/09) - seriously. One might say "You should be lucky that anybody is bringing you any business at all", and maybe that is correct. However, it goes deeper than just dollars - it's about what's right.



When one buys from these companies they are: a) putting money in the pockets of somebody unknown, b) hurting the local economy, c) getting products with no warranty whatsoever, d) dealing with poor customer service after the sale - try to return something to them e) Could be in violation of U.S. Custom's import tariffs (everything over $2,000 must be reported - I STRONGLY recommend reading this: http://www.cbp.gov/xp/cgov/trade/basic_trade/internet_purchases.xml



The buyer becomes the importer, and is responsible for all duties paid. The seller could care less. JRABS has reported violators, and will continue to do so. I have to do what I can to protect my business and the local economy. Whenever gray market purchasers complain about the unemployment rate, the value of the dollar, etc. they should look at themselves as being part of the problem. Could you imagine going to your favorite Italian restaurant and when the waiter says "Would you like some freshly grated parmesan cheese?" you pull out your own that you bought online and say "Yes, but I brought my own, so if you don't mind grating it over my plate for me that would be great. I bought this Italian D.O.P. Parmesan Reggiano on the internet." It sounds silly, but it's the EXACT same thing as taking your Italian bicycle parts to the local bike shop and asking them to install them on your frame, when you could have purchased these items from your LBS.



Restaurants charge a "corking" fee for pouring the wine that the customer brought in for the exact same reason that I will charge this extra 20% on top of regular labor rates for gray market purchases. I have absolutely no problem with products that were purchased at another store that plays by the rules, even mail order. I will gladly install these items, or even used items off of eBay, for my regular labor rate. I will reward my loyal customers who purchase their products from JRABS with a 10% discount on labor.



Thank you for taking the time to read this, and I welcome your opinions. I'm just trying to do what's right, enjoy what I do, and keep my business afloat.



In closing, I ask that the next time you consider purchasing from one of these companies, to please consider either my store or another U.S.-based shop with a storefront. All you have to do is ask for the best price.



Thanks again,

Travis





Thanks again,

Travis

301.963.1273

travis@jrabs.com

www.jrabs.com

[Charles M]

:beer:


Very reasonable.

Good policy.

[merlinmurph]

However, for the record, I don't blame him. Seems reasonable to me, he can do whatever he wishes. I'm kind of surprised he has been so accomodating to customers who brought their own new stuff in to be installed.

Just my 2 cents,
Murph

[beeatnik]

How does he make the distinction between new gray market products or stuff peeps pick up on CL, from friends or even their own parts bin. Does he expect customers to bring in receipts and original packaging?

[DRZRM]

Seems fair, I figure if I'm going to find the best deal, I should be able to wrench myself. If I need to have something done by a shop (usually pressing headsets) I'm happy to pay, and a corking fee seems perfectly fair.

[Aaron O]

WOW.

Gut reaction - however just and right his argument is, and I do believe that it likely is both, this bike shop is probably not operating in a vaccum and buyers are likely just going to head to other shops. For this to work, there would have to be a local industry wide agreement (sometimes known as price fixing) for the practise so that the person enacting the policy isn't just pissing off and offending a guy who bought at ribble. I understand this owner's motivation, logic and point...but I suspect it will end up being counter productive - he'll just anger many of his customers and send them to other shops.

[bicycletricycle]

i was wondering the same thing.


How does he make the distinction between new gray market products or stuff peeps pick up on CL, from friends or even their own parts bin. Does he expect customers to bring in receipts and original packaging?

[Joachim]

[QUOTE= All you have to do is ask for the best price.

[/QUOTE]

While I agree to a certain extent with him, the above mentioned sentence gets to me. My its something personal, but I don't haggle with any shop. Maybe he only does this with new customers, but after a while I expect the price to be the "best price". Not have to ask for it.

[CunegoFan]

The buyer becomes the importer, and is responsible for all duties paid. The seller could care less. JRABS has reported violators, and will continue to do so.
"Not only will I charge you more, I'll report you to the government."

I don't see this as a winning policy. While the surcharge might be reasonable [Do they give you the third degree when you bring something in?], I would not go anywhere near this place.

[Fivethumbs]

It could also prompt people to say, "I guess I should finally learn how to work on my own bike."

[AngryScientist]

yet another reason i'm happy i do all the wrenching on my own bikes.

that shop can do whatever it wants, however, if i've been a loyal customer, and i walk in and want some new shifters installed that i bought from the UK, and i get told i'm being upcharged 20% - i'd be finding a new shop - pronto.

[RedRider]

..but I suspect it will end up being counter productive - he'll just anger many of his customers and send them to other shops.

My take is he's looking to educate the customers to the facts about why these products are so much cheaper and let the customer decide. I doubt many thought they might get nailed for duty if over $2000. That could hurt. He is clearly a man of principles rather than profits and doesn't seem too concerned about losing these customers. To quote another industry friend, "Your local bike shop will save your ass one day...make sure they're still when that day comes!"

[harryblack]

Silly-- and since I can do everything but face my bottom brackets, not really applicable to me.

But still, who's to blame, the consumer or Campy in North America?

I haunted the classifieds here, and Ebay for American sellers, but after months, finally went with one of the Brit outfits for my gf's Veloce build + some 2010 Athena shifters for me; I saved hundreds of $$$ I simply do not have-- not to mention there aren't any shops even marginally devoted to Campy in my area.

If I lived in Boulder I'd do all I could for OldPotatoe because of his generosity with knowledge but otherwise, I'm glad to support Campy and hope having more Campy bikes on the road eventually benefits all with an interest in the company.

[jr59]

It's his shop and therefore he can do as he wishes, to the benefit of his shop.

Just as I have the option of not spending one red cent in his shop, and telling EVERYONE I meet, ride with, or even see, that said shop is a Jerk. Including all Social media.

I have no problem with him charging an upcharge. But the reporting of whatever is over the line. I would like to know if every cash transaction gets put down in the books, or if his tax return has everything 100%!

It's between you and the person you bought it from.

How about if I bought it from a private party, would he say I didn't pay tax on that either? :crap:

[cmg]

i wish him well, but anything that drives prices up will hurt his business. went to a shop i had bought easton wheel parts for. a couple of months later the shops policy had changed towards easton, gave me a long explanation on why the sour note. the only thing i heard was we don't work/honor easton products. i smiled and went somewhere else. suspect he's going to do the same.

[Gummee]

As a mechanic, I don't have a problem installing parts from wherever they came from. The margins just aren't as big as the labor I got to charge for the installation.

If you buy something from the shop I'm working in, I'll typically install for less than if you bring it to me from somewhere else.

Inevitably, there's more going on than just a simple installation. Cleaning up, adjusting the front to go with the new rear der, etc. That gets done less if you didn't buy it from me as well.

While I applaud the sentiment in the OP I don't think its a smart policy longer-term. I could be wrong tho. Have been before!

M

[djg]

Travis, you can set your service prices any way you like. It makes good sense to me that you might discount service charges for folks who also buy parts from you -- in essence, you're just providing a bundled discount for parts and services that works to your advantage and the buyer's advantage. If you want to extend some of that discount to customers who indirectly support your distributor, that's fine too.

Frankly, I'd stay away from offering any legal advice on any topic, unless you are an attorney, offering advice to clients, in a jurisdiction in which you are licensed to practice. What do you win? What might you lose? You can try to educate your customers about grey market goods -- suggesting they check whether they might owe import duties, or whether a warranty is provided directly by the manufacturer or by a domestic distributor, for example -- but more than that just seems to be asking for trouble, or at least antagonizing customers and, honestly, maybe sometimes getting the particulars wrong. Reporting suspected vioations of tax and tarrif responsibilities is something you can do, sure, if you do it honestly, scrupulously, and above-board, but really, are you moonlighting as law enforcement? How strong do your suspicions need to be before you antagonize a potential customer and -- perhaps sometimes -- create hassles for people who might not actually have meant any harm, much less violated any laws? In the past couple of weeks I've bought a pile of parts in anticipation of a spring build. Almost everything came from one local shop, including your beloved Campagnolo's new "cross" crank, a bunch of Chorus bits, and a set of wheels. I also bought one item from an overseas vendor in what I believed, and still believe, to be a lawful fashion. Dollars-wise, that's roughtly a 95%-5% split in favor of the LBS. This particular LBS has always been good about the odd part from elsewhere, a frame from the builder, and what have you. If they lectured me about the grey market, or threatened to report a non-existent violation of our tax and tarriff codes, I'd give them a piece of my mind (no charge) and I'd never go back.

The fact is, most of us are happy to pay a premium to do business with a local shop we trust or somebody else with whom we have an established relationship. The other fact is that most of us are not willing to pay an endless premium, or always or necessarily wait for something that's not in stock -- how happy we are, at what size delta, might vary person-by-person, context-by-context, etc. It seems to me that your best shot in navigating changing and sometimes rough competitive waters lies in making the value of your services clear to your market, and pricing those services in a way that works for you and your customers. This might or might not make you viable. It's a tough world out there. But it seems to me your best shot. Ranting about grey market goods is fine if you want to rant, but it seems to me unlikely to help very much. Prices go up, incomes not necessarily, and there's always used stuff, other shops, close-outs, etc., for folks who are watching the bottom line.

[AngryScientist]

i will also venture to say this new policy will not make the shop one dime in additional revenue due to parts purchased.

if i'm a little guy, you can bet i'll work on anything that comes through the door, driving people away with guilt trips and threats of reporting me t the government sure arent going to help.

[fourflys]

well, I'll say this... I agree that the LBS owner can do whatever he wants, his shop...

while I believe in supporting the LBS as much as I can I have issue with his reasoning for the grey market... he posits the reason for the lower prices is other countries don't have to deal with a distributor and that may very well be true... what I don't understand is why not have issue with the manufacturer then? There is no law that I'm aware of that says a manufacturer HAS to sell through a QBP or ???... Shimano or Campy can sell straight to an LBS if they want to and probably do if someplace is big enough to order enough product...

the tone of the message comes off as a bit whiny and self-righteous... it seems he's almost proud that his new policy has stirred up such an uproar...

the bottom line is we are in a growing global economy and it's only going to grown closer... I sincerely hope his new policy works out for him and he is still around in the summer... always sucks to lose another LBS...

[RedRider]

Just as I have the option of not spending one red cent in his shop, and telling EVERYONE I meet, ride with, or even see, that said shop is a Jerk. Including all Social media.

He's ahead of you. He is telling the world he doesn't want those products in his shop. He's not really looking to get 20% more for the service or rat out people for duty... he is trying to convince you not to buy them to begin with.

BTW...his note will be in Bicycle Retailer next month. On Facebook, his note has gone viral and has been reposted by many people with comments on both sides of the fence.

[jimcav]

not going to work very well in the "global" market we live in.
not sure on the warranty issue, but I've bought from PBK, and returned there. I support my local shop for some consumables (tape, tubes) etc, but even then really because i rode on their team. hard to pay $24 for bar tape when it is 15 online, and $5 on sale if you can tolerate an unpopular color (just got fizik pink for $5).

I come from a small town, and know a few people whose businesses (or parents') went under when stores capable of huge volume/low margin rolled in--walmart, kroger, home depot--all killed the local "dime" store, grocery, and hardware store.
But where they stood there are now unique eateries, antiques, craft/gift type places. the things you can't get at costco, walmart, etc

If anything, I'd be trying to attract more fittings and service encounters--installing stuff regardless where it came from, as I think the margins are better on service--not sure on that, but have always heard it is the repairs that keep bike shops open.

Anyway, I wish him luck--over the years as i return home, all the old shops are gone, even some of the big or local chains i used to see are gone and only a few major shops remain (bicycle garage, terrible prices, but when i am on leave and need something fixed on the bike i keep at my folks, they are there to do it--sometimes, sometimes they are too backed up to help out a guy in town for a week).

I sometimes dream of retiring and having a small shop--but I think really I need to add it to my list: like pools, boats, and pick-ups--I want a friend with one.
Maybe focus on shop sponsored rides or such to get a group that frequents the shop and will make routine or impulse buys.

[AngryScientist]

the two employees he had to lay off should open a shop where they ONLY work on grey market stuff :banana:

[veggieburger]

Bike shops should be pi$$ed off at their suppliers, not the consumer. We live in a global marketplace, we all want the best bang for the buck. Nothing strange about that.

When Michelin sells 50,000 tires to Pinarello knowing full well that Pinarello will only manufacture 10,000 bicycles (for egs.), the blame falls on the tire manufacturer. The excess tires will be sold under the table to "wholesalers" and middlemen who flip them in large quantities at small margins.

Instead of hammering the consumer who goes online and buys a set of PR3s that didn't come with packaging, bike shops should be pressuring Michelin.

[jr59]

Just as I have the option of not spending one red cent in his shop, and telling EVERYONE I meet, ride with, or even see, that said shop is a Jerk. Including all Social media.

He's ahead of you. He is telling the world he doesn't want those products in his shop. He's not really looking to get 20% more for the service or rat out people for duty... he is trying to convince you not to buy them to begin with.

BTW...his note will be in Bicycle Retailer next month. On Facebook, his note has gone viral and has been reposted by many people with comments on both sides of the fence.

I wouldn't sat viral! I would doubt .5% of facebook has seen it! That is not viral. At least not in my world.

I could give a rat's butt how he thinks or what he does, but I KNOW this; 1 vocal person can make a HUGE impact on someones bottom line!

Now if he has so much cash in reserve that he doesn't care. GREAT, it's good to be him.
But most LBS that I know don't. Like I said, he is welcome to do whatever he thinks will improve his bottom line.

As I am free to disagree with it.

[Mark McM]

Mr. Evans says that he will add a 20% surcharge for items imported through gray market channels, to make up for the money not paid for import duties or to the licensed distributors. Does he give this 20% to the government duty collectors and the distributors, or does he just pocket it? If he just pockets it, isn't he an even worse culprit, essentially acting as a fence for the gray market?

Does Mr. Evans also have a stand about goods bought from fully authorized mail-ordered retailers from out of state, for which state sales taxes were not collected? In this case, wouldn't Mr. Evans be aiding and abetting tax evasion?

[rain dogs]

I'm a little ignorant to all of this (so maybe that it his hope...to inform), but if what he says is true: By purchasing from PBK etc, you essentially become the middle man importer I have two questions:

1. How does this affect a company like Campagnolo/Shimano. They should be selling at their "out the door price" no? The wholesale price that goes to distributor/importer #1. Isn't PBK et al. just cutting out the number of middlemen?

2. Why is there no warranty from the Manufacturer? If I was the importer and selling to shops, there would be a warranty, right? So, if I am the importer, why is there no warranty?

I need to be more informed before I can make a decision on how I personally feel about this.

However, I can tell you that if I bought an apple from a farmer that he sold for $1. He passed it to another guy and it's $2 and three more guys later they are asking me to pay $32... I wouldn't feel very happy about it.

If I bought the apple for $16 and someone wanted to charge me 20% more to clean it? Big deal?

[fourflys]

Bike shops should be pi$$ed off at their suppliers, not the consumer. We live in a global marketplace, we all want the best bang for the buck. Nothing strange about that.

When Michelin sells 50,000 tires to Pinarello knowing full well that Pinarello will only manufacture 10,000 bicycles (for egs.), the blame falls on the tire manufacturer. The excess tires will be sold under the table to "wholesalers" and middlemen who flip them in large quantities at small margins.

Instead of hammering the consumer who goes online and buys a set of PR3s that didn't come with packaging, bike shops should be pressuring Michelin.

exactly... like I said, there is no law that demands manufacturers sell only through distributors... they just choose to here in the US because I'm sure it's better for the manufacture's bottom line and until the internet came around, nobody was any the wiser...

[William]

Mr. Evans says that he will add a 20% surcharge for items imported through gray market channels, to make up for the money not paid for import duties or to the licensed distributors. Does he give this 20% to the government duty collectors and the distributors, or does he just pocket it? If he just pockets it, isn't he an even worse culprit, essentially acting as a fence for the gray market?

Does Mr. Evans also have a stand about goods bought from fully authorized mail-ordered retailers from out of state, for which state sales taxes were not collected? In this case, wouldn't Mr. Evans be aiding and abetting tax evasion?

I think he's taken a page from the book of "Outrage Gorilla Advertising", or in other words, any publicity is good publicity. He states he tagged everyone he could on FB ....... and now his name and shop are getting out there. Like the Rapha threads, we be talking about it. If it's not this, then pretty stupid IMO.




William

[MarleyMon]

screw it, I'll do it myself.

[rain dogs]

Why does this guy assume that people don't want to support LBS'?

- I certainly want to support local bike shops
- I certainly want to support manufacturers (especially ones still conducting businesss like Campagnolo)

What I'm not sure I see that value in supporting is 3 levels of middlemen all jacking the price up 50%.

In fact, I WOULD pay MORE to the manufacturer AND the LBS if I could pay LESS to redundant middlemen.

But is this not the case? Isn't this kinda what the music industry struggled with?

I still support music shops and artists as much as possible, but think the major label distributors are/were fleecing everyone but themselves.

[54ny77]

I wonder what his stance is on Chinese-made goods. :p

[RedRider]

exactly... like I said, there is no law that demands manufacturers sell only through distributors... they just choose to here in the US because I'm sure it's better for the manufacture's bottom line and until the internet came around, nobody was any the wiser...

There is no law that forces using a distributor. When a local bike shop doesn't want to do a "pre-season" order or meet minimum volumes from a manufacturer, distributors like QBP play a vital role. These distributors allow the bike shop to order individual parts when needed. Balancing cash flow and inventory is life or death.
On the other hand, a few companies like Reynolds wheels and Speedplay have shut down their distributor network and are selling direct to bike shops.

[jr59]

I think he's taken a page from the book of "Outrage Gorilla Advertising", or in other words, any publicity is good publicity. He states he tagged everyone he could on FB ....... and now his name and shop are getting out there. Like the Rapha threads, we be talking about it. If it's not this, then pretty stupid IMO.




William

I would agree with this! It is also a knife that cuts both ways!

I also agree it's pretty stupid!

[fourflys]

There is no law that forces using a distributor. When a local bike shop doesn't want to do a "pre-season" order or meet minimum volumes from a manufacturer, distributors like QBP play a vital role. These distributors allow the bike shop to order individual parts when needed. Balancing cash flow and inventory is life or death.
On the other hand, a few companies like Reynolds wheels and Speedplay have shut down their distributor network and are selling direct to bike shops.

oh I totally understand this (I'm a business major), my point was the shops in Europe seem to be able to operate without distributors according to the rant... I gotta assume those shops need to make smaller orders periodically throughout the year... QBP does play a vital role, however I also know it's standard practice to double the price when ordering from QBP for most shops... again, I don't have a major issue with this if I'm asking for a special part...

I would be interested if anyone has worked in a shop in Europe recently and knows how they get product... is there a Euro version of QBP?

[rain dogs]

http://www.i-b-t.net/anm/templates/trade_article.asp?articleid=213&zoneid=3

extracted:

-Opportunities for gray marketing occur when manufacturers use different pricing strategies for branded products in different countries or regional markets. If the price differential is significant, independent distributors or brokers are motivated to acquire the goods in one market and divert them to markets where prices are higher.

-If the distributors’ margins are disproportionately large relative to the marketing tasks they perform, gray markets will emerge.

-Unscrupulous distributors and brokers also create gray markets by breaking distribution agreements or misrepresenting discount programs for products.

-OEMs themselves also contribute to the gray marketing problem as sales mangers struggle to meet quotas or year-end sales goals by selling significantly larger quantity of products to authorized dealers than the market can bear

It sounds to me like gray markets are a natural extension of our current economic model which is based more on quasi-religious beliefs than any "laws".

To me, blaming the consumer seems to be short-sighted. And as usual, the guy furthest down the line gets the worst of it.

[Ken Robb]

Inevitably, there's more going on than just a simple installation. Cleaning up, adjusting the front to go with the new rear der, etc. That gets done less if you didn't buy it from me as well.

M
I don't think you meant to but it sounds like you will agree to install parts you didn't sell but you won't do a good thorough job of it.

[gdw]

It's his shop and he can do what he wants. That said, I'll bet the feds will think they're dealing with a wacko after the second or third time he calls to report some guy who brought in a $60 set of tires or a Chorus rear derailleur from across the pond.

[fourflys]

I don't think you meant to but it sounds like you will agree to install parts you didn't sell but you won't do a good thorough job of it.

I understood this as he will only do what the customer is paying for and nothing more where if the part was bought in-house for example he might do a little extra that wasn't part of the original service order if needed...

[Fishbike]

I am all for supporting the LBS. And I love most LBS folks. I buy from them when it makes sense and I seek them out when the necessary labor is beyond by abilities or I don't have the Campy tool de jour.

But as other have said, it is a global economy and every year more and more commerce takes place online. The reality is my LBS does not carry most parts that suit my finicky bike tastes; the LBS is not open at strange hours when I have the time to order; the LBS does not provide an environment where I can compare 716 types of handlebars; the LBS is often more expensive; and the LBS does not deliver to my front door.

Businesses that will survive in this changed economy need to find a way to compete. My impression is that the bike shops that do well make a lot of $$ on great service. Perpetuating a guilt trip because I ordered Campy parts in my PJ's after working a long day and after said esteemed bike shop was closed is not great service.

They are bike parts for crying out loud. I have enough moral dilemmas in any given day. I don't need anyone judging me because I am building a bicycle.

[Ahneida Ride]

How does one determine if the parts were purchased from Aunt Gray,

or good old Uncle Ernie ?

you bring em in .... say .... in a plastic box.

Does one call in the Pedal Preserve Inspection team ?
FBI
TSA
Secret Service
NSA
Naval Intelligence
CIA
US Customs
Home Security

or any one of the Myriad of other Agency's?

and which agency would the unaware customer be reported to ...
maybe all of them ....

Pretty scary .... I bring in some bike parts and next thing I know
there are black suburbans with tinted windows circling my house.

Men in black asking me questions about grey alien parts

Methinks I'd just find another LBS

-------------------------

I wonder how the LBS would react if all his cash customers reported
all cash transactions to the IRS.

[thinpin]

My return to cycling 10 years ago found me looking for a LBS in my new home in Melbourne. After several rip-offs, some appalling wrenching and poxy service I ended up on the net. I have since found a great wrench who builds all my wheels and does stuff I cant do like thread forks, facing etc. He carries a good stock of stuff for wheels (spokes, nipples and 3 or 4 brands of rim) and is happy you get whatever else on line. You pay him for labour. He is not short of work.

[54ny77]

That bike shop owner ought to check this out as a model for how to treat customers as customers, not as bad children:

http://ifixbyx.com/site/about

"We know that the world is full of great deals on components that you want to take advantage of. Go ahead and buy that cassette online for 60% off and bring it in for us to install. You will not be hassled about it, not here."

FYI, Mr. Purdy ROCKS. Was my go-to guy for anything I couldn't do myself when I was in NYC. Even picks stuff up for a nominal fee ($20 each way). Yeah, that's right: picks it up from your home. Granted it's NYC and that's an easier logistic than in other locales, but you get the drift. It's all about SERVICE.

[Waldo]

I don't entirely disagree with the sentiment, but to avoid paying the upcharge, all a savvy customer needs to do is install gray-market items, however poorly, then take the bike to the store for a tune up.

[rccardr]

It's a global economy, not a local economy- especially when you're talking about manufactured nonperishable commodities that can be easily transported. So trying to make a large margin on a small sales volume is very difficult unless you're servicing a particular and very specialized niche.

This guy's value is in his intellectual property- how to install, adjust, repair and maintain his customers' bicycles. He should charge what his intellectual property is worth. If the market doesn't want to pay what he feels his time and knowledge is worth, then it's a bad business model (or what the IRS more appropriately terms a 'hobby business').

I do all my own wrenching and building but give my LBS some business when it's appropriate. Or a six pack of micro if I'm just passing by. In return they help me out with the odd stuck BB, etc.

Sometimes it's imported micro...'cause it's a global economy.

[bicycletricycle]

hall monitorism

[Tonger]

I imagine Mr. Evan's frustration with what sounds like an unfair distributor margin has probably reached the point that he feels the need to lash out. If I had to lay off two friends/employees, I'd be mad too.

All of this raises two questions for me:

1. Where does Serotta stand on the issue?

2. How are we going to keep these shops around long term? My favorite shop is now a 1 hr drive away. I tried some others and despite being a lot more convenient and having great websites, they used a lot of hammers...

The price creep of bicycle related equipment has reached the point that it's still worthwhile to save a bunch on an overseas groupset just to pay an extra 30-40$ for service. Maybe that's what Mr. Evans intended all along...

[RedRider]

[
http://ifixbyx.com/site/about

"We know that the world is full of great deals on components that you want to take advantage of. Go ahead and buy that cassette online for 60% off and bring it in for us to install. You will not be hassled about it, not here."

FYI, Mr. Purdy ROCKS. Was my go-to guy for anything I couldn't do myself when I was in NYC. Even picks stuff up for a nominal fee ($20 each way). Yeah, that's right: picks it up from your home. Granted it's NYC and that's an easier logistic than in other locales, but you get the drift. It's all about SERVICE.[/QUOTE]

Yes, This is a great example of how the marketplace works. ifixbyx is an independent service shop that has grown because he sells only service and very good service. He doesn't sell bikes or represent "brands" he leaves that to the other shops.

[csm]

easiest way is to learn to wrench yourself.
I don't disagree with him but....

[CunegoFan]

I
2. How are we going to keep these shops around long term? My favorite shop is now a 1 hr drive away. I tried some others and despite being a lot more convenient and having great websites, they used a lot of hammers...

Small service only shops look like the future to me.

[SPOKE]

I here Travis' frustration. What I would like to know is how do these sellers overseas handle warranty issues. Those of you that purchase from overseas sellers have you had to deal with warranty issues?

For my little hobby business I've just decided to work on most anything that a customer brings in. If I'm asked to install parts that weren't purchased from me then I charge my standard rate/hr. If the stuff is bought from me then I charge a bit less for the labor portion. I do this because I appreciate the loyalty and the fact the goods come thru established channels here in the US that help me provide the customer with warranty service.

[Marz]

My return to cycling 10 years ago found me looking for a LBS in my new home in Melbourne. After several rip-offs, some appalling wrenching and poxy service I ended up on the net. I have since found a great wrench who builds all my wheels and does stuff I cant do like thread forks, facing etc. He carries a good stock of stuff for wheels (spokes, nipples and 3 or 4 brands of rim) and is happy you get whatever else on line. You pay him for labour. He is not short of work.

I so concur Thinpin. I've tried every shop around where I live, and everyone has given me grief of one type or another.

An LBS installed the bearings on a Record threaded headset the wrong way, they were different diameters, and didn't notice that the thing didn't look right. I took it apart when I spotted it at home and installed them correctly. This shop is the premier LBS in the region and makes a lot of money. Interestingly, the staff turnover is high though.

I now press cups myself and do everything except build and true wheels.

Thinpin, are you talking about Dan hale at Shifterbikes for wheels? he's regarded as the best.

[tiretrax]

He should just mark up the price for service on goods he didn't sell and be done with it. I can't see how he'll be able to tell the origin if the parts are out of the box. Also, 11 speed chains are expensive and require an expensive chain tool. I doubt many people have one. He's going to keep people from coming back to his shop to buy tubes, have additional service, etc, which are the high mark up items.

Performance is having an effect on the smaller shops here, especially as they've expanded their locations since coming to town. They probably affect LBS's more than PBK, Ribble, etc. I've serviced my bikes myself there, too. Can't do that at the LBS.

[1centaur]

Sounds like a guy who will go out of business.

The competitive question for an LBS is: how do I maximize my margin? It's a complicated question with various answers, but one of them is NOT what he proposes. "I will charge 20% less for the service on parts bought through me, and I will charge at least 5% less than MSRP on parts you buy for installation by me" would be a friendly, approachable sounding bargain. That would turn customers on and bring them through the door. You can even scare people about gray market goods re: warranty availability if you wish, though most of those buyers kinda already have a clue on that and are taking the chance. But "I'll rip your eyes out on service and maybe report you to the Feds if you don't buy your stuff from me or lie about otherwise paying the US distributor its mark-up" is a dumb-ass way to scare away customers because the guy comes off as just another whiny poor-me LBS owner (there are a lot of them) with a chip on his shoulder and an inclination to vent (or worse). And with no staff, customers have to deal with that guy and nobody else.

The trade-off between the "heck yeah, gray market's for the birds when you can pay US mark-ups" customers and "I'd rather look at the overall value of parts and service and skip the attitude" customers is probably pretty skewed to the latter, but he just directed his plea to the former. That's the kind of business judgment you expect from somebody who will not be in business much longer.

[JRABS]

Thank you for all of your input and perspectives on this topic. I will no longer pursue the "corking fee".

Travis Evans

[e-RICHIE]

...the "corking fee".



i know funny - and that's funny atmo.

ps

arrange disorder

:) :) :)
:) :) :)
:) ;) :)

[Gummee]

I don't think you meant to but it sounds like you will agree to install parts you didn't sell but you won't do a good thorough job of it.Oh its thorough, but I'm a little on the anal side too. Bikes get a quick wipedown if you've bought something from me. Air in the tires. Check the headset. Stuff that gets done that doesn't get charged for.

Maybe even quick lube and clean on the chain too depending on what I'm working on.

Bring in parts and you'll get the parts installed in working order, a quick look-over (and if something's wrong, I'll point it out with a price for fixing it), and maybe a wipedown.

I've done LOTS and lots of quick jobs that get charged $15-20 that are basically quick tune-ups. It ain't the best business model, but customers keep coming back.

M

[JSL]

oh I totally understand this (I'm a business major), my point was the shops in Europe seem to be able to operate without distributors according to the rant... I gotta assume those shops need to make smaller orders periodically throughout the year... QBP does play a vital role, however I also know it's standard practice to double the price when ordering from QBP for most shops... again, I don't have a major issue with this if I'm asking for a special part...

I would be interested if anyone has worked in a shop in Europe recently and knows how they get product... is there a Euro version of QBP?

I'll chime in here. 99% of the products you purchase at a local shop in any European country were purchased from a distributor. Each country has a distribution network that mirrors the US version almost exactly. Due to logistics, stock, sales support, language, etc virtually no manufacturer prefers to sell direct to a retailer. We could spend hours listing the reasons why distributors or agents are a necessity within the EU.

The exception lies with a few of the large retailers that have the buying power to purchase large quantities. i.e. Chain Reaction, Wiggle, etc. As was previously mentioned, they are often purchasing overstock from various sources at very low prices. They found a source for acquiring product and are very good at exploiting it. It is almost never direct from the manufacturer (but sometimes) that these goods are purchased. They come mostly from local distributors that need to unload overstock in large quantities or from a bike manufacturer that has too many cranks, tires, etc at the end of a production run.

The prices on the UK websites don't at all reflect the prices you will give at a local Euro shop. I can assure you, European shops complain about the large UK websites just as much as shops in the US.

[thinpin]

are you talking about Dan hale at Shifterbikes for wheels? he's regarded as the best.

Thats the man.

[d_douglas]

While I agree to a certain extent with him, the above mentioned sentence gets to me. My its something personal, but I don't haggle with any shop. Maybe he only does this with new customers, but after a while I expect the price to be the "best price". Not have to ask for it.


Yes, I totally agree with the shop owner's point. I am totally guilty of buying from Chain Reaction, etc. and likely will continue to do so, but I do feel a sense of guilt when I go into a bike shop, see a Ritchey stem selling for $100 that I bought for $50 online and think, 'sorry dude, that's is an unreasonable price".

It is reasonable for storefront owners to ask what they ask, as the buyer gets WAY more from them than they do from Chain Reaction.

When I bought my Speedvagen, I was in search of Vittoria Corso EVO's and asked my locales shop, where the price quoted was $85 per tire. I said thanks and proceeded to buy online for $40 per tire.

I felt bad for the shop owner, who is a nice guy, good businessman, and a stellar mechanic.

It's complicated.

[mike p]

Thanks for that viewpoint. I wondered about that!

Mike


I'll chime in here. 99% of the products you purchase at a local shop in any European country were purchased from a distributor. Each country has a distribution network that mirrors the US version almost exactly. Due to logistics, stock, sales support, language, etc virtually no manufacturer prefers to sell direct to a retailer. We could spend hours listing the reasons why distributors or agents are a necessity within the EU.

The exception lies with a few of the large retailers that have the buying power to purchase large quantities. i.e. Chain Reaction, Wiggle, etc. As was previously mentioned, they are often purchasing overstock from various sources at very low prices. They found a source for acquiring product and are very good at exploiting it. It is almost never direct from the manufacturer (but sometimes) that these goods are purchased. They come mostly from local distributors that need to unload overstock in large quantities or from a bike manufacturer that has too many cranks, tires, etc at the end of a production run.

The prices on the UK websites don't at all reflect the prices you will give at a local Euro shop. I can assure you, European shops complain about the large UK websites just as much as shops in the US.

[BobbyJones]

I didn't read every post, but if he hasn't made any money in two years and recently had to layoff his two employees, gray market components may be the least of his problems.

Just because you own a bike shop doesn't make you a good business person.

In this venture, he obviously isn't.

I hope he finds some wisdom and keeps the doors open.

[oldpotatoe]

Well, as a bike shop owner, I don't agree with his policy. Altho I agree that a lot of 'stuff' is probably grey market, I think he will piss people off with his policy. He can state what grey market is and point at Campagnolo and the UK distributors, but I doubt he can catagorically say they are indeed 'grey market'. I think Velomine uses an alternative distribution path for Campagnolo also but nobody will say their stuff is grey market.

These UK places are HUGE(a QBP guy said they are in the 7 and 8 figures big$) and no doubt Campagnolo and other European manufacturers have to decide if they wish to support these places or US distributors.

I think it is primarily the responsibility of the manufacturer, not a little bike shop with a policy that will peeve his good customers.

I don't like it either but it is what it is and losing the labor to build or install something(there is a shop here that has this policy also, with ALL brought in parts) doesn't make sense to me.

Lastly, the laws in Europe are indeed different than in the US. Campagnolo NA knows of this problem altho I doubt they can do much, being an office of Campagnolo ITL.

I just can't see myself telling a guy that bought a Moots RSL from us that I won't build it with the stuff from some UK bike part place. That would be the last time I saw him.

BUT gotta maximize what works and not what doesn't. Don't be just like that other 'successful' shop, thinking you will be too. Be unique, find that niche, identify your target market and aggressively attack that market.

Works pretty well for me.

[Rueda Tropical]

Fitting, service, coaching/training, a store that is a unique customer experience. Cheap online purchases are not going away - yet Competitive Cyclist is only an online experience for most of it's customers and it manages to charge retail and compete with lower priced alternatives.

If your business model is not working. Change it. Someone coming to you for service is an opportunity. You can capitalize on it or penalize them for doing business with you. Which do you think will work better for your business?

[Bob Loblaw]

Hard to say. Even back in the glory days of Lemond and the '84 Olympics, a bike shop was a lean business. A couple bad months could spell doom. Now it seems it goes week to week.

Things are changing, and full-service bike shops might become a memory, replaced by mobile mechanics and Internet mail order.

BL

I didn't read every post, but if he hasn't made any money in two years and recently had to layoff his two employees, gray market components may be the least of his problems.

Just because you own a bike shop doesn't make you a good business person.

In this venture, he obviously isn't.

I hope he finds some wisdom and keeps the doors open.

[Kirk Pacenti]

I feel for the guy and hope he makes it work. I too have recently started to question the value of distributors... I can serve the LBS better, lower their cost and make more $$$ going dealer direct.

Love this tongue and cheek poster... :p

[rugbysecondrow]

This shop is about 25 minutes from me, I might have to check it out. I am not sure if I agree 100%, but the sentiment certainly. He is not anti-self sourced parts, just anti parts sourced from these grey markets...seems fair to me. Also, if his ship is sinking, he can go down struggling or fighting. He is fighting and trying something new. He might see a spike in business not from increased surcharge but from other folks who want to support the LBS taking a standing.

Time will tell if it is the right tactic. I am just glad there is a good local shop that works on Campy.

:beer:

[jr59]

Thank you for all of your input and perspectives on this topic. I will no longer pursue the "corking fee".

Travis Evans

I think you should charge more for your work for parts brought in by the customer. Maybe not 20%, but more.

Maybe work out a flat hourly fee?

It's the reporting of this that is wrong. Not the fact that you charge more for your work using someone brought in parts.


I know I pay a flat hr rate to my LBS for work done with parts I bring in.
I have no problem with this at all. Truth be told, I would buy more from him if he was closer in price. Not the lowest, but somewhere near.

Good luck

[Joachim]

A LBS in my area has a sign next to the labor pricing:

Bring your own parts: +10%
Bring your own parts after you tried to install it and messed it up: +20%

[LesMiner]

Many comments and Travis posted he was dropping his "corking charge". The competition problem between the little guy and the big guys has been around a long time.

In the U.S., any law allowing manufacturers of brand-name or trademarked goods to fix the actual or minimum resale prices of these goods. (Elsewhere the practice is called price maintenance.) Fair trade laws were passed by many states during the Great Depression in an effort to protect independent retailers from price-cutting by large chain stores and consequent loss of employment in distributive trades, but most were later repealed at the state level. Critics argued that such laws restricted competition; the complexity of post-World War II marketing channels also made enforcement impracticable. In 1975 the few that remained in existence were repealed by an act of Congress.

So blame President Ford for signing the repeal of fair trade laws. Consumers got a benefit but at what cost. But here is another model that an LBS here has adopted over the last few years. This LBS is one store front. Trek is their major brand. Three people run the shop but one is really part time. He works mainly to get mad money to spend on more bike stuff. They organized an LBS sponsored bike club. The advanced membership is $100 and in return the members are promised deep discounts from manufacturers. I think the LBS throws in a jersey. The LBS website Ramsey Bicycles (http://sites.google.com/site/ramseycyclingclub/membership-information) A few friends and the part time guy have been trying to talk me into going for the $100 membership. I can get the club riding experience for free anywhere. So if I am in the market to spend major bucks on something like wheels, maybe the $100 can be recovered based on the discount.

I know of 3 other LBS's that have taken advantage of the 4 seasons here in Minnesota. They run spin class training for a fee. In one example the LBS provides the space and a trainer while you provide the bike and power meter device. They subcontract a service to provide a VO2 max measurement. That's your baseline for the next 8 weeks or so of training. They coach the sessions with a training routine and tracking of your improvement. Another one does something similar but with heart rate. Another runs spin classes just coaching. But they also have the new Trax, I think, trainers with video course feedback. The trainers are lined up in row and can all run the same course at the same time. So you and your friends can ride any of the European classics. Although you are physically next to each other each has a separate monitor to view where they are on the course. That way you can race each other. No doubt the LBS for retail sales will need to move toward services to survive.

[nm87710]

sounds like a guy who will go out of business.

+1

[djdj]

This shop is about 25 minutes from me, I might have to check it out. I am not sure if I agree 100%, but the sentiment certainly. He is not anti-self sourced parts, just anti parts sourced from these grey markets...seems fair to me. Also, if his ship is sinking, he can go down struggling or fighting. He is fighting and trying something new. He might see a spike in business not from increased surcharge but from other folks who want to support the LBS taking a standing.

Time will tell if it is the right tactic. I am just glad there is a good local shop that works on Campy.

:beer:

You SHOULD check it out. Travis is a real stand-up guy and a great mechanic. He also has very competitive prices on a lot of parts, etc.

I personally didn't have a problem with his policy (which, as he noted above, he has withdrawn). And I wouldn't be put off if another shop did it. I've never asked a LBS to install something I bought elsewhere -- it just doesn't seem appropriate to me or conducive to building a good relationship, but to each his own.

[fuzzalow]

A LBS in my area has a sign next to the labor pricing:

Bring your own parts: +10%
Bring your own parts after you tried to install it and messed it up: +20%
The added charge for bringing your own parts is disagreeable to me. Raise the price by 10percent and don't single me out because I wanted to hire a LBS and pay them money to do work.

The 2nd statement is wrong also, the fee shouldn't be 20 percent, it should be 50 percent.

I am sympathetic to LBS issues but the pressures indigenous to a small business and the inequities imposed by Campagnolo ITL are not my concern.

[benb]

I am really wondering to what extent these guys are hostages to QBP..

From the sound of these occasional whinings, QBP is charging them more then what Performance, PBK, Chain Reaction, etc.. is charging the end consumer.

QBP (based on my experiences with letting the shop order a part for me) is also really slow a lot of times compared to online vendors.

At that point it makes you wonder what exactly is going on.. why doesn't this guy order from PBK and offer customers cheaper prices with different warranty terms if they want it?

One of the successful shops near me is really mixing it up with not using QBP for everything, going direct to the manufacturer when they can, buying stuff on Ebay when they can, selling customer stuff that gets traded in on Ebay, etc.. they seem to do really well by not just going to the straight "Get everything from QBP and nothing that QBP won't sell us" model that a lot of shops seem to have.

Except for frames and forks I don't find the warranty thing compelling at all. I've never really successfully used a warranty on a bicycle component. I tried to get my LBS to send a set of SRAM brifters back and SRAM hassled the shop for almost a year before finally not doing anything. The other time I tried to use a component warranty was I had a Thomson stem crack.. Thomson did honor the warranty but took like 9 months to send the new part back, at which point I had gone and bought another stem. Usually by the time something actually breaks, neither the manufacturer or nor the LBS has any chance of fixing it or letting you use the warranty, so I don't really feel like that extra 25-50% to get it "white market" is worth anything. I've had a set of Ultegra shifters on my road bike for 3 seasons now that I bought used on Ebay. For what I saved I could care less about the warranty.

[oldpotatoe]

Sounds like a guy who will go out of business.

The competitive question for an LBS is: how do I maximize my margin? It's a complicated question with various answers, but one of them is NOT what he proposes. "I will charge 20% less for the service on parts bought through me, and I will charge at least 5% less than MSRP on parts you buy for installation by me" would be a friendly, approachable sounding bargain. That would turn customers on and bring them through the door. You can even scare people about gray market goods re: warranty availability if you wish, though most of those buyers kinda already have a clue on that and are taking the chance. But "I'll rip your eyes out on service and maybe report you to the Feds if you don't buy your stuff from me or lie about otherwise paying the US distributor its mark-up" is a dumb-ass way to scare away customers because the guy comes off as just another whiny poor-me LBS owner (there are a lot of them) with a chip on his shoulder and an inclination to vent (or worse). And with no staff, customers have to deal with that guy and nobody else.

The trade-off between the "heck yeah, gray market's for the birds when you can pay US mark-ups" customers and "I'd rather look at the overall value of parts and service and skip the attitude" customers is probably pretty skewed to the latter, but he just directed his plea to the former. That's the kind of business judgment you expect from somebody who will not be in business much longer.

I agree.

-bike shop owner

[Ahneida Ride]

The internet changed everything ...

Now we, the people, can talk and order directly from the manufacturer.

Things are a changing ....

------------------

It's 1911, don't be caught making horseshoes.

----------------------

There goes that black suburban again .... Hmmmm

Is it cause I talk about frns or this time I got reported for looking like
I purchased some grey stuff.

[oldpotatoe]

I think you should charge more for your work for parts brought in by the customer. Maybe not 20%, but more.

Maybe work out a flat hourly fee?

It's the reporting of this that is wrong. Not the fact that you charge more for your work using someone brought in parts.


I know I pay a flat hr rate to my LBS for work done with parts I bring in.
I have no problem with this at all. Truth be told, I would buy more from him if he was closer in price. Not the lowest, but somewhere near.

Good luck

Nope, just do spectacular work, better, more knowledgeable than anybody and charge a fair price for that. Most service bike shops charge in the vicinity of $60 per hour, I do.

[rain dogs]

A LBS in my area has a sign next to the labor pricing:

Bring your own parts: +10%
Bring your own parts after you tried to install it and messed it up: +20%

Man, this is just bad optics.

Look people, making your customers feel bad for them coming to you is a bad business concept.

Why not have:
Standard labour rate = $X
You buy parts from the shop it's = $X -20% on labour.

See how much less 'd!ck' that is?

Yet it's the same thing without all the guilt and shaming. Cause you guilt and shame enough people and some are going to think:

"Man, with the money I save on parts in a year buying from UK distributors.... I can take a pro-mechanic two week class at UBI"

Almost everything I buy is used/NOS... why should I get a guilt trip because I buy used parts and bring them to my favourite store?

[oldpotatoe]

oh I totally understand this (I'm a business major), my point was the shops in Europe seem to be able to operate without distributors according to the rant... I gotta assume those shops need to make smaller orders periodically throughout the year... QBP does play a vital role, however I also know it's standard practice to double the price when ordering from QBP for most shops... again, I don't have a major issue with this if I'm asking for a special part...



Keystone parts from QBP, that's 'standard? BS. Nobody here does that. Why make that cogset that can be had online even MORE expensive, that's nutz and IME, doesn't happen very often.

Shops in Europe don't buy directly from Campagnolo or Continental or Vittora, etc. There is a distribution system in Europe.

[fourflys]

QBP (based on my experiences with letting the shop order a part for me) is also really slow a lot of times compared to online vendors.

.

don't blame all of that on QBP... I bet your shop doesn't put an order in just for your part, but waits until they have enough orders to make it worth it... I know that's what the shop I work at does... I know I've done some orders with QBP where it shipped the next day...

[fourflys]

Keystone parts from QBP, that's 'standard? BS. Nobody here does that. Why make that cogset that can be had online even MORE expensive, that's nutz and IME, doesn't happen very often.

Shops in Europe don't buy directly from Campagnolo or Continental or Vittora, etc. There is a distribution system in Europe.

maybe it's just a San Diego thing then...

[rain dogs]

Shops in Europe don't buy directly from Campagnolo or Continental or Vittora, etc. There is a distribution system in Europe.

A company like Campagnolo with the market niche they sit in and minuscule % of on OEM bikes compared to Shimano would/could be better served starting their own independent distribution company if the grey market is jeopardizing their bottom line. (Which I doubt it is)

Especially now that they have Fulcrum and CSW.

[oldpotatoe]

I am really wondering to what extent these guys are hostages to QBP..

From the sound of these occasional whinings, QBP is charging them more then what Performance, PBK, Chain Reaction, etc.. is charging the end consumer.

QBP (based on my experiences with letting the shop order a part for me) is also really slow a lot of times compared to online vendors.

At that point it makes you wonder what exactly is going on.. why doesn't this guy order from PBK and offer customers cheaper prices with different warranty terms if they want it?

One of the successful shops near me is really mixing it up with not using QBP for everything, going direct to the manufacturer when they can, buying stuff on Ebay when they can, selling customer stuff that gets traded in on Ebay, etc.. they seem to do really well by not just going to the straight "Get everything from QBP and nothing that QBP won't sell us" model that a lot of shops seem to have.

.

-No shop uses just QBP

-Wholesale prices at QBP is about the same as retail prices at the UK places.

-QBP ships immediately and 90% of what I order comes in 2 days. Order Wednesday(yesterday), get most on Friday. If it's slow, it's because the LBS has to accumulate an order to make it worthwhile. No you and them, so you don't pay more.

-It's nutz to order from PBK and if there was anything wrong, to have to go back to them for resolution. Back and forth across the pond takes time...and $.

- I have gotten a few things from Ebay, only got bit twice..said they were new and they weren't.

-QBP has just about everything, ships quickly, free freight( I haven't paid for shipping for over 5 years), kit/OE pricing for groups.

QBP isn't the problem, manufacturers letting this happen is the problem. BUT these UK places are spending HUGE $, so I don't think it's going to end anytime soon.

Last point about sram and warranty. I have warrantied about 2 DOZEN items from sram(mostly levers), I call, then send a new one, old busted one goes into a provided, SASE bag. If the warranty thing is gooned up, the bike shop gooned it up.

[oldpotatoe]

A company like Campagnolo with the market niche they sit in and minuscule % of on OEM bikes compared to Shimano would/could be better served starting their own independent distribution company if the grey market is jeopardizing their bottom line. (Which I doubt it is)

Especially now that they have Fulcrum and CSW.

It's expensive to do that. PLUS these UK places are making them and other European manufacturers do well thru tough-ish times.

Here's how it works. UK MO place goes to Campagnolo(or whomever) with CASH, like long green. Says I want this and that, whatever, at this price and will pay CASH. Truck to back door, stuff goes in, truck drives back to UK.

Campagnolo makes a margin(less than normal to QBP), reseller makes a margin also, mostly thru volume. As long as volume is OK, they will survive. If it goes down, adios(see Circuit City, Ultimate Electronics, others).

Or places that sell tires or no name frames or wheels, or whatever. Money opens many doors.

Is this grey market?

[rain dogs]

QBP isn't the problem, manufacturers letting this happen is the problem. BUT these UK places are spending HUGE $, so I don't think it's going to end anytime soon.


How are manufacturers letting this happen?

They are selling to distributors and the distributors are supplying the grey market if they can't move goods at nominal market value.

PBK isn't buying factory direct, you said so yourself.

Manufacturers aren't offering warranty, that's the only power they have in this case, which is pretty big if you make high-quality goods.

How else should they "not let it happen?"

Re: the above comment. Like I said, I don't think it's hurting the OEM bottom line. If it was.... then yes it's expensive, but so are losing money and going out of business.

[oldpotatoe]

How are manufacturers letting this happen?

They are selling to distributors and the distributors are supplying the grey market if they can't move goods at nominal market value.

PBK isn't buying factory direct, you said so yourself.

Manufacturers aren't offering warranty, that's the only power they have in this case, which is pretty big if you make high-quality goods.

How else should they "not let it happen?"

Re: the above comment. Like I said, I don't think it's hurting the OEM bottom line. If it was.... then yes it's expensive, but so are losing money and going out of business.

See my post, I wrote, "Here's how it works. UK MO place goes to Campagnolo(or whomever) with CASH, like long green. Says I want this and that, whatever, at this price and will pay CASH. Truck to back door, stuff goes in, truck drives back to UK. "

They ARE buying factory direct, no distributor is selling to these places, at least in Europe. Manufacturers are allowing this to happen, they have the power to shut it down but that isn't going to happen. I 'suspect' places like Velomine is buying direct as well.

Plus is there unretricted OEM resale? Of course there is. Bike maker buys 5000 XT groups, at really good OE pricing, resells 1000 of them to MO place where ever, makes some $.

PLUS container filling. sram groups in container, isn't full. Manufacturer asks MO place, help me fill the container. Lose $ to send a 3/4 full container. I'll sell to MO place at deep discount to fill container. THIS crap has happened for decades.

[PaulE]

Shimano and Campy sell container-loads of parts to Trek/Specialized/Giant/etc, more than those big bike companies can hope to sell on bikes they will build? These big manufacturers buy so much because that way they know they'll get the lowest OEM prices and they have no downside as they can sell their excess parts out the back door to the UK internet retailers. Half the time I buy a part from a UK website and it comes in a plastic bag sealed with a heating iron, not the manufacturer's pretty box. Shimano and Campy need to tighten up their pricing programs and be more realistic in what they sell to their OEM business, then offer the same pricing to QBP and the other distributors. They probably also need to be more flexible with their foreign exchange rates when they price parts in different currencies, which probably creates some havoc for them as they set prices once or twice a year and fx rates vary constantly.

Bottom line is the business model needs to be fixed. I do >95% of my own wrenching, but I have nothing against the LBS and would be just as happy to buy from them if the price spread was a lot narrower. Why should some UK company across the Atlantic be able to profitably put a part in my mailbox at or less than the same total cost that my LBS would have to pay for that same part? The irony to me here is that Trek/Specialized/Giant etc also exert a lot of economic influence over LBS.

[54ny77]

"Deal. I put you down for 10,000 groupsets."

http://assets.portfolio.com/images/site/editorial/News/2008/06/03-corrupt-deal-large.jpg

See my post, I wrote, "Here's how it works. UK MO place goes to Campagnolo(or whomever) with CASH, like long green. Says I want this and that, whatever, at this price and will pay CASH. Truck to back door, stuff goes in, truck drives back to UK. "

They ARE buying factory direct, no distributor is selling to these places, at least in Europe. Manufacturers are allowing this to happen, they have the power to shut it down but that isn't going to happen. I 'suspect' places like Velomine is buying direct as well.

Plus is there unretricted OEM resale? Of course there is. Bike maker buys 5000 XT groups, at really good OE pricing, resells 1000 of them to MO place where ever, makes some $.

PLUS container filling. sram groups in container, isn't full. Manufacturer asks MO place, help me fill the container. Lose $ to send a 3/4 full container. I'll sell to MO place at deep discount to fill container. THIS crap has happened for decades.

[rain dogs]

Shops in Europe don't buy directly from Campagnolo or Continental or Vittora, etc. There is a distribution system in Europe.

I guess I'm confused by what was meant by this^^^.

I often hear the idea that people back up with trucks and cash to X manufacturers door and say "I want this much for this price" but I think it's more a "tall tale" than reality.

I'm sure distributors with loads of money buy factory direct (that's what they do), but I doubt they're driving to Vincenza unannounced to get it for some insane "out-the-back-door" pricing for massive quantities of in-demand product.

"Hey Tulio, I'd like'a 6000 record hubs fora $10 a peice... I gotta cash ina mi pocket and mi alfa romeo outta back." :banana:

Maybe I'm naive...? But OEM's aren't doing it for their health, it's to make a profit as well.

[oldpotatoe]

I guess I'm confused by what was meant by this^^^.

I often hear the idea that people back up with trucks and cash to X manufacturers door and say "I want this much for this price" but I think it's more a "tall tale" than reality.

I'm sure distributors with loads on money buy factory direct (that's what they do), but I doubt they're driving to Vincenza unannounced to get it for some insane "out-the-back-door" pricing for massive quantities of in-demand product.

"Hey Tulio, I'd like'a 6000 record hubs fora $10 a peice... I gotta cash ina mi pocket and mi alfa romeo outta back." :banana:

Talking about Local Bike Shops, little places, one location, you know, your basic Trekspecializedgiant dealer, not a $125 MILLION mailorder outfit like the UK big boys.

Tullio died in 1983. Believe what you want. Probably not unannounced but you can guarantee, PBK, Ribble, Wiggle, TotalCycling, 'putnameofukmailorderplacehere, absolutely does that very thing.

CritUSA did too, biketiresdirect, maybe, bikesdirect, maybe, Velomine, perhaps. Anytime I see a place that sells something I sell, I ask my distributor(Look Blade pedals for $179), Look, USA acknowledges they don't sell to them. They gotta get product somewhere. Same for Conti tires, Vittoria tires, Ritchey frames....

To get $ and talk price and volume to manufacturers who are coming out of a worldwide economic slump is pretty easy.

For a UK place to drive a truck to Vicenza to take a shipment back to the UK is really just so easy.

For OEMs, why did so much sram end up on so many bicycles so fast? They were offered prices they couldn't refuse(selling below cost, maybe?).

It wasn't because the stuff was so good, it's all about $.

Why does such and such team use such and such product? Cuz it's means the most product or money or both. Few care about what it is(well except J Vaughters and Cadel Evans).

Now read what I said about unrestricted OEM resale..buy 15,000 ultegra groups or Force groups, resell 10% to UK MO places, for cash. Yep, they are all making a margin.

[beeatnik]

http://cyclingiq.com/2011/11/11/vertical-limit-10-years-on-the-first-cracks-appear/

and from CC's Service Course blog:

Purportedly 53 percent of Wiggle's revenue in the previous 12 months came from international sales. Compare this to 2008 when only 2.5 percent of its total revenue came from international sales. Perhaps this was the magical datapoint which convinced its new owner, Bridgepoint, to pay such a premium. However, as I've previously documented, Wiggle wins its American business thanks to its practice of subverting "Minimum Advertised Pricing," or MAP.

MAP policies are regulations created by US wholesale distributors and directed at their "authorized" retailers. To become "authorized" retailers must agree to follow a brand's MAP policy. Simply put, if an American retailer advertises any given product for less than MAP, then it risks having its supply cut off by that manufacturer. There's a fine line here: According to the courts, it's price-fixing if a manufacturer tells a retailer the minimum selling price. However, it's not price-fixing if a manufacturer tells a retailer the minimum advertised price.

American retailers -- both your local bike shop as well as Competitive Cyclist -- have no choice except to follow these rules. To be clear, retailers neither formulate nor discuss MAP with manufacturers

[Mark McM]

... However, as I've previously documented, Wiggle wins its American business thanks to its practice of subverting "Minimum Advertised Pricing," or MAP.

MAP policies are regulations created by US wholesale distributors and directed at their "authorized" retailers. To become "authorized" retailers must agree to follow a brand's MAP policy. Simply put, if an American retailer advertises any given product for less than MAP, then it risks having its supply cut off by that manufacturer. There's a fine line here: According to the courts, it's price-fixing if a manufacturer tells a retailer the minimum selling price. However, it's not price-fixing if a manufacturer tells a retailer the minimum advertised price.

This seems quite the irony - that the gray market, which operates in a 'gray' area from the authorized distribution chain, exists to subvert the MAP system, which exists in a 'gray' area around the illegal practice of price fixing.

Is Mr. Evans a champion trying to protect the American small business man? Or is he acting as an enforcer for the 'MAP Mafia'?

[1centaur]

"For OEMs, why did so much sram end up on so many bicycles so fast? They were offered prices they couldn't refuse(selling below cost, maybe?)."

Logic suggests that if that was what it took, SRAM would lose the business as soon as they priced it to make a profit. I've seen SRAM's financials for the last few years and they look profitable to me. Price/availability that beats or is competitive with Shimano, with Campy not really in the picture, seems more likely. Think about it from the OEM side too - if you are forced to deal with only one company that can give you the volume and pricing you require, would you not be highly interested in a second choice for long-term reasons if nothing else?

[1centaur]

This seems quite the irony - that the gray market, which operates in a 'gray' area from the authorized distribution chain, exists to subvert the MAP system, which exists in a 'gray' area around the illegal practice of price fixing.

Yes, the inefficiencies/frictions of distribution that protect higher prices are being broken down in many ways and across many industries. The LBS in this thread gets the fall out, as does the small shop that loses out to Wal-Mart, and now even Best Buy as shoppers come to trust Amazon and other online retailers. Every business model is temporary, which is why profit maximization is such a universal instinct.

And BTW, even the term "gray market" is a dubious emotional attempt to protect old distribution models by scaring consumers into thinking something is illegitimate or even illegal when it fact it just exploits the current system's flaws in an intelligent way.

[oldpotatoe]

http://cyclingiq.com/2011/11/11/vertical-limit-10-years-on-the-first-cracks-appear/

and from CC's Service Course blog:

Purportedly 53 percent of Wiggle's revenue in the previous 12 months came from international sales. Compare this to 2008 when only 2.5 percent of its total revenue came from international sales. Perhaps this was the magical datapoint which convinced its new owner, Bridgepoint, to pay such a premium. However, as I've previously documented, Wiggle wins its American business thanks to its practice of subverting "Minimum Advertised Pricing," or MAP.

MAP policies are regulations created by US wholesale distributors and directed at their "authorized" retailers. To become "authorized" retailers must agree to follow a brand's MAP policy. Simply put, if an American retailer advertises any given product for less than MAP, then it risks having its supply cut off by that manufacturer. There's a fine line here: According to the courts, it's price-fixing if a manufacturer tells a retailer the minimum selling price. However, it's not price-fixing if a manufacturer tells a retailer the minimum advertised price.

American retailers -- both your local bike shop as well as Competitive Cyclist -- have no choice except to follow these rules. To be clear, retailers neither formulate nor discuss MAP with manufacturers

Really excellent article but if the Independent Bicycle Dealer is going to survive, they need to concentrate on areas that can't be hammered by the MO outfits. Can't buy a New 2012 Trek on line, can't buy service online.

To try to go toe to toe with the BIG UK Mo outfits, while in the US, good luck with that.

Competitve Cyclist Prices-

SuperRecord crankset-$1015

Sram Red crank-$475

SR shifters-$495

Red Shifters-$556

UK MO places-

SR crank-$798

Red crank-$371

SR shifter-$379

Red shifter-$464

I think the places that should worry are the MO places in the US, CC, Excel, Colorado Cyclist, Velomine, etc, etc.

They are the ones hurt, they have a big dinosaur to feed, they rely on volume. Volume goes down(as it has in the face of UK MO) and they hurt quickly...think Circuit City.

[staggerwing]

I don't know about the cycling world, but large US retailers have subverted the MAP scheme too with complicit assistance of manufacturers. Walmart, Home Depot, etc. can just go to the GEs, John Deeres, and Bosches of the workd and have an item made specifically for them. In some cases, the only real difference may be the part number, in other cases, very real corners may have been cut to reach a price point, although, on the outside, all may appear the same. Good luck in calling the manufacturer "help line" for an explanation of the real differences between two visually items with differing part numbers.

[zetroc]

I don't know about the cycling world, but large US retailers have subverted the MAP scheme too with complicit assistance of manufacturers. Walmart, Home Depot, etc. can just go to the GEs, John Deeres, and Bosches of the workd and have an item made specifically for them. In some cases, the only real difference may be the part number, in other cases, very real corners may have been cut to reach a price point, although, on the outside, all may appear the same. Good luck in calling the manufacturer "help line" for an explanation of the real differences between two visually items with differing part numbers.


This is exactly why I try to order according to part numbers now. Not all Brand X toasters/jeans/TVs/knives/etc are the same, despite appearances. The $200 42" LCD flatscreens on the Friday after Thanksgiving are not the same as the $800 models.

[djg]

http://cyclingiq.com/2011/11/11/vertical-limit-10-years-on-the-first-cracks-appear/

MAP policies are regulations created by US wholesale distributors and directed at their "authorized" retailers. To become "authorized" retailers must agree to follow a brand's MAP policy. Simply put, if an American retailer advertises any given product for less than MAP, then it risks having its supply cut off by that manufacturer. There's a fine line here: According to the courts, it's price-fixing if a manufacturer tells a retailer the minimum selling price. However, it's not price-fixing if a manufacturer tells a retailer the minimum advertised price.



MAP policies are contract terms. They may look sorta like regulations, from the point of view of the small shop that is handed the terms on a take-it-or-leave-it basis, but they are contract terms.

It's no longer the case that federal antitrust law necessarily regards vertical price restraints (such as minimum pricing) as price fixing -- not since 2007. If a manufacturer or distributor sets downstream restrictions on retail prices, that might well be ok (although not necessarily under a given state's own competition law). If, however, a bunch of shops get together to negotiate fixed prices . . . don't go there.

[oldpotatoe]

MAP policies are contract terms. They may look sorta like regulations, from the point of view of the small shop that is handed the terms on a take-it-or-leave-it basis, but they are contract terms.

It's no longer the case that federal antitrust law necessarily regards vertical price restraints (such as minimum pricing) as price fixing -- not since 2007. If a manufacturer or distributor sets downstream restrictions on retail prices, that might well be ok (although not necessarily under a given state's own competition law). If, however, a bunch of shops get together to negotiate fixed prices . . . don't go there.

Or the distributors in the US band together to force somebody like Campagnolo to shut the UK places down.

http://en.wikipedia.org/wiki/Collusion

Oh well, wish it would stop snowing.

[rain dogs]

Tullio died in 1983. Believe what you want.

Yeah, that was a joke... I'm aware that Tullio died in the 80's.

Again from the article I linked earlier:

"If the distributors’ margins are disproportionately large relative to the marketing tasks they perform, gray markets will emerge."

PBK et al are working both ends of that spectrum to their advantage buying the lowest price AM from OE components manufacturers and buying OE from other distributors and OE brands like Giant. I don't know how component manufacturers are supposed to police both those inflows without hurting themselves. Especially when OE overstock will all just end up in PBK's pockets anyway. The internet has enabled new market forces.... ask the music industry.

Anyway, I don't really have a horse in this race, and if I do.... he's lost his energy.

[Gummee]

don't blame all of that on QBP... I bet your shop doesn't put an order in just for your part, but waits until they have enough orders to make it worth it... I know that's what the shop I work at does... I know I've done some orders with QBP where it shipped the next day...I know QBP can get things from MN to VA in 3 days with 'normal' shipping. I didn't look to see where the guy kvetching about it was, but it can't be more'n about a week ANYwhere in the US.

Its not QBP's fault you didn't get your stuff.

If you order from J&B its usually next day. THAT rocks! (course, they don't have all the fancy stuff that QBP does...)

M

[peanutgallery]

irony at work here, Competitive Cyclist is owned by who? and they sell what on the internet? Gray market and lost leaders to the demise of local retailers. Not really the one who should be singing the blues as they are a part of the issue for your local shop. they take a dump on the outfitter places, too

liked them, jury still out on the new owners and locale

carry on

http://cyclingiq.com/2011/11/11/vertical-limit-10-years-on-the-first-cracks-appear/

and from CC's Service Course blog:

Purportedly 53 percent of Wiggle's revenue in the previous 12 months came from international sales. Compare this to 2008 when only 2.5 percent of its total revenue came from international sales. Perhaps this was the magical datapoint which convinced its new owner, Bridgepoint, to pay such a premium. However, as I've previously documented, Wiggle wins its American business thanks to its practice of subverting "Minimum Advertised Pricing," or MAP.

MAP policies are regulations created by US wholesale distributors and directed at their "authorized" retailers. To become "authorized" retailers must agree to follow a brand's MAP policy. Simply put, if an American retailer advertises any given product for less than MAP, then it risks having its supply cut off by that manufacturer. There's a fine line here: According to the courts, it's price-fixing if a manufacturer tells a retailer the minimum selling price. However, it's not price-fixing if a manufacturer tells a retailer the minimum advertised price.

American retailers -- both your local bike shop as well as Competitive Cyclist -- have no choice except to follow these rules. To be clear, retailers neither formulate nor discuss MAP with manufacturers

[TimD]

Disclaimer: I didn't read every post in this latest "you're screwing the LBS by buying online" thread.

One closely related topic I didn't see discussed: Precisely why a crankset has an MSRP in excess of 1000 (ONE THOUSAND) US dollars. Any why two nearly identical cranksets differ in MSRP by a factor of two (FC-7900 & FC-6700).

Is there really any question why the end user looks for lower pricing on such items?

[oldpotatoe]

Disclaimer: I didn't read every post in this latest "you're screwing the LBS by buying online" thread.

One closely related topic I didn't see discussed: Precisely why a crankset has an MSRP in excess of 1000 (ONE THOUSAND) US dollars. Any why two nearly identical cranksets differ in MSRP by a factor of two (FC-7900 & FC-6700).

Is there really any question why the end user looks for lower pricing on such items?


?? Even at 40 points, a 7900 crankset is about $700 and the 6700 is about $350.

MSRP of 7900 isn't $1000. Nor is $6700 $500.

Wholesale is $428 and $214 respectively.

[Pete Serotta]

The stores do not differ by this. Some dealers in certain areas of the country could differ some, but in 20 plus years I have never seen this in continental US.


Someone is "playing" you on the crank. Pete





Disclaimer: I didn't read every post in this latest "you're screwing the LBS by buying online" thread.

One closely related topic I didn't see discussed: Precisely why a crankset has an MSRP in excess of 1000 (ONE THOUSAND) US dollars. Any why two nearly identical cranksets differ in MSRP by a factor of two (FC-7900 & FC-6700).

Is there really any question why the end user looks for lower pricing on such items?

[TimD]

http://www.coloradocyclist.com/product/display/15451/

6700 list is $329.99. 7900 list is $659.99. Depending on how you want to calculate it, 6700 is 50% off, or 7900 is 100% more.

I didn't claim 7900 was $1000. The $1015 SuperRecord crankset is mentioned in this thread. Here's the listing:

http://www.competitivecyclist.com/product-components/2012-campagnolo-super-record-11-titanium-ultra-torque-carbon-crankset-8511.198.0.html

If you want to narrowly define "store", Bikeman is a "brick and mortar" store (actually a wood frame house with a couple of shipping containers out back) in Bath, ME. They offer the Super Record 11 at $1149.99 (!), FC-7900 at $659.99, and FC-6700 at $329.99.

I think my point stands...

[oldpotatoe]

http://www.coloradocyclist.com/product/display/15451/

I didn't claim 7900 was $1000. The $1015 SuperRecord crankset is mentioned in this thread. I checked the listing; here it is:

http://www.competitivecyclist.com/product-components/2012-campagnolo-super-record-11-titanium-ultra-torque-carbon-crankset-8511.198.0.html

Don't shoot the messenger.

No worries, but you wrote this, "Disclaimer: I didn't read every post in this latest "you're screwing the LBS by buying online" thread.

One closely related topic I didn't see discussed: Precisely why a crankset has an MSRP in excess of 1000 (ONE THOUSAND) US dollars. Any why two nearly identical cranksets differ in MSRP by a factor of two (FC-7900 & FC-6700).

Is there really any question why the end user looks for lower pricing on such items?"

No mention of SR. But yep, SR titanium titanium spindle cranks are expensive. Much more expensive to make than an aluminum crank. I imagine machining the ti spindle is not cheap. I think a better question is why a 7900 crank(aluminum) is $700 and why does the big ring cost $400?? Very expensive to forge/weld all this hollow aluminum stuff but ALL of it is expensive. All components. Some are more 'worth it' than others.

[JRABS]

Hello and Thanks,

I appreciate all of the thoughtful input on this subject. I will not be charging the "corking fee". Unfortunately I wrote and published this policy/letter/note/whatever you want to call it when I was in a very emotional state (I get pretty personal and passionate about this stuff). I had one single customer that was being relentless about my prices and services. I let it get the best of me, and I shouldn't have.

I'm very disappointed in myself for writing and publishing the note on Facebook, and wish I could take it back. I've obviously deleted the note from Facebook, but I'm sure it will live on in internet forums such as this. I only had an issue with one customer - not all of them. I let my emotions take over without thinking, or sleeping on it.

Everyone makes mistakes, and unfortunately for me, this one was huge. I suppose it created some thoughtful discussion, which is good.

I've made a promise to myself (and hence to my customers) that I wouldn't post anything without at least sleeping on it. It's a tough economy, and I've been trying to stay afloat. I had a single customer get the best of me (unintentionally) at the wrong time.

Thanks again,
Travis Evans

[Ken Robb]

haven't we all said or posted something we wish we hadn't or posted something that didn't read the way we intended it to "sound"?

[Pete Serotta]

so posts and posts some more....YOU are welcome to posts and the past is the past.


haven't we all said or posted something we wish we hadn't or posted something that didn't read the way we intended it to "sound"?


:D :bike: Pete

[fourflys]

Hello and Thanks,

I appreciate all of the thoughtful input on this subject. I will not be charging the "corking fee".
<snip>
I've made a promise to myself (and hence to my customers) that I wouldn't post anything without at least sleeping on it. It's a tough economy, and I've been trying to stay afloat. I had a single customer get the best of me (unintentionally) at the wrong time.

Thanks again,
Travis Evans

Good on you Travis and if I ever get to the area (which is a likely future assignment), you'll be one of the first shops I visit...