State of the industry: a running thread

[bikeworkshop]

During covid our bike suppliers found they couldn't get the components they'd specced in the catalogue, so we were getting bikes supposed to have (say) shimano rf+ coming in with microshift, cheaper chainsets loads of differences. Mostly cheaper but the choice was that or partially built bikes sitting in a shed in Taiwan.
The cost increase was a lot to do with shipping prices too which jumped from under $1000 a container to over $30,000!

Also factories were busy making other stuff, like PPE , so narrow margin bike parts production got kicked right back

You can probably find who's making the money by looking at the ftse index and the like - it's usually the banks.
And where it ends up by looking at the Rich List.

Surprise surprise, it's Jeff bezos Richard Branson, Larry page, Tim Cook and the idiot Musk
None of them own a bike brand

 

[N-plus-one]

[redacted]

I’ve no idea why people get so upset about certain trades making a profit. Cars and bikes seem to be worse when in reality … your local supermarket has far greater mark ups and nobody cares.

I do. I care about it. I loathe the power that the large supermarket chains exert. I hate their ability to squeeze producers (particularly farmers) and customers alike. I try to avoid buying from supermarkets, despite their convenience. I shop local when possible, and direct if feasible. Fortunately, in SW France this is still possible.

 

[d8mok]

I do. I care about it. I loathe the power that the large supermarket chains exert. I hate their ability to squeeze producers (particularly farmers) and customers alike. I try to avoid buying from supermarkets, despite their convenience. I shop local when possible, and direct if feasible. Fortunately, in SW France this is still possible.

I’d suggest certainly a minority (albeit not wrong).

But 99% of people don’t walk around a supermarket trying to work out what the item cost to produce and the supermarkets mark up.

In the motor trade net profit is a few % of turnover. Yet people are programmed to negotiate away this profit. Same for cycle purchases - we search for the best deal around. But I’m yet to see someone try to chip Doris down in checkout as Asda.

I’m sure the cycle trade is like the motor trade where net profit is so minimal compared to turnover many of them aren’t getting super rich.

 

[greencat]

I’ve no idea why people get so upset about certain trades making a profit. Cars and bikes seem to be worse when in reality … your local supermarket has far greater mark ups and nobody cares.

That might be true for some individual goods and lines, but supermarkets in practice make very low margins typically 1-3% due to intense competition. And people do care very much (lots of people shop around for the best prices overall, and on specific goods as well as moan about it):

Supermarkets never had a question to answer on profiteering - but their suppliers do

Sky's Ian King says time and money have been wasted through an investigation into whether grocers are ripping shoppers off but expects the food supply chain to face criticism ahead.

news.sky.com

For the bike industry, I suspect it's problem is that it's too small to benefit from real economies of scale, best priced financing etc - plus there is an awful lot of boutique elements. I suspect any bike costing over £4Kish is likely made in comparatively small numbers.

This is why when compared to some other goods like perhaps cars, things seem expensive and poor value for money whether it's repairs or bikes.

 

[d8mok]

That might be true for some individual goods and lines, but supermarkets in practice make very low margins typically 1-3% due to intense competition. And people do care very much (lots of people shop around for the best prices overall, and on specific goods as well as moan about it):

Supermarkets never had a question to answer on profiteering - but their suppliers do

Sky's Ian King says time and money have been wasted through an investigation into whether grocers are ripping shoppers off but expects the food supply chain to face criticism ahead.

news.sky.com

For the bike industry, I suspect it's problem is that it's too small to benefit from real economies of scale, best priced financing etc - plus there is an awful lot of boutique elements. I suspect any bike costing over £4Kish is likely made in comparatively small numbers.

This is why when compared to some other goods like perhaps cars, things seem expensive and poor value for money whether it's repairs or bikes.

I’m suprised overall it’s such small margin. As I know personally from some products I sell what margin we have which are sold in most major stores (not food though which likely drags it down)

My point isn’t regarding costs to the consumer. As anyone hates paying more. My point was that people don’t complain about the cost to produce and margin on those items… only the cost to them.

For example people don’t look at a packet of potatoes at £1 and say —— these damn supermarkets taking advantage , I bet that packet of pototoes only cost them £30p to produce. Damn you making your 70p GROSS profit and your 3p net

 

[clubby]

Many if us bought our first real bikes in the early 90’s. Since then, inflation is at least 250%. People always main about prices of cassettes. Too end XX1 can be had for about £285, which is £114 in the early 90’s or about the same as XTR when it came out despite having a lot more sprockets.
Disk brakes are way more powerful and reliable, yet cost the same as they did back when they were introduced. Carbon bars that are super strong, wider and light can be had for the equivalent of £45.

Bikes and especially entry level bikes are so much more capable than they used to be. Look at suspension forks. I had RC35’s with 40-50mm travel out of elastomer lumps. They cost £299 (£750). For that money these days you can get top end 180mm travel with adjustable everything.

It’s easy to get hung up on the £8000 halo models but they never sell very many of those and never have. We probably all remember going to a race and seeing an RC100 or. Ti frame dripping with CNC jewellery but most people were on ordinary mid level bikes and still are.

 

[Russell]

‘Greedflation’, not just endemic in the bicycle industry but across a whole raft of retail sectors. Those that are guilty of it are being caught out.

Companies learn greed doesn't pay after all — MoneyWeek

In a competitive market, no one is free to raise prices with impunity Pret A Manger is backing away from price hikes Over the past couple of years we have all become familiar with “greedflation”. With inflation rising to levels not seen since the 1980s, prices were obviously going up, but it...

apple.news

(Sorry if you can’t access the above link)

 

[bikeworkshop]

So back to the problem of the bike industry - endlessly offering us crap we don't need to play to the consumer element, keep them buying a new bike every couple of years.
Some bike advances are fantastic, like suspension and disc brakes, some fashion changes offer us things that were always available - like bigger tyres and wider bars. Some are properly unnecessary like di2 and push fit bbs.
But the wiggle chain reaction thing of selling volume at almost no margin means most towns no longer have a "real" bike shop.
( Featuring a grumpy old man who thinks every change since 1985/95/2005 is a pointless waste of time)
Of course there's loads of knowledge and info on the Internet, but a quick conversation in a shop used to get people set up with the right bike for their needs at a very similar cost to nowdays

 

[Titiritero]

An interesting comment made in the Escape Collective podcast mentioned a few pages back was that in COVID time "bikes were sold to new people, while now we are back selling new bikes to the same people"...

That is, a few newcomers get in every year, and usually buy some entry level stuff, and everything else, the biggest part, is sold to us, the already convinced (I need a winter bike, I want to try gravel, my stuff is obsolete and I need the latest and greatest,...). You only need to search for the shed/workshop posts in this forum...

Given the high inflation in the last 2 years and the reduction in disposable income, less bikes are needed/sold

 

[bikeworkshop]

It's difficult, almost impossible, for any large business to shrink - which means they can all start fighting like rats in a barrel, chasing the few scraps of food in a desperate bid to survive.
It's ugly.

We should be thankful WCR couldn't borrow another £100,000,000, because then they would have killed another few hundred diverse bike businesses before going pop next year.