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.