Inflation steadily grows worse (were does premium bikes fit in?)

Back by popular demand, the general all-things Road forum!

Moderator: robbosmans

spartan
Posts: 1747
Joined: Fri Sep 03, 2004 2:52 am

by spartan

wait what are you talking about. building ad 3000 road bike takes the same amount of time or longer that a 14k super bike. the 3k bike has mech vs di2.
the profit margins are the same ~40%. their is plenty of discount space on the 14k bike vs 2-3k bikes.


TobinHatesYou wrote:
Sun Oct 16, 2022 9:18 pm
If there is a slowdown in bike sales, the real losers are the bike shops who aren’t able to move the $13000-14000 bike at full-retail within a year. A new high-end complete bike has maybe 2 years to sell until it hits the break-even point. Compare that to a Rolex which can be kept by a dealer indefinitely and not lose much value…often appreciating in value if it is discontinued. A Rolex also doesn’t consume floorspace/inventory or have many of the same static costs as a bicycle.

When Cupertino Bike Shop had its going out of business sale they still capped bikes at -15%.

Expect more independent bike shops to call it quits or sell their businesses to Trek, Specialized, Giant, Pon, etc.
Current Rides:

2023 Tarmac SL7 Di2 9270
ex 2019 S-works SL6
ex 2018 Trek Madone SLR Disc
ex 2016 Giant TCRAdvanced Sl
ex 2012 Trek Madone7

by Weenie


Visit starbike.com Online Retailer for HighEnd cycling components
Great Prices ✓    Broad Selection ✓    Worldwide Delivery ✓

www.starbike.com



TobinHatesYou
Posts: 12456
Joined: Mon Jul 24, 2017 12:02 pm

by TobinHatesYou

spartan wrote:
Sun Oct 16, 2022 10:30 pm
wait what are you talking about. building ad 3000 road bike takes the same amount of time or longer that a 14k super bike. the 3k bike has mech vs di2.
the profit margins are the same ~40%. their is plenty of discount space on the 14k bike vs 2-3k bikes.

Yes, static costs are worse when accounting for cheaper bikes. The worst are $700 hybrids in a typical IBD. However those bikes sell like hotcakes and there's never any issue moving them. The problem is keeping them in stock, especially ahead of back-to-school season.

The issue with expensive bikes is percentages and depreciation rate. And no, no major catalog bike has a profit margin of 40%. Midrange bikes might see 33% these days while the highest end bikes are closer to 30%. When you add the static costs, then the margin dips into the 20-somethings, which is where you expect discounts to be after a bike has been sitting fallow for 2-3 years.

Cemicar
Posts: 472
Joined: Mon Aug 21, 2017 7:40 am

by Cemicar

I predict the bike prices at this moment are actually the cheapest for the next 5 years. There is a rapidly growing tension between the two biggest bike manufacturing countries, and once the concern becomes real, we will even more suffer from the shortage of chips or any computer-related stuff, but the bike price hike we'll face is likely to be at an unprecedented level. The industry shoud move factories somewhere else, but it takes decades to get fully independent.

So, in short, buy whatever is in font of you. Or secure whatever you need before it is too late.

robertbb
Posts: 2179
Joined: Thu Jul 23, 2009 3:35 am

by robertbb

I didn't realise Russia and Ukraine made so many bikes...... ;-)

pmprego
Posts: 2513
Joined: Mon Jan 21, 2019 3:16 pm

by pmprego

I guess the new diverge shows how prices are not going down.

AJS914
Posts: 5397
Joined: Tue Jan 28, 2014 6:52 pm

by AJS914

If Specialized can't make bikes then they can still charge hefty prices. Why is it that Specialized still can't get a Tarmac in stock? Aren't they made in Taiwan? I presume they haven't had the total lockdown like in China.

TobinHatesYou
Posts: 12456
Joined: Mon Jul 24, 2017 12:02 pm

by TobinHatesYou

AJS914 wrote:
Sat Oct 22, 2022 6:54 am
If Specialized can't make bikes then they can still charge hefty prices. Why is it that Specialized still can't get a Tarmac in stock? Aren't they made in Taiwan? I presume they haven't had the total lockdown like in China.

At this point it doesn't seem to be a Shimano or SRAM problem anymore. It's everything else like frames, frame materials, stems, bars, saddles, etc. It took a couple months for me to get a warranty replacement saddle from Trek. In contrast Force AXS and Red AXS groupsets are both in-stock pretty much everywhere by now.

User avatar
wheelsONfire
Posts: 6283
Joined: Mon Jul 07, 2014 8:15 am
Location: NorthEU

by wheelsONfire

AJS914 wrote:
Sat Oct 22, 2022 6:54 am
If Specialized can't make bikes then they can still charge hefty prices. Why is it that Specialized still can't get a Tarmac in stock? Aren't they made in Taiwan? I presume they haven't had the total lockdown like in China.
Maybe the Chinese factory see how much Spesh charge for the frames and ask for a better price themselves :lol:
Bikes:

Ax Lightness Vial EVO Race (2019.01.03)
Open *UP* (2016.04.14)
Paduano Racing Fidia (kind of shelved)


Ex bike; Vial EVO D, Vial EVO Ultra, Scott Foil, Paduano ti bike.

LeaC6088
Posts: 4
Joined: Wed Nov 02, 2022 5:37 am

by LeaC6088

wheelsONfire wrote:
Thu Oct 13, 2022 7:33 pm
There seems to be steady updates to inflation and it moves into worse.
Just looked now and they say we won't see prices for food, roof over head yada yada come down to "normal values" again.
How will this affect the sales of premium bikes?
Most here are nerds, so if those with big pockets take their own ego out (not to be rude), how will the market globally handle this?
Tried to fish around more locally and to me it seems like there's (to put it mildly) a really poor understanding for big money going to a bike.
Most i guess have some sort of relation and that might also have an input in a potential buy!?

Are manufacturers relying on hybris - cyclist buy at any cost?
Or how does it really work?
Did Shimano and Sram release 105 Di2 and Sram Rival AXS foreseeing this?
To me it seems many who have a smallish income would need to buy bikes at some sort of installment.
But will they?

Personally i think this is a big thing these days when bikes start to cost like a motorcycle or like a really fine second hand car.

What do you guys think?
I do agree, the price might level up to nowhere lol. I think the industry provided some options recently, we don't have to purchase a "premium" brand with ridiculous price taq to get similar or at least close to premium bike performance.

The information in the internet also easy to access. You can find what brand is reliable and what brand is giving the best value to the customer.
I agree that carbon fiber bike is the pinnacle of the sport, but looking from "technological value" it should not be more expensive than a motorcycle.

let say, chinese product, such as Yoeleo provide quite good deal (from the website). I owned R12 from a years ago, no significant issue.

Neckkoss
Posts: 186
Joined: Thu Dec 03, 2015 5:03 am

by Neckkoss

LanceLegstrong wrote:
Andrew69 wrote:
Fri Oct 14, 2022 11:23 pm
inflation in the US is at 40 year highs...but corporate profits are at 50 year highs!
So much of the inflation is being casued by increasing corporate margins
Corporate greed. Fixed it for you. This is the problem. They keep calling it inflation but if every industry is posting record profits, it's not inflation, it's greed. Bike prices go up, people buy them. Why would they stop?
Exactly


Sent from my iPhone using Tapatalk

Neckkoss
Posts: 186
Joined: Thu Dec 03, 2015 5:03 am

by Neckkoss

Cemicar wrote:I predict the bike prices at this moment are actually the cheapest for the next 5 years. There is a rapidly growing tension between the two biggest bike manufacturing countries, and once the concern becomes real, we will even more suffer from the shortage of chips or any computer-related stuff, but the bike price hike we'll face is likely to be at an unprecedented level. The industry shoud move factories somewhere else, but it takes decades to get fully independent.

So, in short, buy whatever is in font of you. Or secure whatever you need before it is too late.
Agreed


Sent from my iPhone using Tapatalk

aeroisnteverything
Posts: 893
Joined: Fri Aug 24, 2018 4:43 pm

by aeroisnteverything

TobinHatesYou wrote:
Sun Oct 16, 2022 11:38 pm
spartan wrote:
Sun Oct 16, 2022 10:30 pm
wait what are you talking about. building ad 3000 road bike takes the same amount of time or longer that a 14k super bike. the 3k bike has mech vs di2.
the profit margins are the same ~40%. their is plenty of discount space on the 14k bike vs 2-3k bikes.

Yes, static costs are worse when accounting for cheaper bikes. The worst are $700 hybrids in a typical IBD. However those bikes sell like hotcakes and there's never any issue moving them. The problem is keeping them in stock, especially ahead of back-to-school season.

The issue with expensive bikes is percentages and depreciation rate. And no, no major catalog bike has a profit margin of 40%. Midrange bikes might see 33% these days while the highest end bikes are closer to 30%. When you add the static costs, then the margin dips into the 20-somethings, which is where you expect discounts to be after a bike has been sitting fallow for 2-3 years.
You are being exteremely unspecific as to whose margins and which margins you have in mind. Certainly we can agree that bike shops do not operate with a 40% net profit margin. But I think most here were talking about bike manufacturers. Simplistically:
1) revenue - cost of goods sold = gross profit profit. Gross profit/evenue = gross margin.
2) gross profit - operating costs (i.e. other variable costs, including gselling and marketing expenses, employee costs, R&D) = operating profit. Operating profit/revenue = operating margin.
3) operating profit - all other costs = net profit. net profit/revenue = net profit margin

So with something like the tarmac, gross margin is going to be sky high. The cost of making that frame and shipping it to a point of sale is... what - $500? $1000? Can't be more than that. I think when folks here talk about margins on selling these bikes, this is what we are referring to.

Stuff below that is not going to be measured product by product like that unless you can cleanly segregate all the costs into the right segments. So when you talk about things like "static" costs, by which you must mean non-variable costs, you seem to be aiming at net profit margin. And that, of course, will be well below 30%.

Giant is the only bike manufacturer I am aware of that is a public company. They move far fewer bikes in the high end premium territory, and a lot more bikes than Spesh in the mid to low range territory. Ther gross margin is around 25% ini 2021 across the whole group - which obviously includes a huge range of products. Their net profit margin was around 8% for that year. 2022 will, no doubt, be measurably worse.

TobinHatesYou
Posts: 12456
Joined: Mon Jul 24, 2017 12:02 pm

by TobinHatesYou

I was clearly talking about bike shop operating profit.

Sales margins might be around 40% average for all goods. Payroll might be 17-18% of total sales, occupancy might be 6-8% and other general expenses ~15%.

aeroisnteverything
Posts: 893
Joined: Fri Aug 24, 2018 4:43 pm

by aeroisnteverything

TobinHatesYou wrote:
Fri Nov 18, 2022 3:55 pm
I was clearly talking about bike shop operating profit.

Sales margins might be around 40% average for all goods. Payroll might be 17-18% of total sales, occupancy might be 6-8% and other general expenses ~15%.
Well, bike shops are a separate beast entirely. Last year was probably pretty good. This year most are barely threading water. Nothing to do with prices on top-tier bikes whatsoever.

TobinHatesYou
Posts: 12456
Joined: Mon Jul 24, 2017 12:02 pm

by TobinHatesYou

aeroisnteverything wrote:
Sun Nov 20, 2022 11:26 pm
TobinHatesYou wrote:
Fri Nov 18, 2022 3:55 pm
I was clearly talking about bike shop operating profit.

Sales margins might be around 40% average for all goods. Payroll might be 17-18% of total sales, occupancy might be 6-8% and other general expenses ~15%.
Well, bike shops are a separate beast entirely. Last year was probably pretty good. This year most are barely threading water. Nothing to do with prices on top-tier bikes whatsoever.

Maybe you should read some earlier posts in this thread?

by Weenie


Visit starbike.com Online Retailer for HighEnd cycling components
Great Prices ✓    Broad Selection ✓    Worldwide Delivery ✓

www.starbike.com



Post Reply