On this Episode
Do mountain bike companies conspire to create new standards just to sell more gear? Are electric bikes being pushed down our throats so others can get rich? We explore these and other myths about how the bike industry works.
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4 Comments
Nov 27, 2017
Nov 28, 2017
Jan 15, 2018
First, 35% gross margin on the sale of a new bicycle isn't "thin" at all. It's actually higher than a lot of retail, especially when one considers the price of bicycles. It shouldn't take a rocket scientist to realize that with the few employees it takes to staff a bike shop, one wouldn't have to sell too many bicycles to make a decent profit. The problem with making that happen is getting people to set foot in the store in the first place, not that margins are too tight.
Second, the criticism that one can buy a motorcycle for the cost of a high end bicycle is a serious consideration that should immediately indicate to someone that high end bicycles are way overpriced. Even the crudest street legal motorcycle has many complex systems that most bicycles do not. Besides the engine, clutch, and transmission, it has to have some means of making electricity, much larger brakes to deal with the speed and heat, perhaps a cooling system, turn signals, speedometer, systems to monitor the performance of the engine, etc. Even a modern $5,000 motorcycle is going to be fuel injected as well, which adds a high pressure fuel system, computer, sensors to monitor the engine running, emissions equipment, etc. Everything about that $5,000 motorcycle (suspension, brakes, steering, wheels) is more complicated and robust. There is some degree of economies of scale here--a similar motorcycle can probably be marketed worldwide for many different kinds of consumers. But blowing off this criticism because of marketing, R&D, sponsorship, or other costs is avoiding a serious criticism of the way this industry is structured.
I suspect, but do not know, that the bicycle companies--the corporations you are suggesting aren't actually that big/capitalist but are actually huge transnational companies (assuming we're talking about the big four)--are raking in substantial profits under arrangements that make it increasingly difficult for shops to turn a profit. One need not look around the bicycle industry for long to note that things we notice in virtually all other retail are absent. When's the last time you heard of major brand bikes going on sale? I'm not talking about clearance of last year's models. I'm talking about things like black friday. When have you ever seen that? You haven't. Try to think of another industry where people pay MSRP or they don't get the product. There really isn't one. I'm not saying that every bike has to be marketed and sold on price, but when your product never goes on sale, the budget conscious shopper is filtered off to Performance Bicycle, Bikes Direct, or some other means, even though the major brands could absolutely get this business by just running a sale a few times a year--few people buy a $5000 bike on an impulse.
What we need to remember is that bicycles are, for a good chunk of users, recreational objects. They aren't necessities. A good chunk of them are priced outside of the range of most wage earners. Where they are popular is in places where incomes tend to be higher. In fact, a visit to your bike shop is usually all you need to see to demonstrate this. The people who work in the bike shops aren't usually riding the latest and greatest from their own shop, because it's beyond what they can realistically afford. The bike industry is noticing this lately, though, with some bikes actually going down in price from year to year for a similarly-speced bike in the past few years.
All of the marketing, sponsorship, and manufacturing efficiency in the world isn't going to work if the bike industry can't innovate across the board. That means that the price points and the entire supply chain needs to be continually looked at to make sure that it's competitive.
Nov 29, 2017