retail vs online costs
Discussion
i'm a big fan of supporting my LBS wherever and whenever possible. bought a number of bikes, parts and services from them. recently had them build up some wheels for me (they supplied parts) and had another bike serviced which required a few parts which they provided.
the other day i decided to upgrade my brakes on the cross bike to hydraulics. this required a fair few components for which they quoted a specific price. i had already been online to look at prices and to get an idea of what they might charge, expecting their prices to be a little higher, but i'd be happy to accept the price because it is important to support retail businesses not least for their benefit of the shop but for the benefit of the high street as a whole i.e. if shops start to close down because people don't use them there is a knock on effect for other shops and the danger of places starting to look a bit run down.
however.... the shop price was 40% higher than the online price. at that sort of difference you can't ignore the difference as it starts to run in £100's of pounds.
my question what margin do bike shops need to work on to make their businesses viable. i would have thought 30% would be very good. on the other side of the coin, what sort of margin are the online retailers making if they are selling kit for 40% less than retail?
i would be very interested in hearing from anyone who knows or understands the retail market. i can't work it out myself!
the other day i decided to upgrade my brakes on the cross bike to hydraulics. this required a fair few components for which they quoted a specific price. i had already been online to look at prices and to get an idea of what they might charge, expecting their prices to be a little higher, but i'd be happy to accept the price because it is important to support retail businesses not least for their benefit of the shop but for the benefit of the high street as a whole i.e. if shops start to close down because people don't use them there is a knock on effect for other shops and the danger of places starting to look a bit run down.
however.... the shop price was 40% higher than the online price. at that sort of difference you can't ignore the difference as it starts to run in £100's of pounds.
my question what margin do bike shops need to work on to make their businesses viable. i would have thought 30% would be very good. on the other side of the coin, what sort of margin are the online retailers making if they are selling kit for 40% less than retail?
i would be very interested in hearing from anyone who knows or understands the retail market. i can't work it out myself!
https://www.facebook.com/permalink.php?story_fbid=...
"lots of online prices at or less than our trade"
"lots of online prices at or less than our trade"
Shops like Sigma Sport are I think making more money from the workshop than sales, they're hardly a tin pot operation, but their prices used to be far higher than online, more recently they're up there with Wiggle, or close to. But their workshop is where the margin is and its fully booked for about 2 months from any given time. I think the days of making money on bits in shops is probably gone.
I suspect they can't make 'much' of a living from selling parts, although bike sales are a bit more of a level playing field. Trek for instance won't allow delivery as an option for their bikes, only collection which probably aids the LBS's.
Suspect most progressive LBS's will be working on developing services, on which they can make a better profit margin than on parts/bikes alone. I know a few around us have performance workshops, training sessions, altitude sessions etc which seems like the way to go.
As the OP says, you cannot ignore the discounts which is unfortunate. Currently looking at a new DA 9000 chainset from CR at £258, whereas local LBS is nearly £400.
Suspect most progressive LBS's will be working on developing services, on which they can make a better profit margin than on parts/bikes alone. I know a few around us have performance workshops, training sessions, altitude sessions etc which seems like the way to go.
As the OP says, you cannot ignore the discounts which is unfortunate. Currently looking at a new DA 9000 chainset from CR at £258, whereas local LBS is nearly £400.
The bigger distributors are finally helping the shops out, by helping them with the price margins that they supply at, unfortunately this isn't the case for every part company. OP I would personally go and ask the shop if they can quote a more competitive price, let them know what and where you have seen for what price, they might be able to get some help from the distributor to help.
A small shop will need to cover rent, rates, salaries and other running costs from the margin they make. For ease of maths let's say that comes to £125k a year (£80k on staff costs, £45k for the rest) so that's about £350-500 per day depending on number of trading days. If you sold small-ish stuff at 30% margin you're never going to make that - £1.5k a day on components day in, day out, isn't going to happen.
As others have said, buying prices are also vastly different. Some online sites buy from outside the UK to get better prices, or even direct from factories bypassing the local distributor altogether. Their cost of sales is far lower and they shift a load more volume so they can make 25% margin and still sell at below a small shop's 'trade' price.
This is what has driven a lot of shops to diversify, trying to become a destination, selling coffee and so on to get people in the door and impulse buying things. All the retailers know if someone wants an Ultegra rear mech they can't get close to online prices so won't even try.
As others have said, buying prices are also vastly different. Some online sites buy from outside the UK to get better prices, or even direct from factories bypassing the local distributor altogether. Their cost of sales is far lower and they shift a load more volume so they can make 25% margin and still sell at below a small shop's 'trade' price.
This is what has driven a lot of shops to diversify, trying to become a destination, selling coffee and so on to get people in the door and impulse buying things. All the retailers know if someone wants an Ultegra rear mech they can't get close to online prices so won't even try.
A lot comes down to customer service (or lack thereof). There's many things I choose to buy in a shop and not save less than a tenner. For example my Garmin was 8 quid more to buy in a major welsh sounding chain than online. But... items like Garmins are just consumer electronic crap, and as we all know, consumer electronic crap has a high likelihood of going wrong. I want somewhere to take it when that happens who cant fob me off easily as I'm standing there in front of them, not from behind a keyboard.
I Had this problems with a well known brand of shorts that fell apart, I'm glad i didn't save just under 20 quid by buying online as when the same shop tried to squirm out of it I was there so they had to deal with me. (I did get a replacement). Might have been a different story from behind and email. Cleanly ill never know of course.
I know certain online outlets are great with returns but you only really find out who is any good when there is a problem. I might be just unlucky, but ive had to return so many items due to faults (not just cycling equipment) that I'm very wary of buying online, certainly for stuff that can (and does) easily go tits up like electronic goods.
Depends what your buying and what is worth what to you I guess. You pays your money as they say.
I Had this problems with a well known brand of shorts that fell apart, I'm glad i didn't save just under 20 quid by buying online as when the same shop tried to squirm out of it I was there so they had to deal with me. (I did get a replacement). Might have been a different story from behind and email. Cleanly ill never know of course.
I know certain online outlets are great with returns but you only really find out who is any good when there is a problem. I might be just unlucky, but ive had to return so many items due to faults (not just cycling equipment) that I'm very wary of buying online, certainly for stuff that can (and does) easily go tits up like electronic goods.
Depends what your buying and what is worth what to you I guess. You pays your money as they say.
Steve vRS said:
I asked a bike shop for a price for some Campag Zondas a while ago and they said much the same. The price they could buy them for in the trade was more than wiggle were selling them for including VAT.
Steve
They all say that, their trade cannot be higher than wiggle. Otherwise buy them from wiggle, claim vat back, add margin plus vat and argue the margin is LBS survival. But not that their trade price is higher.Steve
N8CYL said:
They all say that, their trade cannot be higher than wiggle. Otherwise buy them from wiggle, claim vat back, add margin plus vat and argue the margin is LBS survival. But not that their trade price is higher.
If they do that, they have no recourse to the manufacturer / UK distributor in the event of a customer return or warranty claim. They would still have to fulfill their legal obligations to the consumer but be left with the worthless item.I have zero loyalty to my LBS.
Likewise when I need them for mechanical work I am happy to pay the premium for parts they supply.
Bought a stem recently from Acycles, french online retailer with some awful feedback. Price was so keen I am happy to take a chance that my experience will be different.
Likewise when I need them for mechanical work I am happy to pay the premium for parts they supply.
Bought a stem recently from Acycles, french online retailer with some awful feedback. Price was so keen I am happy to take a chance that my experience will be different.
astroarcadia said:
I have zero loyalty to my LBS.
Likewise when I need them for mechanical work I am happy to pay the premium for parts they supply.
Bought a stem recently from Acycles, french online retailer with some awful feedback. Price was so keen I am happy to take a chance that my experience will be different.
My experience of Acycles has only been positive. Only bought Mavic from them - so they shouldn't go too far wrong on that.Likewise when I need them for mechanical work I am happy to pay the premium for parts they supply.
Bought a stem recently from Acycles, french online retailer with some awful feedback. Price was so keen I am happy to take a chance that my experience will be different.
N8CYL said:
Steve vRS said:
I asked a bike shop for a price for some Campag Zondas a while ago and they said much the same. The price they could buy them for in the trade was more than wiggle were selling them for including VAT.
Steve
They all say that, their trade cannot be higher than wiggle. Otherwise buy them from wiggle, claim vat back, add margin plus vat and argue the margin is LBS survival. But not that their trade price is higher.Steve
My last 2 MTB's have been bought via a direct model (YT industries)
I just ordered a carbon DH bike from them - it was £3800. A same specced Santa Cruz V10 was nearly £11k from a retail bike outlet
I buy everything on-line for bike stuff, the only bits I get from my LBS are parts required when work is being done - the price differentials of chain reaction v my LBS are huge and the choice of products is wider by several orders of magnitude
I just ordered a carbon DH bike from them - it was £3800. A same specced Santa Cruz V10 was nearly £11k from a retail bike outlet
I buy everything on-line for bike stuff, the only bits I get from my LBS are parts required when work is being done - the price differentials of chain reaction v my LBS are huge and the choice of products is wider by several orders of magnitude
Edited by Mr Gearchange on Friday 26th February 03:40
I find this thread quite interesting given I own(ed) a bike shop which is closing down due to health reasons at the moment - but not far off being not worth it financially anymore.
The poster above who estimated operating costs and the turnover we need to generate daily was not far off the reality for a business like mine. I genuinely can buy most things slightly cheaper from wiggle rather than my suppliers - however I don't because why on earth would I do that and lose the support network (marketing, point of sale information and equipment, listing as a dealer on product websites, warranty support, spares availability, proper business delivery, staff training etc etc) that my suppliers afford me.
Wiggle is a b2c business. They don't offer any of that to me - and I can't buy from them and charge more. I find that a bit silly given its only a few quid cheaper. Often a lot of the bargain priced stuff doesn't come in retail packaging that I can display or even sell it in. If customers want wiggle prices they buy from wiggle and I charge to fit the stuff if applicable, otherwise they pay more but get to support us. I recognise that this isn't sustainable and there is a clear tipping point when the difference is too great. We reached that tipping point in early 2014.
Diversification is useful to some extent but is entirely location specific. If you are in a poor location in terms of footfall or disposable discretionary income, then having a coffee shop is pointless capital allocation as you simply won't sell enough coffee to justify the costs of implementing the idea. Offering bike fitting and training services works to some extent, but like most other life rafts for a struggling retail industry, it's one that is being clung too by far too many shops now so completion is stifling both the prices you can charge and the number of customers you can access.
To the person who correctly identified that our suppliers are trying to help with margins - yes they are. One example is Shimano's main distributor offering a price beating service where if we find it cheaper online we have to email them and they beat the price. By up to 5%. This gets quite tiresome when you have to send an email highlighting the item and where you found it at what price EVERY time you order something - only to get it 5% cheaper. On a £15 cassette or chain, I might as well not bother. The 15 minutes of to and fro-ing I have to go through to make 75 pence is quite insulting - but I suck it up and do it because over the course of a month the 5%'s add up and I might be able to pay one of of operating costs that way. It would be lovely if the supplier just put the prices down - but thats a whole other conversation and they are already on tenterhooks themselves. Those 5%'s really add up for them and they are relying on most people not bothering.
Aside from the staple consumables of chains, cassettes and brake pads, there is a finite number of bikes/wheels/other components people need and they sure as hell can no longer afford full retail prices for those. Regardless of what politicians say, I haven't seen a recovery in the spending power of my customers since the recession. If anything my wealthiest customers who have over the years each spent more in my shop than it takes to buy a decent new sports car, are now struggling to meet their own financial commitments and are slightly embarrassed to still hang out in the shop but reveal they have no plans to upgrade to the latest gizmo as has been their custom over the years. Instead they trade parts with each other or sell bits they have accumulated online - further eroding the industry as the marketplace is flooded with nearly new parts on sale at unspeakably attractive prices. Why buy new when you can buy secondhand at a third of cost?!
It's a sad state of affairs that is repeated throughout high streets in many different industries. Music shops, camera shops, specialist sports retailers have all been through the same cycle. If you have any more questions feel free to post them and I will do my best to answer.
The poster above who estimated operating costs and the turnover we need to generate daily was not far off the reality for a business like mine. I genuinely can buy most things slightly cheaper from wiggle rather than my suppliers - however I don't because why on earth would I do that and lose the support network (marketing, point of sale information and equipment, listing as a dealer on product websites, warranty support, spares availability, proper business delivery, staff training etc etc) that my suppliers afford me.
Wiggle is a b2c business. They don't offer any of that to me - and I can't buy from them and charge more. I find that a bit silly given its only a few quid cheaper. Often a lot of the bargain priced stuff doesn't come in retail packaging that I can display or even sell it in. If customers want wiggle prices they buy from wiggle and I charge to fit the stuff if applicable, otherwise they pay more but get to support us. I recognise that this isn't sustainable and there is a clear tipping point when the difference is too great. We reached that tipping point in early 2014.
Diversification is useful to some extent but is entirely location specific. If you are in a poor location in terms of footfall or disposable discretionary income, then having a coffee shop is pointless capital allocation as you simply won't sell enough coffee to justify the costs of implementing the idea. Offering bike fitting and training services works to some extent, but like most other life rafts for a struggling retail industry, it's one that is being clung too by far too many shops now so completion is stifling both the prices you can charge and the number of customers you can access.
To the person who correctly identified that our suppliers are trying to help with margins - yes they are. One example is Shimano's main distributor offering a price beating service where if we find it cheaper online we have to email them and they beat the price. By up to 5%. This gets quite tiresome when you have to send an email highlighting the item and where you found it at what price EVERY time you order something - only to get it 5% cheaper. On a £15 cassette or chain, I might as well not bother. The 15 minutes of to and fro-ing I have to go through to make 75 pence is quite insulting - but I suck it up and do it because over the course of a month the 5%'s add up and I might be able to pay one of of operating costs that way. It would be lovely if the supplier just put the prices down - but thats a whole other conversation and they are already on tenterhooks themselves. Those 5%'s really add up for them and they are relying on most people not bothering.
Aside from the staple consumables of chains, cassettes and brake pads, there is a finite number of bikes/wheels/other components people need and they sure as hell can no longer afford full retail prices for those. Regardless of what politicians say, I haven't seen a recovery in the spending power of my customers since the recession. If anything my wealthiest customers who have over the years each spent more in my shop than it takes to buy a decent new sports car, are now struggling to meet their own financial commitments and are slightly embarrassed to still hang out in the shop but reveal they have no plans to upgrade to the latest gizmo as has been their custom over the years. Instead they trade parts with each other or sell bits they have accumulated online - further eroding the industry as the marketplace is flooded with nearly new parts on sale at unspeakably attractive prices. Why buy new when you can buy secondhand at a third of cost?!
It's a sad state of affairs that is repeated throughout high streets in many different industries. Music shops, camera shops, specialist sports retailers have all been through the same cycle. If you have any more questions feel free to post them and I will do my best to answer.
Edited by fossilfuelled on Friday 26th February 07:33
Edited by fossilfuelled on Friday 26th February 07:35
fossilfuelled said:
I find this thread quite interesting given I own(ed) a bike shop which is closing down due to health reasons at the moment - but not far off being not worth it financially anymore.
The poster above who estimated operating costs and the turnover we need to generate daily was not far off the reality for a business like mine. I genuinely can buy most things slightly cheaper from wiggle rather than my suppliers - however I don't because why on earth would I do that and lose the support network (marketing, point of sale information and equipment, listing as a dealer on product websites, warranty support, spares availability, proper business delivery, staff training etc etc) that my suppliers afford me.
Wiggle is a b2c business. They don't offer any of that to me - and I can't buy from them and charge more. I find that a bit silly given its only a few quid cheaper. Often a lot of the bargain priced stuff doesn't come in retail packaging that I can display or even sell it in. If customers want wiggle prices they buy from wiggle and I charge to fit the stuff if applicable, otherwise they pay more but get to support us. I recognise that this isn't sustainable and there is a clear tipping point when the difference is too great. We reached that tipping point in early 2014.
Diversification is useful to some extent but is entirely location specific. If you are in a poor location in terms of footfall or disposable discretionary income, then having a coffee shop is pointless capital allocation as you simply won't sell enough coffee to justify the costs of implementing the idea. Offering bike fitting and training services works to some extent, but like most other life rafts for a struggling retail industry, it's one that is being clung too by far too many shops now so completion is stifling both the prices you can charge and the number of customers you can access.
To the person who correctly identified that our suppliers are trying to help with margins - yes they are. One example is Shimano's main distributor offering a price beating service where if we find it cheaper online we have to email them and they beat the price. By up to 5%. This gets quite tiresome when you have to send an email highlighting the item and where you found it at what price EVERY time you order something - only to get it 5% cheaper. On a £15 cassette or chain, I might as well not bother. The 15 minutes of to and fro-ing I have to go through to make 75 pence is quite insulting - but I suck it up and do it because over the course of a month the 5%'s add up and I might be able to pay one of of operating costs that way. It would be lovely if the supplier just put the prices down - but thats a whole other conversation and they are already on tenterhooks themselves. Those 5%'s really add up for them and they are relying on most people not bothering.
Aside from the staple consumables of chains, cassettes and brake pads, there is a finite number of bikes/wheels/other components people need and they sure as hell can no longer afford full retail prices for those. Regardless of what politicians say, I haven't seen a recovery in the spending power of my customers since the recession. If anything my wealthiest customers who have over the years each spent more in my shop than it takes to buy a decent new sports car, are now struggling to meet their own financial commitments and are slightly embarrassed to still hang out in the shop but reveal they have no plans to upgrade to the latest gizmo as has been their custom over the years. Instead they trade parts with each other or sell bits they have accumulated online - further eroding the industry as the marketplace is flooded with nearly new parts on sale at unspeakably attractive prices. Why buy new when you can buy secondhand at a third of cost?!
It's a sad state of affairs that is repeated throughout high streets in many different industries. Music shops, camera shops, specialist sports retailers have all been through the same cycle. If you have any more questions feel free to post them and I will do my best to answer.
That's a great post, and really interesting to read. My guesses were based on working in retail consultancy a long time ago so it's good to know I'm not a million miles away.The poster above who estimated operating costs and the turnover we need to generate daily was not far off the reality for a business like mine. I genuinely can buy most things slightly cheaper from wiggle rather than my suppliers - however I don't because why on earth would I do that and lose the support network (marketing, point of sale information and equipment, listing as a dealer on product websites, warranty support, spares availability, proper business delivery, staff training etc etc) that my suppliers afford me.
Wiggle is a b2c business. They don't offer any of that to me - and I can't buy from them and charge more. I find that a bit silly given its only a few quid cheaper. Often a lot of the bargain priced stuff doesn't come in retail packaging that I can display or even sell it in. If customers want wiggle prices they buy from wiggle and I charge to fit the stuff if applicable, otherwise they pay more but get to support us. I recognise that this isn't sustainable and there is a clear tipping point when the difference is too great. We reached that tipping point in early 2014.
Diversification is useful to some extent but is entirely location specific. If you are in a poor location in terms of footfall or disposable discretionary income, then having a coffee shop is pointless capital allocation as you simply won't sell enough coffee to justify the costs of implementing the idea. Offering bike fitting and training services works to some extent, but like most other life rafts for a struggling retail industry, it's one that is being clung too by far too many shops now so completion is stifling both the prices you can charge and the number of customers you can access.
To the person who correctly identified that our suppliers are trying to help with margins - yes they are. One example is Shimano's main distributor offering a price beating service where if we find it cheaper online we have to email them and they beat the price. By up to 5%. This gets quite tiresome when you have to send an email highlighting the item and where you found it at what price EVERY time you order something - only to get it 5% cheaper. On a £15 cassette or chain, I might as well not bother. The 15 minutes of to and fro-ing I have to go through to make 75 pence is quite insulting - but I suck it up and do it because over the course of a month the 5%'s add up and I might be able to pay one of of operating costs that way. It would be lovely if the supplier just put the prices down - but thats a whole other conversation and they are already on tenterhooks themselves. Those 5%'s really add up for them and they are relying on most people not bothering.
Aside from the staple consumables of chains, cassettes and brake pads, there is a finite number of bikes/wheels/other components people need and they sure as hell can no longer afford full retail prices for those. Regardless of what politicians say, I haven't seen a recovery in the spending power of my customers since the recession. If anything my wealthiest customers who have over the years each spent more in my shop than it takes to buy a decent new sports car, are now struggling to meet their own financial commitments and are slightly embarrassed to still hang out in the shop but reveal they have no plans to upgrade to the latest gizmo as has been their custom over the years. Instead they trade parts with each other or sell bits they have accumulated online - further eroding the industry as the marketplace is flooded with nearly new parts on sale at unspeakably attractive prices. Why buy new when you can buy secondhand at a third of cost?!
It's a sad state of affairs that is repeated throughout high streets in many different industries. Music shops, camera shops, specialist sports retailers have all been through the same cycle. If you have any more questions feel free to post them and I will do my best to answer.
Regarding the recovery in spending power, I think the recession has made a lot of people more careful about spending their money, and this in turn has played into the hands of the online discounters rather than the high-street.
UK retail is in general fairly depressing, with too much property around and dying high-streets in all but the most attractive towns so it's tough for everyone. The big problem for bike shops is that their customers are enthusiasts who can get their advice online, their reviews online, their product info online and their fitting advice online too. That makes it pretty tricky for an LBS to conquest new customers and retain them going forward.
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