LBS reasonable markup

Keith Vetter said:

I'm all in favor of supporting local bike shops (LBS) but what do
people consider a fair markup?

Last year I needed some Look-type bike cleats. I went to a
bike shop, and, while they didn't have any in stock, the owner
just happened to be on the phone to the supplier and he added it
to their order. When they came in, the store wanted $27 for
them--that seemed expensive but not knowing better and
since they were ordered explicitly for me, I bought them.

Later I saw that Performance was selling Look cleats (not clones)
for half that price.

Last month, I needed another pair and I went to a different bike shop.
Again they didn't have them in stock, but they looked it up in
the catalog. The catalog price was $13 and they said they could
sell it to me for $21. This time I declined.

So what to people consider a reasonable markup? My first example
I feel is clearly too high. The second one seems to high but by
how much?

Keith

A sucessful shop owner once told me "if no one complains about the price
then you're not charging enough". As a customer you don't want to hear
that (I was a little stunned when I heard it), but the guy ran a great shop.

Retail more or less doubles the price, which they need to succeed by the
way. You walk in and expect them to stock what you need, but a lot of
stuff nobody walks in for.

On the other hand most retail businesses fail, so they have to guess
right what there's a need and a market for.

I abandoned LBSs not for the price so much as that they stopped
carrying a decent inventory.
--
Ron Hardin
[email hidden]

On the internet, nobody knows you're a jerk.

Keith Vetter said:

Last year I needed some Look-type bike cleats. I went to a
bike shop, and, while they didn't have any in stock, the owner
just happened to be on the phone to the supplier and he added it
to their order. When they came in, the store wanted $27 for
them--that seemed expensive but not knowing better and
since they were ordered explicitly for me, I bought them.

Wow! I almost choked when a local shop wanted $16 for them a couple of
years ago. Then I found out all the shops charged that. But $27 is highway
robbery for two pieces of plastic. Find a good online source and buy
several pair.

Quoted message said:

Last month, I needed another pair and I went to a different bike shop.
Again they didn't have them in stock, but they looked it up in
the catalog. The catalog price was $13 and they said they could
sell it to me for $21.

Yikes! First, why is it that these shops don't carry such a common item?
And how do they justify such a huge markup?

Art Harris

Harris said:

Keith Vetter said:

Last year I needed some Look-type bike cleats. I went to a
bike shop, and, while they didn't have any in stock, the owner
just happened to be on the phone to the supplier and he added it
to their order. When they came in, the store wanted $27 for
them--that seemed expensive but not knowing better and
since they were ordered explicitly for me, I bought them.

Wow! I almost choked when a local shop wanted $16 for them a couple of
years ago. Then I found out all the shops charged that. But $27 is
highway robbery for two pieces of plastic. Find a good online source
and buy several pair.

Quoted message said:

Last month, I needed another pair and I went to a different bike
shop. Again they didn't have them in stock, but they looked it up in
the catalog. The catalog price was $13 and they said they could
sell it to me for $21.

Yikes! First, why is it that these shops don't carry such a common
item? And how do they justify such a huge markup?

I have a couple of extra pair somewhere that came with shoes. Maybe I should
put them on eBay, with a healthy reserve!

Matt O.

Keith Vetter said:

Last month, I needed another pair and I went to a different bike shop.
Again they didn't have them in stock, but they looked it up in
the catalog. The catalog price was $13 and they said they could
sell it to me for $21. This time I declined.

I don't know what catalog they looked in, but that sounds
like a pretty high wholesale price for Taiwanese Look
cleats. Even gen-u-wine Looks don't cost that much.

Still, for small parts, a keystone margin (50%) is pretty
common in retail.

Todd Kuzma
Heron Bicycles
Tullio's Big Dog Cyclery
LaSalle, Il 815-223-1776
http://www.heronbicycles.com
http://www.tullios.com

Harris said:

Yikes! First, why is it that these shops don't carry such a common item?
And how do they justify such a huge markup?

We stock them, but they really aren't a very common item.
Remember that roadies represent a very small part of the
overall bicycle market. Bike shops make their money selling
$350 comfort bikes. The volume is all in the family
market, not the enthusiast market.

We are not a big shop, but we do a fair amount of road stuff
because we own Heron. We sell 3-4 pairs of Look replacement
cleats a year.

Also, if the shop is charging $21 for an item that they buy
for $13, that is not a huge mark-up. Actually, that's a
fairly small mark-up for that type of item.

Todd Kuzma
Heron Bicycles
Tullio's Big Dog Cyclery
LaSalle, Il 815-223-1776
http://www.heronbicycles.com
http://www.tullios.com

Ron Hardin said:

Retail more or less doubles the price, which they need to succeed by the
way. You walk in and expect them to stock what you need, but a lot of
stuff nobody walks in for.

In this case, the OP did not expect them to stock what he needed, or
even if he did, they failed to do so. At that point, what's the
difference if the bike shop orders it or he orders it from
Performance?
--
Rick Onanian

Quoted message said:

My first example
I feel is clearly too high. The second one seems to high but by
how much?

A guy on ebay was selling them 10/pair shipped from England. For things like
this buy a couple sets to last a year at nashbar etc.
Cheaper than being ripped by a shop. Markups vary from industry to industry-
autos are 5 to 10% markup while clothing can have a 100% markup(yes the Gap
still makes money when you buy a shirt on sale for 9.99)

kantspel said:

A sucessful shop owner once told me "if no one complains about the
price then you're not charging enough". As a customer you don't want
to hear that (I was a little stunned when I heard it), but the guy
ran a great shop.

That's a great way to look at it! And if enough customers don't like it,
they will seek alternatives. The shop will then lower prices, find ways to
cut costs, or go out of business. That's the system! I'm new to this
group, but recently kicked off a flame-a-thon in alt.mountain-bike for
posting letter to an LBS where I complained about a mickey mouse charge and
crappy customer service. You'd think I'd insulted the Pope while visiting
Rome!

Ironically, I support both sides on this one. Shops should charge as much
as they think they can get away with, and customers shouldn't let 'em get
away with it! That's why competition -- in bike parts, airlines, or
breakfast cereal -- is good. If forces innovation and gives buyers options.

Tom

For that price they should've at least offered to replace them for you. If
shops want to charge you for their so-called "better customer service", then
they should provide it. Otherwise, why be loyal?
Secondly, I don't think any formula for a mark up is fair. Not 50%, not
double. What's fair is what's competitive. If they can't compete with
Performance, then they should at least base their price on what the going
market price for the product is, even if it's barely worth their while. Did
you ever get the line from a salesman when you bought a car that "for that
price we won't make any money"? Well, the truth is, that not the consumer's
problem if a business can't make enough money at a certain price. The
consumer's problem is getting a fair market price. You don't have to shop
around for the lowest price on earth, but you'd be nuts to treat your LBS
like it's a charity and just give them extra money out of your pocket.

"Keith Vetter" <[email hidden]> wrote in message
news:[email hidden]...

Quoted message said:

I'm all in favor of supporting local bike shops (LBS) but what do
people consider a fair markup?

Last year I needed some Look-type bike cleats. I went to a
bike shop, and, while they didn't have any in stock, the owner
just happened to be on the phone to the supplier and he added it
to their order. When they came in, the store wanted $27 for
them--that seemed expensive but not knowing better and
since they were ordered explicitly for me, I bought them.

Later I saw that Performance was selling Look cleats (not clones)
for half that price.

Last month, I needed another pair and I went to a different bike shop.
Again they didn't have them in stock, but they looked it up in
the catalog. The catalog price was $13 and they said they could
sell it to me for $21. This time I declined.

So what to people consider a reasonable markup? My first example
I feel is clearly too high. The second one seems to high but by
how much?

Keith

Quoted message said:

[email hidden] (Keith Vetter)

Quoted message said:

I'm all in favor of supporting local bike shops (LBS) but what do
people consider a fair markup?

Last year I needed some Look-type bike cleats. I went to a
bike shop, and, while they didn't have any in stock, the owner
just happened to be on the phone to the supplier and he added it
to their order. When they came in, the store wanted $27 for
them--that seemed expensive but not knowing better and
since they were ordered explicitly for me, I bought them.

Later I saw that Performance was selling Look cleats (not clones)
for half that price.

Last month, I needed another pair and I went to a different bike shop.
Again they didn't have them in stock, but they looked it up in
the catalog. The catalog price was $13 and they said they could
sell it to me for $21. This time I declined.

So what to people consider a reasonable markup? My first example
I feel is clearly too high. The second one seems to high but by
how much?

Keith

Before deciding what a "reasonable markup" is you have to consider the total
cost of just staying in business and where the profits come from. For example,
have you ever wondered why it is so much more expensive to have a car repaired
at a new car dealer than at the garage down the street? It's because the
dealer's service department profits pay the entire cost of the daily operation
of that dealer- utilities, salaries for all the hourly wage employees, the new
carpet in the showroom, property taxes on the football field sized car lot,
even a good part of the dealer's "floor plan". The markup on the cars they sell
is where their profit is generated so the best deal for the individual consumer
is to buy the car there but have it serviced elsewhere. Your LBS works in a
similiar way. They probably don't make a lot of money on the bikes they sell.
They stay in the black on the profits from the accessories they sell. That's
not to say you have any kind of duty to subsidize them. Just realize that it's
not a "rip off".

Regards,
Bob Hunt

Quoted message said:

Last month, I needed another pair and I went to a different bike shop.
Again they didn't have them in stock, but they looked it up in
the catalog. The catalog price was $13 and they said they could
sell it to me for $21. This time I declined.

So what to people consider a reasonable markup? My first example
I feel is clearly too high. The second one seems to high but by
how much?

My guess is that you're dealing with a shop that has very little, if any,
expertise in road bike equipment. It was simply not something they wanted
to get involved in, and they may not be buying from the best source either.
He might even be special-ordering them from a source he doesn't buy anything
else, and charging you for freight as well.

We sell "real" Look cleats for about $13 if I recall correctly (not at the
shop right now so don't have the exact amount handy). We buy them in
significant qty (probably 50 at a time) because we sell lots of them.

If someone needed an obscure (to us) BMX part that we had to special order
only that part from a distributor, we wouldn't be very competitive on it
either. By the time we paid freight (which we don't have to pay on large
shipments from our regular suppliers) and a likely minimum-order surcharge,
the price kicks up pretty nastily. However, we'd also recommend that
someone try a shop that regularly deals in such merchandise.
--
--Mike-- Chain Reaction Bicycles
www.ChainReactionBicycles.com

GS said:

Well, the truth is, that not the consumer's
problem if a business can't make enough money at a certain price. The
consumer's problem is getting a fair market price. You don't have to shop
around for the lowest price on earth, but you'd be nuts to treat your LBS
like it's a charity and just give them extra money out of your pocket.

of course when they close because of cheapskates like you, then
you'll whine because there's no local shop. what a buncha horse
puckey.

GS said:

Secondly, I don't think any formula for a mark up is fair. Not 50%, not
double. What's fair is what's competitive. If they can't compete with
Performance, then they should at least base their price on what the going
market price for the product is, even if it's barely worth their while.

It's true that the correct price for a product is whatever
the market will bear. You DO need to look at competition.
However, it's difficult for most shops to do a competitive
analysis on every item that they stock. So, certain
formulas will generally get you in the ballpark.

A shop's pricing strategy also has to take into account
their overall business plan. It's very difficult to run any
business based solely on price. Someone else can always
find a way to be cheaper, even if they have to sell the item
at a loss.

So, most shops try to combine a fair price with convenience,
expertise, service, etc. In this regard, the primary market
for most bike shops is NOT the same market targeted by
Performance and the like.

Performance actually sells to a very small portion of the
overall bicycle market. I'd bet that fewer than 5% of
customers are even aware that Performance exists. Mail
order operations are best at serving experienced customers
who already know what they want and simply are looking for
the best price. That is NOT the typical LBS customer.

So, many enthusiasts find their LBS lacking. That might be
because that particular LBS is not pursuing the enthusiast
market for the bulk of their business.

Speaking for myself, selling a Heron loaded touring bike is
a lot of fun and can be a fairly large individual sale, but
$350 comfort bikes keep the lights on. Of course, I am in a
rural area without any other full-line bicycle shops for 45
minutes in any direction. So, we need to be all things to
all people.

Todd Kuzma
Heron Bicycles
Tullio's Big Dog Cyclery
LaSalle, Il 815-223-1776
http://www.heronbicycles.com
http://www.tullios.com

Todd Kuzma said:

So, most shops try to combine a fair price with convenience,
expertise, service, etc. In this regard, the primary market for most
bike shops is NOT the same market targeted by Performance and the like.

Performance actually sells to a very small portion of the overall
bicycle market. I'd bet that fewer than 5% of customers are even
aware that Performance exists. Mail order operations are best at
serving experienced customers who already know what they want and
simply are looking for the best price. That is NOT the typical LBS
customer.

Too right.

Quoted message said:

So, many enthusiasts find their LBS lacking. That might be because
that particular LBS is not pursuing the enthusiast market for the bulk
of their business.

Speaking for myself, selling a Heron loaded touring bike is a lot of
fun and can be a fairly large individual sale, but $350 comfort bikes
keep the lights on. Of course, I am in a rural area without any other
full-line bicycle shops for 45 minutes in any direction. So, we need
to be all things to all people.

Todd Kuzma
Heron Bicycles
Tullio's Big Dog Cyclery
LaSalle, Il 815-223-1776
http://www.heronbicycles.com
http://www.tullios.com

My local bike shop always charges more than the big stores. However -
they are always ready to discuss the pros and cons of various styles and
brands. They ask for feedback on items like tires and brake pads, so
they can stock what keeps customers happy.
They know their regular customers (by name!) and will install small
items at no charge. Things like pedals, computers, a new chain...
That's a treat for the mechanically inept, like meself. Service and
help is competetive. Try to get it at a big box store.

I find the personal service extremely helpful and have never felt like
they were playing me in order to get a few more bucks in the till. They
get first shot at any bike or accessory that I want to buy.
Best regards, Bernie

Quoted message said:

You don't have to shop
around for the lowest price on earth, but you'd be nuts to treat your LBS
like it's a charity and just give them extra money out of your pocket.

There needs to be some reasonable combination of price & service for the LBS
to exist. That combination will be different for different people; no
single LBS (or mail-order outfit) is going to have all the answers for
everyone.

As I previously pointed out, the shop that special ordered the LOOK cleats
for $20+ probably wasn't the right place to be buying road bike parts from.
That's not a crime, it's just a fact. There may be somebody else in the
area that would be a better choice, just as the original shop might have
been the best place had the customer needed something for a high-end mtn
bike or perhaps BMX, who knows?

If I were choosing a shop to buy something from, the first red flag would be
that a relatively-common road bike part (LOOK cleats) wasn't a
normally-stocked item and had to be special-ordered. Pricing would be a
secondary thing.

--Mike-- Chain Reaction Bicycles
www.ChainReactionBicycles.com

Sun, 13 Jun 2004 12:38:19 -0700, <[email hidden]>,

Bernie said:

I find the personal service extremely helpful and have never felt like
they were playing me in order to get a few more bucks in the till. They
get first shot at any bike or accessory that I want to buy.

Bike Dr.? First time I went there they sent me to another shop that
had exactly what I was looking for.
I of course went back there later to buy their stuff.

Good people. Good service. Good selection of commuter type gear. And
now they're opening a third store on Kingsway in Burnaby. No wonder.
--
zk

Zoot Katz said:

Sun, 13 Jun 2004 12:38:19 -0700, <[email hidden]>,

Bernie said:

I find the personal service extremely helpful and have never felt like
they were playing me in order to get a few more bucks in the till. They
get first shot at any bike or accessory that I want to buy.

Bike Dr.? First time I went there they sent me to another shop that
had exactly what I was looking for.
I of course went back there later to buy their stuff.

Good people. Good service. Good selection of commuter type gear. And
now they're opening a third store on Kingsway in Burnaby. No wonder.

Well, no it was not Bike Dr. No slur on them tho! They are first
class, and extremely helpful. Very good inventories too. I've spent
money there with no regrets. In fact I'd give them 100% confidence.
Get it, they are ok? Alright.
I dont' like to namedrop on this group, but since you started... I live
near Edmonds Cycle on Edmonds St Burnaby. A real old fashioned Momma
Poppa operation, with couple of hard working wrenches in the back workshop.
Nice people, good service. I just wish they carried more lines. They
are a Norco dealer, also carry a selection of near new decent bikes at
good prices.
Shops like this are always struggling to survive. Long may they
prosper, I say.
Best, Bernie

Quoted message said:

We sell "real" Look cleats for about $13 if I recall correctly (not at the
shop right now so don't have the exact amount handy).

Gee Mike, that is very similar to the price they charge at the bike shops
around here. I have found that the LBS prices are very close to Performance on
most common items like tires, chains, cleats and so on. I get some things from
Performance because of the ease of purchase and availability but given the
shipping costs, I generally do not save much money ordering mail order.

On quite a few things, I buy them from the LBS because if something goes wrong
with my bike mechanically that I can not cope with, they will. Performance
won't do that.