Dealer cost questions.

I don't know dealer prices, but it never hurts to ask!

Anecdotal evidence (reading forums etc) seems to indicate that it is easier to get the LBS to throw in an accessory or two, and/or discount some other items you need, rather than going down in price.

Editting:

Even if you find the dealer price, remember that if a small bike shop only makes a couple of hundred on a bike, it is going to be VERY hard for them to make a living. By selling bikes for only $200 over their cost, I estimate a shop would have to sell 10 bikes a week just to stay afloat, probably twice that many to make a reasonable living. That would be a lot of bikes for a small shop.

Also, the typical rule in retail is that the wholesale cost of an item is roughly half of the retail price. I don't know if this holds true for bikes.

fury4 said:

I am shopping for a new bike and do not know what bikes are worth or what I should expect to pay. If a dealer has a bike marked at lets say $1350, is there any room for the dealer to move price wise or is that what I should expect to pay? What is the average makeup on a bike? Does anyone know?

1. Actual selling prices tend to be situational. Most of the time, manufacturers advertised prices tend to be on the high side to make it look like you're already getting a deal. Some dealers will discount virtually everything, others will stand pat at their listed price. As a general rule, dealers will pay between 60% and 80% of their asking price for bikes. The high percentge mark-up will be on their lower priced bikes so their gross profit in dollars will tend to be close to the same regardless of what bike you buy. They also have to perform some assembly and after the sale service so their real profit margin on bikes is pretty thin.

2. Dealers generally only pay around 50% of their asking price for things like clothing and accessories and they don't have to assemble them. They'll usually be happier about using accessories as deal sweeteners. They can give you 25% off at the time of a bike sale and still stay in the black. It also changes the dymanics of the deal because the more accessories the customer buys, the better deal he gets.

3. Overhead can take a huge chunk out of a bike shop's gross profit. Retail rents in desirable locations, for example, can be high.

I added this to the first thread also:The bike shop is one of the bigger ones I have been at. They seem willing to deal somewhat and I am cool with that. I was just wondering what the profit margin was. They told me that dealer cost on the $1350 bike was $906. Does that sound reasonable or are they blowing hot air? I never saw that in black and white (the price sheet was on the counter) it was verbal. So that had me wondering. I think they move a lot of bikes. And is it normal for a shop to charge labor if you want to upgrade a few things when buying a new bike?
Thanks for the replys!

fury4 said:

I added this to the first thread also:The bike shop is one of the bigger ones I have been at. They seem willing to deal somewhat and I am cool with that. I was just wondering what the profit margin was. They told me that dealer cost on the $1350 bike was $906. Does that sound reasonable or are they blowing hot air? I never saw that in black and white (the price sheet was on the counter) it was verbal. So that had me wondering. I think they move a lot of bikes. And is it normal for a shop to charge labor if you want to upgrade a few things when buying a new bike?
Thanks for the replys!

$902 is 67% of the asking price which is about what I'd expect.

Once you start changing out parts, the rules pretty much go out of the window. The bike shop probably doesn't want to put the part that you're replacing into their stock. I'd consider anything that they do for you in that regard as an accommodation that they made in order to get the sale.

fury4 said:

I added this to the first thread also:The bike shop is one of the bigger ones I have been at. They seem willing to deal somewhat and I am cool with that. I was just wondering what the profit margin was. They told me that dealer cost on the $1350 bike was $906. Does that sound reasonable or are they blowing hot air? I never saw that in black and white (the price sheet was on the counter) it was verbal. So that had me wondering. I think they move a lot of bikes. And is it normal for a shop to charge labor if you want to upgrade a few things when buying a new bike?
Thanks for the replys!

IME, most shops won't haggle on the price of new bikes, but they may on an older model if they're trying to clear space.

They may also put older clothes on a sale rack, but probably won't haggle there either.

If you buy a new bike, even an older model, they'll usually put on accessories and upgraded parts that you buy at the same time for free, but they might not give you anything for parts you swap off... depends on what it is; if your bike has no-name tires or pedals they probably can't sell them as new to anyone else so they'll balk at your wanting a credit for them.

I understand people wanting to get a good deal but it seems questions like this come from people who are making a parallel between the way car dealers operate and bike shops - it's just not the same business model. No one tries to haggle with the prices at drug stores or restaurants or gas stations.

Possible exception for buying in bulk - example: "So this here deluxe titanium bike is $5,000... do I get a discount if I buy one for my wife and another for my kid too?" They might talk then.

While I understand (as confirmed by my earlier message) the potential of bike shops low profit margins, I jjust thought of a segment I saw on one of the national morning shows.

The guy said that almost everything is negotiable. His favorite lines were "Is that the best you can do?" and when all else fails (assuming you will truly not buy at the posted price) say "That's not good enough." and walk away.

Unfortunately this will not work in the places where the owners can afford to deal (the large chains) but might where the owner/proprietor must make decisions based on his/her ability to make a living. I would much rather deal with getting a little extra from a larger (chain) store where I have little power other than shopping somewhere else. I actually shop at a few places that cost me a little extra in order to support the small business owners... if I like the owners. 😎

Can you (the people who have replied) tell me what kind of bikes you have bought in recent years and how much you paid? I have never bought a new bike at a store, I have built 4 in the past 2 years (all MTB) and I am now buying road. I guess my question is...am I getting a good deal for the product that I am getting? I am looking at 4 different bikes. All new.

06 Lemond Alpe D'Heuz-Ultegra rear, 105 9sd, Bont Select wheels. $1300
05 Trek 2100-Full 105, Bont Race wheels, 9 sd. $1300
05 Trek 5000-Full Ultegra 9sd, 105 brakes, Bont Race wheels $1750
04 Lemond Zurich-Full Ultegra 9sd, Bontrager wheels (can't remember) $1900

The Lemond seems to fit better than the Trek so I was leaning towards that. Thinking about ordering the 2006 to save some cash and I would just up grade the wheels on my own. Any suggestions on where to buy wheels? Thanks again!

Bike shops dont make money off bikes. They make it off the accessories, clothing, basically everything else.

say 35-40% and include build time....

It's been, um, quite a few years since I worked in a bike shop, but as I recall the margin on new bikes wasn't all that good, around 15% after you factor in the cost of assembly and checkout. The shop has to pay the nose picker to get it put together. (yeah, Jim, still thinking about you)

See what they'll do on a better saddle, shoes, clothes, helmet, etc... they deal more there than on the price of the bike.

DiabloScott said:

Possible exception for buying in bulk - example: "So this here deluxe titanium bike is $5,000... do I get a discount if I buy one for my wife and another for my kid too?" They might talk then.

I wouldn't bet the rent money on the discount for buying two bikes concept. You would certainly get someone's attention if you wee talking about two $5,000 bikes but two $300 bikes are simply twice the work for a $600 sale. If the margin isn't there it isn't a good deal for the bike shop and they're not likely to go for it. I wouldn't.

I know for a fact that the dealer cost on a 2005 Stumpjumper FSR 100 was $1040 and the MSRP was $1800. That's about a 73% markup. I can't speak on behalf of the 2006 models b/c I only saw my LBS's catalog for 2005. It's safe to assume the markup hasn't changed.

Specialized (as do most manufacturers) does not allow dealers to advertise their bicycles at lower than MSRP, however the dealers have the right to sell the bike at whatever price they want.

There are reasons why Specialized (as do other manufacturers) makes the MSRP so much higher than dealer cost. The main reason is that LBS's wouldn't be able to stay in business if they only made 20% markup. It goes without saying that there are many costs to running a business that are not clear to the average consumer walking through the door, and with the internet & sporting good outlet stores making it much more difficult for LBS's to compete in the marketplace (Think Ebay, Sports Authority, Walmart), the manufacturers need to incentivise their dealer to carry their products. Why would a dealer want to sell WidgetBrand Bicycles at a 40% markup when I can sell Specialized at a 75% markup? Mind you, the MSRP is the top end of the price spectrum and many dealers are willing to go below the MSRP in order to get your business and keep you from shopping elsewhere. This is also why you'll only find certain brands at you LBS rather than Walmart or Sport's Authority where they can advertise and afford to sell bikes at near cost. How much below MSRP they go is entirely up to the dealer. Keep in mind that dealer cost does not include shipping & assembly costs. Often times, rather than reduce the selling price of the bicycle, dealers will throw in free things like tune-up services for a year, or some inexpensive accessories. Accessories tend to have very high markups as well, higher than the bicycles in many cases. That's why a dealer wont hesitate to throw in an airpump, computer, etc when you're spending $2K on a bicycle. However if you're spending only $500 on a bike and the dealer is only making $225, you'll likely get anything more than a free water bottle and tune-up services for a year.

niceguymr said:

I know for a fact that the dealer cost on a 2005 Stumpjumper FSR 100 was $1040 and the MSRP was $1800. That's about a 73% markup. I can't speak on behalf of the 2006 models b/c I only saw my LBS's catalog for 2005. It's safe to assume the markup hasn't changed.

The example given would be a 40% margin. That's fairly typical for the industry.

Retro Grouch said:

The example given would be a 40% margin. That's fairly typical for the industry.

40%?

wow, thats high.

having friends that run a sucessful long established bike shop, i would say its about 15 to 20% for 'bread and butter' bikes, >£200. Slightly more for specialist and race bikes.

the larger the business then the cheaper the bike. Bulk buying is one way of reducing bike retail prices and most if not all suppliers/wholesalers give discounts for bulk purchases.

i havent met a bike retailer yet who will negotiate on price to the customer..

Dealers will give discounts to bulk purchases. I knew of a rollerblading club that came in and all wanted to buy the same exact bike. They each bought a trek 5200 and a crapload of accessories. About 15 bikes in all. I think that should warrant a good discount.

fury4 said:

I am shopping for a new bike and do not know what bikes are worth or what I should expect to pay. If a dealer has a bike marked at lets say $1350, is there any room for the dealer to move price wise or is that what I should expect to pay? What is the average makeup on a bike? Does anyone know?

Added:

The bike shop is one of the bigger ones I have been at. They seem willing to deal somewhat and I am cool with that. I was just wondering what the profit margin was. They told me that dealer cost on the $1350 bike was $906. Does that sound reasonable or are they blowing hot air? I never saw that in black and white (the price sheet was on the counter) it was verbal. So that had me wondering. I think they move a lot of bikes. And is it normal for a shop to charge labor if you want to upgrade a few things when buying a new bike?
Thanks for the replys!

the best way to get a lower price on a new bike is to join a club or team that is sponsored by that shop. Typically the lowest discount for club members is ~15%. if you race competitively and often enough (20 races/season) you might be able to get a frame at cost.

JS