Mark Up on Parts

[Heisenberg]

super exciting that the OP has discovered the concept of global macroeconomics, but only realized it 12 years later.

perhaps next the discovery of fiat currency?

[makoti]

Originally Posted by dancinkozmo

i believe thats a kathy lee gifford quote

I didn't know KLG had quotes

[oldpotatoe]

Originally Posted by beaverstuff

Guys,
I went to China with my wife in 2007. In Shanghi we went into a HUGE store. The main floor was as big as Walmart; it also had a second floor - same size as the first floor and two basements - just as big.
I found the department that sold bikes and I was in for the shock of my life.
There was a granny style bike, a cruiser like the old days, with fenders and a wicker basket up front. The bike was spotless, like it just jumped out of a catalog. I checked the price; I checked it again and did the Yuan to US$ conversion a couple of times. THE BIKE WAS RETAILING FOR LESS THAN $20 USD.
Then I started thinking about contributions to the cost: $10 for the frame, $5 for each wheel - nothing for the remaining parts - wowser. Then I considered wholesale, plus profit, equals retail and my head went spinning.
Bike parts markup is extortion. I came to the conclusion that no matter the name brand, most parts are made in east Asia and that's where the local bike shops make their money.

Your head is spinning in the wrong direction and confused is right.
First-wholesale plus cost of inventory plus fixed costs=cost of doing business.
Most retailers recognize that cost of 'stuff' divided by about .65=35% 'margin...which is the minimum to come out the other end with ZERO net profit and no more added debt.

You pay for your inventory and then cover your fixed costs(like rent, labor, utilities, insurance) either thru margin(35% minimum) or thru volume.

Throw on the fact that a 'bike' is made of many parts and economically, that means a distributor, who also needs to make a 'margin' to stay in biz. So, a $30 widget, from manufacturer is sold to retailer at $46..who in turn sells it to retailer for $70..he sells it to you and that means he pays his rent, makes payroll, pays his bills at end of month etc.

Probably the big store in China 'may' own the factory, which eliminates the middle man plus the standard of living in china is a 'bit' different than the US.
Average monthly salary in Shanghi

The average monthly salaries for select Chinese cities in the first quarter of 2017 were: Beijing: 9,942 yuan ($1,440) Shanghai: 9,802 yuan ($1,420) Shenzhen: 8,892 yuan ($1,288)

And in Baltimore is about 3 times that...Add in the cost of doing biz in China is much less..rents, insurance, utilities...etc...2017 prices, BTW...

So I'd say bike part markup isn't really 'extortion'.....

BTW-when you went to China 11 years ago..how much was a really good meal? How much was gasoline? ETC...

[peanutgallery]

I got extorted for an exhaust on my son's car last week...come to think about it...I got extorted a while back for that car, too

If you buy something, keep it warm/dry for a period of time, and install on demand for a customer at a profit margin that allows you to pay overhead and keep folks employed...does that make you a bad person?

The interwebs have allowed a large number of consumers with absolutely no technical knowledge to shop for things purely based on price. That's an interesting conundrum as it doesn't take lots of important variables into consideration Sure you can buy a fresh 2.5 lump for your 2010 Jetta off of Craigslist for $250...but spend a day under the shade tree with it and that $1500 all in from your local mechanic isn't such a bad deal after all

Be interested to see when consumers tire of purchasing I'll fitting widgets manufactured in China from nuclear waste and instead take the time to get the actual product withe the correct fit from someone who knows what they're talking about

Interesting times

[David Kirk]

Words and their true meaning matter.

dave

[charliedid]

Originally Posted by David Kirk

Words and their true meaning matter.

dave

And how.

[earlfoss]

I agree in part with the OP. It's hard for me to assume that companies aren't simply pulling numbers out of their a$$es when setting MSRP. It's going to fly as long as people are willing to pay the prices they're making up.

[zmalwo]

Everyone who touches the good need to take a cut and after passing through so many hands it gets expensive.

[choke]

All I can say don't ever buy any jewelry....the markup on that will make your head spin.

[Jaybee]

Originally Posted by earlfoss

I agree in part with the OP. It's hard for me to assume that companies aren't simply pulling numbers out of their a$$es when setting MSRP. It's going to fly as long as people are willing to pay the prices they're making up.

What do you do for a living? No matter what good or service you are providing, if you consistently provide it at your cost or less, then you won't be in business very long.

People decide what the market will bear, and the market tells them if they are correct or not. If you think you can do it cheaper, go for it. If you're right, you'll rake in the bucks.

[peanutgallery]

Bingo, we all make our way in the world. Would love to peel back the layers in that

Originally Posted by Jaybee

What do you do for a living?

[earlfoss]

Originally Posted by Jaybee

What do you do for a living? No matter what good or service you are providing, if you consistently provide it at your cost or less, then you won't be in business very long.

People decide what the market will bear, and the market tells them if they are correct or not. If you think you can do it cheaper, go for it. If you're right, you'll rake in the bucks.

This echoes part of my message. The market tells them if their pricing model is correct, and it must be because consumers are willing to pay up.

[oldpotatoe]

Originally Posted by earlfoss

I agree in part with the OP. It's hard for me to assume that companies aren't simply pulling numbers out of their a$$es when setting MSRP. It's going to fly as long as people are willing to pay the prices they're making up.

For some products, no doubt it's what the market will bear. I doubt this handbag really 'costs' $13,000 to make and sell at $20,000..but bike stuff..from raw materials->factory->distributor->retailer..each gets about a 25-35% 'margin'..and if you can do it for less, go right ahead, other wise pay that $35 for that shimano BB...

It's surprising that so few really understand the whole..."cost of doin' business", model. Any business...

[unterhausen]

in small quantity, a Shimano bb would cost $3000

[oldpotatoe]

Originally Posted by choke

All I can say don't ever buy any jewelry....the markup on that will make your head spin.

Skiis too..