Discussion
Do we have any bike shop owners on here? Just a quick query regarding the previous model years stock of bikes and what happens to it once it goes out of date. I know lots of places significantly reduce the price to offload it, but is it all personal choice? I.e. Could they send it back to the factory? Would they be more inclined to get rid ASAP in order to get new stock in, or do last years models still provide them with a large profit so it's worth hanging onto them?
Any answers appreciated (not just from bike shop owners).
Thanks in advance, Arry!
Any answers appreciated (not just from bike shop owners).
Thanks in advance, Arry!
Basically, it works like this:
Larger bike manufacturers know that the shops want to stock a known brand and have easy sales.
Therefore they weight the contracts that the dealers have with them in so far that in order to have reasonable discounts so that they may maximise the profit, they through contracts oblige the dealer to commit to a spend of a certain amount or a certain amount of units.
They also force the dealer to commit to their choices at the start of the year(March/April usually, with first deliveries expected in Aug/September), without knowing if the market will change (i.e. a good/bad magazine review).
Therefore, this is why the Evans of the world have so many End of Season sales; they buy at the highest discount by buying huge quantities knowing that they should be able to sell many at full price, and then take a hit on the remainder at the end of the year.
Obviously smaller shops don't have the cash flow of Evans et al, and so buy smaller quantities, and therefore find it harder to price match the larger shops. This is why smaller shops should offer a better level of service as this is their USP over the larger shops.
No manufacturer tends to offer Sale or Return UNLESS it is on a model that is in demand, for example a popular model in a Medium, for example, and then they tend to come to the shops, not the other way around.
Its common sense to assume that its not in the manufacturers interest to take back unsold bikes; after all they are a business too, and what would they do with them.
This is why you find that the smaller brands, Lapierre at the moment being an example, tend to restrict supply, as it is better for the shops, no oversupply = no unwanted bikes at the end of the year = maximum demand = maximum profit.
Oversupply kills the market, its clear, something which Cannondale found to their downfall 10 years ago when they aggressively pushed their huge ranges at dealers.
Something to note also:
The larger brands have a very large cachet for general Joe Public, but at a price. Its harder to sell unique brands to those who do not pore over the magazines, and therefore its sometimes not very profitable to stock the more unique brands.
This is why you get smaller shops with one large brand to be the bread and butter, and therefore the profit earner, and then this allows them to carry the 'eye candy' that draws in the geeks, and therefore get a name for themselves.
One point I need to make clear:
For those of us who have uber expensive bikes that we've specced and built ourselves, we are the worst customer to a shop. We know and demand the best price, generally buy the cheapest stuff from the CRC's of the world, and don't tend to give the shops any chance of making a decent profit. Therefore, we're not their favourite customer, however much we like to think we are.
The most revered customer for a bike shop is the middle/upper class family who come in off the street, buy 2 or 3, maybe 4 bikes at full price, with accesories and helmets (at a 10% discount for those accesories obviously
) and then never come back. They offer the decent profit margin, the least amount of tossing about selling TO (unlike those annoying deliberators who mull over whether we should have a Hope brake or an Avid for at least an hour). They are the best customers - easy and quick.
People have a very skewed impression of bike shops, especially smaller ones, often complaining that they don't help themselves etc by being surly when asked to price match or offer advice, but sometimes thats for a reason: They don't want to waste time and money unless the bottom line is profit; they're there to run a business. Hence why we say "Develop a good relationship with your LBS and you'll start to see a difference in attitude"
Hope that helps...
Neil
Ex bike shop lad, manager and mechanic
Larger bike manufacturers know that the shops want to stock a known brand and have easy sales.
Therefore they weight the contracts that the dealers have with them in so far that in order to have reasonable discounts so that they may maximise the profit, they through contracts oblige the dealer to commit to a spend of a certain amount or a certain amount of units.
They also force the dealer to commit to their choices at the start of the year(March/April usually, with first deliveries expected in Aug/September), without knowing if the market will change (i.e. a good/bad magazine review).
Therefore, this is why the Evans of the world have so many End of Season sales; they buy at the highest discount by buying huge quantities knowing that they should be able to sell many at full price, and then take a hit on the remainder at the end of the year.
Obviously smaller shops don't have the cash flow of Evans et al, and so buy smaller quantities, and therefore find it harder to price match the larger shops. This is why smaller shops should offer a better level of service as this is their USP over the larger shops.
No manufacturer tends to offer Sale or Return UNLESS it is on a model that is in demand, for example a popular model in a Medium, for example, and then they tend to come to the shops, not the other way around.
Its common sense to assume that its not in the manufacturers interest to take back unsold bikes; after all they are a business too, and what would they do with them.
This is why you find that the smaller brands, Lapierre at the moment being an example, tend to restrict supply, as it is better for the shops, no oversupply = no unwanted bikes at the end of the year = maximum demand = maximum profit.
Oversupply kills the market, its clear, something which Cannondale found to their downfall 10 years ago when they aggressively pushed their huge ranges at dealers.
Something to note also:
- Certain brands do not allow multiple dealers in an area (Trek, Cannondale, Specialised for example)
- Certain brands force the dealer to take on their clothing and accessories ranges (Trek, Specialised, Cannondale)
- Many brands offer credit incentives to shops if they commit to a certain level of spend, hence tying many smaller shops without cashflow
- Certain brands demand a certain level of sales in order to be a stockist; fail to meet this, you lose your right to sell the products
The larger brands have a very large cachet for general Joe Public, but at a price. Its harder to sell unique brands to those who do not pore over the magazines, and therefore its sometimes not very profitable to stock the more unique brands.
This is why you get smaller shops with one large brand to be the bread and butter, and therefore the profit earner, and then this allows them to carry the 'eye candy' that draws in the geeks, and therefore get a name for themselves.
One point I need to make clear:
For those of us who have uber expensive bikes that we've specced and built ourselves, we are the worst customer to a shop. We know and demand the best price, generally buy the cheapest stuff from the CRC's of the world, and don't tend to give the shops any chance of making a decent profit. Therefore, we're not their favourite customer, however much we like to think we are.
The most revered customer for a bike shop is the middle/upper class family who come in off the street, buy 2 or 3, maybe 4 bikes at full price, with accesories and helmets (at a 10% discount for those accesories obviously
) and then never come back. They offer the decent profit margin, the least amount of tossing about selling TO (unlike those annoying deliberators who mull over whether we should have a Hope brake or an Avid for at least an hour). They are the best customers - easy and quick.People have a very skewed impression of bike shops, especially smaller ones, often complaining that they don't help themselves etc by being surly when asked to price match or offer advice, but sometimes thats for a reason: They don't want to waste time and money unless the bottom line is profit; they're there to run a business. Hence why we say "Develop a good relationship with your LBS and you'll start to see a difference in attitude"
Hope that helps...
Neil
Ex bike shop lad, manager and mechanic
local small shop - bought the bike from there and am happy with the service, when need work done, get given a quote, if it takes the guy twice as long as he thought, the price is still the same.
bought some bike, has a nice brand name that I forget, had it serviced to tweak stuff and am happy with it
in there the other day, some woman came in looking really stressed, could she borrow some tools to fix leaking pipe as hubby was away, owner gave her the tools and told her to bring it back the next day, no deposit needed, nor address, she was almost shocked...
he got the tools back the next day and heard she upgraded her bike a few weeks later, suspect she could have gone to halfords, but customer service.....
bought some bike, has a nice brand name that I forget, had it serviced to tweak stuff and am happy with it
in there the other day, some woman came in looking really stressed, could she borrow some tools to fix leaking pipe as hubby was away, owner gave her the tools and told her to bring it back the next day, no deposit needed, nor address, she was almost shocked...
he got the tools back the next day and heard she upgraded her bike a few weeks later, suspect she could have gone to halfords, but customer service.....
Thanks for your response neil. Basically my thought thread came from the fact that I don't see any 'last year models' only shops....the thought being that shops could offload their old stock (for the price they paid or slightly more) where upon they could then get the current years stock in. This would then leave a company that specialises in last years stock to put their own mark up on the bikes they have in stock and because they're solely selling last years models, that is their brand and people looking for cheap bikes that don't mind if it's last years model (both my bikes have been out of date by a year due to the huge discounts) know where to go to get cheap last years models? Have I missed something?
AyBee said:
Thanks for your response neil. Basically my thought thread came from the fact that I don't see any 'last year models' only shops....the thought being that shops could offload their old stock (for the price they paid or slightly more) where upon they could then get the current years stock in. This would then leave a company that specialises in last years stock to put their own mark up on the bikes they have in stock and because they're solely selling last years models, that is their brand and people looking for cheap bikes that don't mind if it's last years model (both my bikes have been out of date by a year due to the huge discounts) know where to go to get cheap last years models? Have I missed something?
In a way yes, you have to consider that shops know that people want to buy at a discounted rate.Therefore they know that before a new range appears, they can run 'Sales' offers or indeed offer attractive pricing on old stock alongside equivilent new stock.
For every person who wants a bargain, there will always be someone who wants the latest and greatest regardless of price. This is the ABC of sales, and any bike shop owner worth his salt should know this.
Additionally, 'Sales' draw in the passing traffic, people inquisitive about whats on Sale, and therefore you'll quite often be reducing stock such as t-shirts, jerseys etc at the same time.
Its all relative; although they don't make as much money on a reduced 'last years model', they know that at a right reduced cost they are going to easily sell the old stock, and after all, in business Cash Flow is king: as long as you cover your initial spend on the item, then getting the cash back is fine, as you can always invest it in new stock.
Ultimately, it works great for the shop, and it works even better for the consumer
Let me know if you have any more questions
Neils assessment of the market is not completely unbiased I imagine. The brands mentioned dont force Bike shops to do anything. Like all business arrangements the relationship has to be mutually benficial and also the old ways of stuffing dealers, up with product, that dont have the financials to back it are over. The trade in the quality sector doesnt work like that. Sale or Return does not happen -period!
Crippo said:
Neils assessment of the market is not completely unbiased I imagine. The brands mentioned dont force Bike shops to do anything.
You'd be surprised. I work for a medium sized retailer.There ARE restrictions, rules, and limitations. There are brands that I will happily order in for a customer but I am STRICTLY not allowed to display - as there are other shops in our catchment area that deal with them.
It is a very, very complex industry. Neils comments regarding the differing types of customers are also very fair.
Regarding the changeover in model years, and discounted 'old' models. Do not expect there to be quite as many bargains this year, as in the past. Supply has been much lower from many manufacturers.
Giant, Specialized, Cannondale, Marin, have all been very low, or out of stock, of many models since the spring even.
There simply isnt the same number of unsold bikes knocking about. Also, prices of 2010 models are going well up, or the specs are going down.
So by all means keep your eyes open, but dont bank on getting that killer bargain.
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