Sunday, April 6, 2008

How do they do that...

A friend of mine is building up a new bike and asked me how much it would cost for an XTR group. He told me that he had been looking at the prices on a mail order site in the UK. I checked out their site and found to my disbelief that the price they were selling an XTR group for (shipped to the US), was within dollars (okay, that is a very slight exaggeration, the actual difference was about $100) of the price I, as a bike shop, could buy the parts. Amazing. How can a company in the UK sell an XTR to the end user for the same price I can buy it for?

I know how, but it's still boggling. One thing that boosts the cost of the parts that I buy is the enormous amount of packaging material that is used to make the parts look pretty on a display shelf. I recently received a front derailleur in after-market packaging. As amazing as it sounds, the packaging weighed within grams of the actual derailleur. Now that is excessive.

There needs to be an option when buying parts. Most of the parts I buy will be used to fix a bike or to assemble a bike. I don't need the fancy after-market packaging. A simple bag is fine. Actually, a plastic bag is pretty wasteful too since it just gets put in the trash. Better would be wrapping the part in heavy paper. Easily recyclable and protective in shipping.

But eliminating the wasteful after-market packaging wouldn't be enough to make the pricing such that I could buy and re-sell the parts for anywhere near that UK mail order company. What's the answer? I don't know. Maybe Shimano does. I can't blame my friend for looking to that company for the parts. It's not like the difference in 50 bucks or even a hundred. It's hundreds of dollars. It's the price of a really nice suspension fork. The "well, we offer after the sale service" doesn't work in this case.

Guess it's my "welcome to bicycle retail."

(What's playing: Michelle Shocked 33 RPM Soul)


cyclofiend said...

Now, now... you were on the manufacturer's side. When someone can source OEM component groups, the price is significantly less than picking them up via distributor. The big mailorder companies in the US all have their own bike lines to assist in that effort. It's a simple matter of ordering 1,000 component group sets for your RadMTB Pro and then - oops - coming to find that they only shipped you 250 frames.

What, oh what, will you do with those extra 750 component sets?

As far as small businesses, there's gross margin and cash flow. Sometimes you have to chip a little bit off the former to help the latter... Hang in there! ;^)

blackmountaincycles said...

Yep - to all points :-)

Jim G said...

I recently read on some other blog that they were going to request parts in "OEM packaging" to cut down on all the excessive/wasteful boxes and packaging...they didn't say if/how that would affect pricing, however...?

Anonymous said...

Wow. I remember when Shimano was like 1.5 times what you could get it for in the USA. God forbid you wanted anything American, "King HS, that will be 100 pounds please". My guess it has more to do with Shimano getting sick of hedging the dollar and import duties than anything else.