Mark Up on Parts

[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.

[nmrt]

you saw first hand the reason why corporations manufacture in china.
cheap labor!!!

[unterhausen]

how does this reflect on the local bike shops at all? Not like they can go to China themselves for manufacturing. Chinese manufacturers are notorious for stiffing small clients that try to go direct without local representation.

Standard retail markup sounds high, but it is long established because people that cut their margins don't stay in business. Same for distributor markups. The real problems come when there are more levels of markup than that, as is the case with Campagnolo, for example. The usual markups on complete bikes is significantly less than normal retail markups. OTOH, my guess is that walmart has significantly higher than normal markups on their bikes, since they are selling those $20 bikes for $100-$150.

I once asked a framebuilder why he didn't build in aluminum. He said that you can get a container of aluminum frames for $25 each, so it didn't make sense to compete with that.

[MaraudingWalrus]

Markup and margin are different things.

I can tell you that as a local bike shop, it costs me a hell of a lot more than $20 to get a single-speed beach cruiser in the door.

The cheapest single-speed cruiser I sell is about $270 or so. The store does not make $250 on that bike. Margin on that bike is under 35%.

The manufacturer that is buying in absurd volume, is obviously going to make even more money than the shop.

Back in the day, some shop were able to import their own line of bikes. I know the bigger shop in town here used to import their own bikes called Adventure Cycles (store is called Adventure Cycles) in the mid-1980s or early 1990s, and were able to make significantly more money, but they were leveraged out by having ordered containers full of them.

In most cases, the shop is not pulling in the extreme margins or large amounts of money - especially on bikes. It's someone else in the supply chain that is making bigger shares - or just lots of people along the way making guaranteed shares. And then it's up to the bike shop to try and convince someone to buy the thing, but nobody upstream cares, as they've already made their portion.

Shops may make big margins on things like Cloud9 branded saddles or various other "house brand" items from distributors, but that's about it.


I can also walk up to the guy up the street from my parents' house and buy bucket fulls of avocados, mangoes, or oranges for like $2 a bucket. But you probably pay many times more than that to get a smaller amount of mangoes at the grocery store. It passed through many more layers to get to you via Whole Foods than from the dude's backyard grove.


How many bike shop owners do you know that are rolling in money?

[biker72]

Originally Posted by MaraudingWalrus

How many bike shop owners do you know that are rolling in money?

None that I know of. Big shocker to me is the closing of Plano Cycling and Fitness here in the DFW area. I bought my first real road bike from them around 1987. They had been operational many years before that.

[tuscanyswe]

Originally Posted by MaraudingWalrus

Snip*
I can also walk up to the guy up the street from my parents' house and buy bucket fulls of avocados, mangoes, or oranges for like $2 a bucket. But you probably pay many times more than that to get a smaller amount of mangoes at the grocery store. It passed through many more layers to get to you via Whole Foods than from the dude's backyard grove.


Snip*

2$ for a bucket of avocados? Damn i pay 2 / avocado here. id live on them alone if they were 2$ a bucket. My fav non meaty product .)

[Davist]

Originally Posted by nmrt

you saw first hand the reason why corporations manufacture in china.
cheap labor!!!

Cheap China has been over with for a while... We use Chinese manufacturing for the willingness to automate stuff, some real cutting edge stuff happening there..

from '12: https://www.economist.com/business/2...of-cheap-china

OP and $20 bike was spotted in Shanghai in '07, a lot has happened since then, I was in Xiamen in November, saw full "4th industrial revolution" (full analytics and digital manufacturing) factories...

[Veloo]

And this just popped up on my Linkedin feed.

[dave thompson]

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.

.....sigh.....

[weisan]

Originally Posted by beaverstuff

I went to China with my wife in 2007.

Did you just wake up?

[ultraman6970]

In many countries china imports killed local indistry big time. in my country chinese imports killed hand made custom bikes big time. In other countries the same.

[dancinkozmo]

Originally Posted by Veloo

And this just popped up on my Linkedin feed.

i believe thats a kathy lee gifford quote

[Peter P.]

Anybody know if there are tariffs on bicycles?

[Spaghetti Legs]

So when do we start talking about bike parts and not Chinese Wal Mart bikes from 2007?

[unterhausen]

I put together a Walmart Denali road bike for someone and the quality of those parts led me to believe that it probably left the factory for less than $10. Made an early '80s AMF look like a ... okay, nothing could make those old AMFs look any better. In fact, I think the Denali might be a step up.