Shimano changing aftermarket pricing; lowering distributor margins

[BengeBoy]

Shimano is changing their aftermarket pricing Jan. 1.

http://www.bicycleretailer.com/news/newsDetail/4911.html

Not sure I understand enough about the industry's sales channels to read between the lines, but looks like they are lowering recommended dealer margins and distributor margins in order to bring down MSRP's at the dealer level ?

From the story:


"The margin reduction should give IBDs more competitive pricing against on-line discounters who have steadily eroded part sales at retail. Distributors, however, are unhappy over the reductions and say that Shimano should do a better job of controlling gray market sales....


....Several factors are driving Shimano’s efforts to bring component pricing more in line with consumer expectations—expectations too often driven by the Internet. Among them:

* Loss-leading and cutthroat pricing from overseas on-line discounters who also collect no sales tax.
* Retailers confronted by consumers demanding prices more in line with prices they find on the Internet.
* Shimano’s global operations, which serve hundreds of OEMs worldwide, make it all but impossible to control gray marketing. "

[Ken Robb]

The needle on my BS-Detecto-Meter is pegged!
There two ways to narrow margins. Lower list prices or raise wholesale prices. Gee, I wonder which way Shimano will go.
The way I read the article is that if the gross margin is reduced from the surprisingly high 60% quoted to less (30%??) the discounters will be unable to offer such big discounts and this will help the retailers. Of course lots of retail customers do pay full retail. If a retailer wants to sell some goods at discounted products it's his choice. He has to decide if the discounted sales are really extra business or if he's just giving away margin for no gain on his bottom line.
Under the new plan he will be selling everything at a discount relative to his potential margins last year. Gee thanks Shimano for making every store a limited mark-up discounter no matter what.

[oldpotatoe]

The needle on my BS-Detecto-Meter is pegged!
There two ways to narrow margins. Lower list prices or raise wholesale prices. Gee, I wonder which way Shimano will go.
The way I read the article is that if the gross margin is reduced from the surprisingly high 60% quoted to less (30%??) the discounters will be unable to offer such big discounts and this will help the retailers. Of course lots of retail customers do pay full retail. If a retailer wants to sell some goods at discounted products it's his choice. He has to decide if the discounted sales are really extra business or if he's just giving away margin for no gain on his bottom line.
Under the new plan he will be selling everything at a discount relative to his potential margins last year. Gee thanks Shimano for making every store a limited mark-up discounter no matter what.

No, it said they 'could' promise 60% margin(now about 35%) but they aren't going to do that. We'll see if prices at the wholesale level stays the same or not..then a retailer can charge less and maintain a 'normal' margin and compete with low overhead retail based resellers.

Perhaps Campagnolo will do the same. Wholesale prices have taken a big dip lately for Campagnolo...I'm much closer to places like Ribble than ever before..about 15% higher. 2011 Campagnolo

[PaulE]

Wants to do something about their pricing structure, they need to address their OEM business with all of the bike manufacurers as well. I think that a good chunk of ProBikeKit's (and possibly other overseas online sellers') Shimano sales are new components stripped off of complete bikes that they buy. How many times have you bought a Shimano component from ProBikeKit and it came in a plastic bag sealed with a heat gun? I've bought a lot of Shimano components from PBK and I would say it's about 50/50 between components that come in Shimano's factory packed aftermarket boxes and plastic bags that have been melted closed with a heat gun. The plastic bag items still manage to have the Shimano instructions most of the time!

While Shimano should offer some discount to bike manufacturers and distributors based on their volume of business, it should not be so much that creates such a signifcant price disparity between overseas internet merchants and your LBS. It always amazes me that I can have a tire or component delivered to my door from the UK at a price that the LBS says is cheaper than their cost.

[bike22]

so basically what this means is that a lbs will make less off parts?

[oldpotatoe]

Wants to do something about their pricing structure, they need to address their OEM business with all of the bike manufacurers as well. I think that a good chunk of ProBikeKit's (and possibly other overseas online sellers') Shimano sales are new components stripped off of complete bikes that they buy. How many times have you bought a Shimano component from ProBikeKit and it came in a plastic bag sealed with a heat gun? I've bought a lot of Shimano components from PBK and I would say it's about 50/50 between components that come in Shimano's factory packed aftermarket boxes and plastic bags that have been melted closed with a heat gun. The plastic bag items still manage to have the Shimano instructions most of the time!

While Shimano should offer some discount to bike manufacturers and distributors based on their volume of business, it should not be so much that creates such a signifcant price disparity between overseas internet merchants and your LBS. It always amazes me that I can have a tire or component delivered to my door from the UK at a price that the LBS says is cheaper than their cost.

Called unrestricted OEM resale..but 15,000 groups at amazing prices, resell 2500 to places like Ribble for notmuch$.

We'll see if shimano can close that hole again..trekspecializedgiantetc have done it for a while.

[oldpotatoe]

so basically what this means is that a lbs will make less off parts?

Margin will be the same, wholesale prices to the LBS 'may' be reduced..we'll see.

[PaulE]

Called unrestricted OEM resale..but 15,000 groups at amazing prices, resell 2500 to places like Ribble for notmuch$.

We'll see if shimano can close that hole again..trekspecializedgiantetc have done it for a while.

So Trek, Specialized, Giant, etc are buying more groups than they need for complete bikes they're going to sell and then back door the rest to the overseas internet discounters? Seems short-sighted, they are putting a hurt on their LBS dealers. Seems like these big bike co's should first offer the "excess" components to their dealers. Seems like Shimano needs to do something about their unrestricted OEM resale policy too.

[oldpotatoe]

So Trek, Specialized, Giant, etc are buying more groups than they need for complete bikes they're going to sell and then back door the rest to the overseas internet discounters? Seems short-sighted, they are putting a hurt on their LBS dealers. Seems like these big bike co's should first offer the "excess" components to their dealers. Seems like Shimano needs to do something about their unrestricted OEM resale policy too.

LBS/USA buys complete bikes. Reselling groups does nothing to LBS/USA.

The dealers don't want groups. Big money talking. When Trek wants 50,000 groups and pays for it up front, shimano isn't going to question it. sram is in the wings waiting for Trek to flinch.

Also a thing called container fills. A container is 3/4 full of groups..somebody like Ribble offers to fill it up, and pays much less cuz the container to ship costs the same. shimano is happy to fill it and sell more stuff.