Bicycle Purchasing Pyschology - We've Been Duped

[samsays]

Recent evolution of the high-end cycling market is fascinating in terms of pricing and consumer purchasing. My analysis goes something like this…(please focus on the general concept)

Stage 1
Custom bike builders (Serotta, Seven, IF, Calfee, etc.) were producing superior products in the form of quality (materials), precision (manufacturing) and design (customization) – not to mention most of these products were made in America. In exchange for these qualities, consumers were willing to pay a premium.

Stage 2
Something odd happens. The giants (Trek, Cervelo, Specialized, Time, Look, etc.) figure out they can charge the same high-end prices without delivering on any of the unique qualities of the custom bike builders. Rather the story primarily shifts to weight – lightest bike wins. Given high margins on these products (mostly made off shore), they can invest large sums of money into adverting and sex appeal (and perhaps expanded R&D departments). Example, Trek Madone 6.9 SSL RADIOSHACK NISSAN TREK Edition = $11,686.48 (current list price).

Stage 3
By equalizing the cost difference between custom builders and the giants the perceived value and associated price premium to custom builders no longer holds the same weight as it used too. More importantly, by driving cost similarities at the top end, the mid-market ($3,000-$7,000) bikes explode. While we all argue about the insane prices at the top, we now purchase in the mid-market at a much higher average price than ever before. By quantifying the insane, the outrageous is more attainable.

Result
Custom bike builders have a difficult time competing without off shoring operations, and we the consumer pay much higher prices for stock, run of the mill racing bikes.

I grew up riding dirk bikes (KTMs)…a brand new 2012 KTM 350 SX-F lists for $8,499...point being…perhaps we are paying too much!

Note: This is not a rant against the giants, or a sap story for the custom bike builders. To me, it’s just an interesting story to see how capitalism and consumer preferences can not only change an industry overnight, but fundamentally skew the true cost of a product.

[classtimesailer]

Very interesting. Good for us. My custom steel was easier to justify at my house since it cost less than nice store bought bikes.
Jeff

[sg8357]

..

[Kontact]

I completely agree. Add to that:

High end stock bikes are made in the USA or Europe (the cycling meccas). Yay!

High end stock bikes are made in Asia by US and European design companies. Yay!

High end stock bikes are made in Asia by companies that work closely with and supply US and European design companies. Yay.

High end stock bikes are made and designed in Asia. Yay?


And that's how Chinarello becomes the equivalent to a Pinarello in just a few short years. Companies have sold overseas production quality so well that consumers are starting to believe that no one knows bikes like the Chinese.

[peanutgallery]

you will never pull a holeshot, get the Dungey 450 and a neck brace

so true, same thought at times. that is why I shop around and am selective, try not to believe the hype

Originally Posted by samsays

Recent evolution of the high-end cycling market is fascinating in terms of pricing and consumer purchasing. My analysis goes something like this…(please focus on the general concept)

Stage 1
Custom bike builders (Serotta, Seven, IF, Calfee, etc.) were producing superior products in the form of quality (materials), precision (manufacturing) and design (customization) – not to mention most of these products were made in America. In exchange for these qualities, consumers were willing to pay a premium.

Stage 2
Something odd happens. The giants (Trek, Cervelo, Specialized, Time, Look, etc.) figure out they can charge the same high-end prices without delivering on any of the unique qualities of the custom bike builders. Rather the story primarily shifts to weight – lightest bike wins. Given high margins on these products (mostly made off shore), they can invest large sums of money into adverting and sex appeal (and perhaps expanded R&D departments). Example, Trek Madone 6.9 SSL RADIOSHACK NISSAN TREK Edition = $11,686.48 (current list price).

Stage 3
By equalizing the cost difference between custom builders and the giants the perceived value and associated price premium to custom builders no longer holds the same weight as it used too. More importantly, by driving cost similarities at the top end, the mid-market ($3,000-$7,000) bikes explode. While we all argue about the insane prices at the top, we now purchase in the mid-market at a much higher average price than ever before. By quantifying the insane, the outrageous is more attainable.

Result
Custom bike builders have a difficult time competing without off shoring operations, and we the consumer pay much higher prices for stock, run of the mill racing bikes.

I grew up riding dirk bikes (KTMs)…a brand new 2012 KTM 350 SX-F lists for $8,499...point being…perhaps we are paying too much!

Note: This is not a rant against the giants, or a sap story for the custom bike builders. To me, it’s just an interesting story to see how capitalism and consumer preferences can not only change an industry overnight, but fundamentally skew the true cost of a product.

[Ahneida Ride]

In the mid range ..... a good part of the cost is federal reserve note dilution.

However ....
Walk into any LBS pick up a Saddle and look at the price tag? 145 frn ?
Saddles used to be in the 35 range. That is NOT due to frn dilution.

So .... have we become suckers ?

oh yea ....HB's leather cost just went up 6% (in one year) in frns.

when I was a kid 10K cars hardly existed. a souped up BMW was 8,500.

[Ahneida Ride]

I'd humbly submit that one can purchase a great bike from a leading builder
below the price of a off shore "quality" bike.

What does Carl Strong ask? 2300 for frame/fork ?

I any event, I am just rambling, 3 cheers to the OP.

[MattTuck]

After talking to builders, I'm not sure that they are 'rolling in the money'. The precision you talk about comes at a cost, their time.

Running a business with overhead, materials, health benefits, general and product liability, traveling to trade shows, etc. is not cheap -- not to mention, the builder only gets to take home what they make after all of this.

The cheapest custom steel frames I've seen are around 1,500 - 1,800. And that is for tubes welded together, no fancy fillets or nice lugs. And that price is from a guy who runs a bike shop and builds in his spare time.

It is expensive to run a business...

[tiretrax]

I think the point is that custom frames now seem like a bargain (well, good value anyway) compared to a stock, high-end carbon bike.

[cmg]

Where the frame is made has no effect on it's cost but it's profit margin. the stage 2 giants were always ahead of the game (custom builders) in the equation. Those early giants that were able to see the shift survived (Bianchi, Colnago Trek) and yes lightness wins or leads the list of desirable qualities because that is the easiest to quantify. go to a group ride when someone shows up with a custom builder's bike amongst a sea of Treks and specialized riders. They just stand around and wonder why.

[Ahneida Ride]

What the little inside knowledge I have ...

On a lugged frame ... a builder can make frns .... BUT they also
have to put in a LOT of time ... so the trade off.

On a true "show bike" frame .... there are show bike hours.

On a tig'ed frame, ... to be truly profitable, you have to have volume.

[c-record]

I agree with what's been said. I'm baffled, BAFFLED, why some feel that their stock bike is truly superior to a custom. Buyer justification? I don't knock their bike and have ridden/owned many, many of the current crop of high-end production stuff on the market. Nice bikes yes, better value than what I can purchase custom... I think not.

[Rueda Tropical]

Originally Posted by c-record

I'm baffled, BAFFLED, why some feel that their stock bike is truly superior to a custom.

Back when pro's raced on custom Italian steel. Customers wanted what the pros rode. Now they ride massed produced Asian CF. Now that's what the customers want.

Just like kids walking into a music store and buying whatever guitar their guitar hero played or the car in the transformer flick or the with an older generation the camera Cartier-Bresson shot with or the car James Bond or James Dean drove. It's lifestyle, tribal identification and mythology, not function.

[bking]

Is the high cost legit, i confess i don't know. Are Trek, Giant etc making Apple or Microsoft, or even Exxon type margins, i'm pretty sure they're not. And i have no idea if someone in their supply chain is, i've not heard about it if they do (someone let me know if they are, i'll invest).
On the list started by the op i don't entirely agree with all the points. I do think that the quality of product, especailly the top end, is on par with what the best custom guys put out (granted there are customer service issues occasionally, but that exists for some of our best one man shops as well). On the fit, I also think i can make a BMC work and fit just as well as a custom. Don't know that there's an advantage there either.
I entirely agree with what i got out of the thread that the high cost of a tricked out Trek makes a trip north to Montana for a handmade for me bike from a builder who becomes a friend and ally seem very reasonable indeed.

I'm not really defending the giant builders, don't misunderstand. I haven't bought a plastic bike since the BMC mentioned above in, I think it was 2007 or 8. I have been on a tear buying from some of the best one man shops or small builders in the country. Quality of materials, sure, workmanship absolutly, proper fit, yes, price, very fair and reasonable (perhaps thanks to the big guys, as OP points out), but for me it's more than all of that, and i don't know that i can put it in words. I just like it when it says Kirk, or Sachs, or Pegoretti, and not Specialized, and i have to explain.
I love to ride, and i really love the bikes these guys produce one at a time, and I'm grateful they share their passion and skill at a price, that as pointed out above, seems pretty darn reasonable these days.

While i have converted a few friends to my way of thinking--handmade steel, when someone is really looking into getting into bikes I explain there are a lot of companies that make a great bike. Find one that just screams out to you to throw a leg over it and ride.

By the way, I've been a KTM guy since about 1972 or so, when a guy named John Penton was importing them and slapping his name on them. Really sad that they are the only one of all the great European marques that made it...there too is a David and Goliath story, but for another day .

[Kontact]

Originally Posted by c-record

I agree with what's been said. I'm baffled, BAFFLED, why some feel that their stock bike is truly superior to a custom. Buyer justification? I don't knock their bike and have ridden/owned many, many of the current crop of high-end production stuff on the market. Nice bikes yes, better value than what I can purchase custom... I think not.

Well, if the bike fits and you like the way it rides, why wouldn't it be "as good" or "better" (lighter or more aero) than a custom that also fits and rides well?

I have a Merlin with Tom Kellogg geometry that fits me very well, and I am a fairly normal weight for my frame size. What would Tom have done on a custom for me that he and Merlin didn't do when they designed my bike? (I am happy with the finish and braze-ons).

Customs are nice if you need a custom or want a custom.