Why It’s (So Much) Cheaper Online

Why It’s (So Much) Cheaper Online

If there’s one thing your local bike shop hates, it’s a customer walking into his (or, increasingly, her) place of business holding a sheet of paper.

Of course, that paper might contain a shopping list of top-of-the-line goodies to buy in-store. But it probably doesn’t. And your retailer knows this from long and bitter experience.

The conversation inevitably goes something like this. The customer walks in, puts the piece of paper—the printout from a screeencap–on the counter face-up and turns it around so the text is facing the retailer. “Online retailer XXX has product YYY for $ZZZ,” he says (yes, it’s almost always a guy). “Can you match their price?”

The retailer looks at the page. He looks at the price. He looks at the customer. And he knows he is up shit creek without a pair of roller skates. The price is lower than his selling price. In fact, often enough to matter, it’s lower than the lowest price any of his suppliers offer.

The retailer knows all about pricing because he spends a huge amount of time on the phone or online, comparing prices and buying all the stuff you see on the shop floor. If it’s a large store, there’s a buyer whose entire job is to purchase and track those items. These folks know the best wholesale price, for anything, any time, anywhere in the country,

Worse is what the retailer doesn’t know the backstory for the item on that piece of paper. It might be damaged. Or last year’s model. Or only available in size XS or XXXL and then only in bright purple. Or it might be out of stock entirely. Or the consumer might already know this and is trying to game the bike shop owner, who has no way of knowing any of these things. And maybe the consumer knows that too.

01 Tilted Playing FieldSo the shop owner has to make a painful choice. He can either swallow hard, match the price, and take a sometimes considerable loss. Or he can decline to match the price and risk losing a customer.

Hence the creek, and the absence of skates.


Bike shop owners hate this scenario for a bunch of reasons. Because it makes them look bad, like they’re trying to rip off their customers. Because every time it happens it costs them either money or customers, sometimes both. And mostly because it makes them feel like the playing field is tilted so far out of kilter, there’s no way they can possibly win.

And with certain notable exceptions, they’re absolutely right.

Before we go any further, I need to make two things clear. The first is that business practices of online retailers, to my knowledge, are seldom illegal or even unethical. The ones I’ve met—probably half a dozen personally—are reasonable, competent, pleasant people.

The second thing is that my purpose is only to explain some of the ways online retailers are able to do what they do. I don’t presume to tell you what you ought to do about it. If you’re old enough to read RKP, you’re old enough to make your own decisions about where to buy your equipment.

Ask most cyclists—and most bike shop owners, too—why internet retailers can sell things so much cheaper than brick-and-mortar stores and they’ll usually tell you “low overhead.” It simply costs a lot less, they say, to run an online mail-order operation out of a warehouse in some weed-choked industrial zone with where a few trained monkeys pump stuff into boxes than it is to maintain a modern storefront with lights,  displays, and knowledgeable employees who deliver a high standard of service.

Those people are wrong. They’ve probably never been to the offices of an online bike business, or called their salespeople, or seen the level of service for themselves.

Modern online retailers have all kinds of costs bike shops don’t. Relatively large and well-trained customer service staffs, for instance, who will chat as long as needed with customers by text or phone. Plus database administrators, SEO/SEM/SES specialists, e-commerce managers, copywriters, video production people, advertising and remarketing professionals, and pricey computerized pick/pack warehouse management systems.02 More Zeros on the endOf course every business wants improved operational efficiencies to keep costs down, but for online retailers it’s less about low overhead and more about low costs and high sales volume; low COGS and high GMROI.

Pretty much the same as regular bike shops. Only with a couple more zeroes on the end.

This will be a long explanation—just under 3,300 words worth–so for the tldnr crowd, here are the six reasons online prices are so much lower than your hometown bike shop’s: supplier discounts, closeouts, loss leaders, house brands, sales tax, and gray marketing.

The rest of you are invited to read on.

The first thing online retailers do that bike shops (usually) can’t is buy in bulk. If that sounds laughably obvious, that’s because it would be, in most other industries. But in this, as in so many other things, the bike business is different. Unlike most 21st-century industries, the bike business still has a relatively large number (thousands) of small, independent business at the bottom of the retail food chain versus a relatively small number (dozens) of very large businesses at the top. And almost nothing in between.

That means the relative disparity afforded by volume pricing is huge. Suppliers encourage this by offering massive discounts to their largest (and mostly online) customers, often close to or even below their own cost. Yes, really. They do this because driving their sales volumes up lets them get lower prices from their factories, so even a zero-profit sale today can result in larger profits tomorrow.

03 Zero SumMore to the point, when suppliers calculate sales forecasts and revenue plans for a product, they balance selling price against anticipated profit and demand. Low profit on sales to a few big guys is offset by higher profit on sales to a lot of little guys. This is all built into the pricing model. So your local bike shop is literally financing the discounts offered to online merchants.

Yes, that’s right. Every dollar saved by the big guys is paid for by the little guys. With few exceptions, it’s a zero-sum game.

Pricing is pretty much the same throughout the industry because the relatively few, primarily online retailers have enough clout (and the relatively many small retailers don’t act cohesively) that virtually every supplier plays the big-guy discount game. Those who don’t, miss out on their slice of the online pie; their order volumes go down and consequently so do their profits, meaning they have to raise prices to stay in business.

To be sure, this kind of pricing model is the case in virtually every industry. What’s different for the bike business is the disparity in pricing, which is driven by the disparity in order size, which is driven in turn by the disparity in the size of the businesses doing the ordering.

A similar chicken comes home to roost with closeouts, inventory that’s undesirable to the supplier for some reason. That reason might be that it’s “broken,” sold out in some styles, sizes, or colorways. Or it might be  the product’s about to become “distressed” because something better or newer is scheduled to take its place due to an approaching model year change or midseason “line refreshment”.

Like some of the least comfortable sectors in Dante’s version of Hell, closeouts create a special dilemma for the bike shop owner. Often he can’t take advantage of closeout pricing because he’s already got a display case full of the stuff being closed out. Or even if he can purchase some of it, he’s only able to buy a fraction of what the online retailer can. In this case, the discounter doesn’t necessarily enjoy a price advantage (unless he buys up the last closeout dregs at a single bundled price), just a volume advantage. But that volume can be leveraged into big profits when combined with some other tactics.

You may already be acquainted with the concept of loss leaders: products marked down to a very low price in the hopes that once the customer is in the store (or on the site), they’ll buy some full-priced stuff as long as they’re there. In large-scale retail categories (grocery stores or consumer electronics, for instance) the “multiples” of add-on purchases are frequently three or even four times the value of the loss leader.

A nail down is a loss leader that’s not intended to be sold. It’s often discounted to an unbelievably low price, but maybe it’s only available in European size Small (meaning it might fit one of your niece’s Barbie dolls), or it’s an unusual color or out-of-date spec. Whatever. In any case, you come onto the site looking for this particular item only to discover you don’t want it after all. But while you’re there, maybe you’ll pick up a few things.

Similar to the nail down is the bait and switch, which is a loss leader that doesn’t exist and never did. Bait and switch (as opposed to just selling out of something) is technically fraud and therefore illegal, but it’s almost impossible to prove. If your grocery store runs out of something that’s on sale, you get a rain check for next time. But just try getting one from an online retailer…which means the line between selling out of an item and baiting and switching it can be as thin as the seller wants to make it.

Of course, bike shops can use these tactics too, and some do. But online retailers can do it in huge volume across a much wider breadth of products with fewer consequences. Every online add-on is a sale lost to  the local bike shop. Plus bike shops have a limited customer base and simply can’t afford to alienate folks with things like nail downs or bait and switch.

But wait. There’s more.

Very large online retailers have their own house brands. In at least one case, the retailer is owned by the house brand, or to be more accurate, by the factory that makes the house brand. Quality of house branded products can vary from excellent to execrable, but in all cases, the online retailer is buying not just below dealer wholesale, but at distributor’s ex-factory cost. And in cases where the retailer is owned by the factory making the house brand, it’s even lower.

Called transfer cost, this is the factory’s cost to actually make the goods, plus the cost to move (“transfer”) it to the retailer. Put another way, transfer cost is distributor cost minus the factory’s net profit. (The factory makes its profit back when the house-branded product is sold to the consumer.)

Not only do house brand products mean a lower price for the customer and higher profits for the online retailer, they are products bike shops don’t have access to, sold at a price they can’t begin to match.

Brick-and-mortar stores also have to charge sales tax on every purchase. Online retails generally don’t. The law on this is constantly changing (Google “online sales tax law,” and it’ll return more than 60 million results), but the Marketplace Fairness Act of 2013 requires online sellers to collect sales tax in all states…but with many, many exceptions. The most common practice, in my experience, is for online retailers to collect tax only on sales they make within their own state. Your mileage may vary.

Of course, online retailers from outside North America don’t have to charge any sales tax at all. And if they’re selling into another country (ours) from somewhere in the EU country they don’t have to pay VAT (Value Added Tax, the EU’s equivalent of sales tax, more or less), either.

While sales tax doesn’t put money into the pocket of either brick-and-mortar or online retailers, it can take money out of the one pocket that impacts sales the most…yours.

Average sales tax in the USA in the first half of 2015 was a hair under 5.5%. In Canada, it’s higher, but let’s stick to the US model for now. As a consumer, when you make a $100 purchase without paying tax on it, you just saved five and half bucks. If you buy a Dura Ace Di2 groupset for $2,623.49, not only do you save 35% off Shimano’s recommended retail price, but you leave with nearly an extra $250 in your pocket in the form of tax savings. Or maybe you spend it on some more stuff, with the profits going straight into the pocket of the online guy.

(Actually, the online retailer I got that price from was out of stock on Dura-Ace Di2 kits in every configuration, so maybe it was all just a bait and switch.)

The question of discounted prices becomes even murkier when you realize that products from most major cycling brands in the United States aren’t supposed to be discounted in the first place. These brands, which include pretty much every major bike company plus equipment names like Bell Sports, Shimano, SRAM, GoPro, Oakley, Saris/CycleOps, Park Tool and so forth—you can see some more here—have a MAP policy.

MAP is Minimum Advertised Price, and it works just about the way it sounds. Retailers for a brand are required to sell its products at or above a set price, which is generally the same as or close to the brand’s suggested retail price. If they don’t, the brand can refuse to sell them more product.

MAP policies have been legal since 2007 when the US Supreme Court ruled that, with some exceptions, MAP is not a violation of antitrust law. The general idea is that manufacturers have a right to protect the value of their brands, and one of the way brands retain their value is through consistent (= not discounted) pricing. Consistent pricing also has the advantage of making the brands’ products more profitable, and therefore more desirable, for retailers. Hence MAP. There are a whole bunch of exceptions–sales, close-outs, and so forth—but you get the idea.

In Canada, the practice is called UMAP (the U is for “Unilateral”), and it’s slightly more complex, but it’s pretty much the same for our purposes.

Of course, retailers in both the USA and Canada can sell products for whatever price they want, once the customer is in the store. That’s why it’s MAP and not just MP. If you’ve ever seen an ad that says “Prices Too Low To Advertise,” or a website that says “Mouse over the regular price to see your special discount,” that’s MAP at work.

04 MAP policiesLike everything else, the devil in MAP is in the details. Some brands are stricter at enforcing their MAP policy than others. And online retailers know this. Amazon, for instance, has online bots that do nothing but crawl the web looking for MAP violations. And when the bots find one, Amazon lowers its own price to match it, literally within nanoseconds,  There are also online services that do the same thing, for a price. Most suppliers have access to neither. Which makes it nearly impossible to enforce their own polices.

As you might expect, MAP violations and violators drive bike shops nuts. They feel they’re being held to different standards than the violators, and that MAP policies end up rewarding the violators while punishing the shops that try to honor them.

And you know what? They’re 100% right.

So how are online retailers able to advertise—and, more importantly, sell—products much lower than MAP without getting cut off by the brands? Simple. They buy those products outside of North America, specifically from Asia and (mostly Eastern) Europe.

The practice is called gray marketing or parallel import; basically, bringing goods intended for one market into another one. For online retailers, this can work in a couple of similar but technically different ways.

The first is for domestic (North American) online companies They buy products in Asia (remember some of them are owned by Asian factories, making this easy to do) or from Eastern Europe. (Western Europe typically has higher wholesale and retail prices than North America.)

The process is the same for European-based online retailers, except they may have to gray market twice—once to get the goods (if the goods are from outside the EU) into their warehouse, and again if they want to move them to the USA or Canada.

It’s also worth noting that bike shops in Western Europe have an even worse problem with gray marketing than their North American counterparts, because they have to pay higher wholesale prices to begin with. And since there is no MAP in the EU, bike shops there don’t even enjoy the theoretical price consistency that North America retailers have.

The upshot is that brands in North America can refuse to sell to the gray marketing (and MAP-violating) online retailers all they want. But if the discounting retailer is sourcing those products in Latvia or Bangkok, it can violate with complete impunity. In fact, the tighter the MAP policy on the brand’s part, the greater the benefit to the gray marketers who violate it.

Whether in North America or in Europe, the only recourse brands have is to locate the gray-marketed product at its source and shut it down. This is not an easy process, since the offending distributor has a vested interest in hiding the fact that it’s gray-marketing. This is partly because its violating its operating agreement and risks losing the line, but also because it’s so profitable. In addition to the base profit on sales to the online retailer, the gray marketing boosts the distributor’s sales volume, earning better pricing from the very brand whose operating agreement it’s violating.

05 MAP violatorsConsequently, hiding distributors’ identities is very much in the interests of both partners in the gray marketing enterprise.

Online retailers take the process a step further, to the point of removing or defacing tracking codes from the packaging of gray-marketed product, or serial numbers from the product itself. Stickers are peeled, numbers are marked out or scratched off, whole sections of boxes are cut out entirely.

Despite all the precautions, gray-marketing distributors still get caught regularly and cut off from a brand’s products. Online discounters just shrug. Bikes are a global business.

New markets are opening at a furious pace in developing countries all over the world. Consumers in those emerging markets don’t have the purchasing power of us First Worlders. So the incentive is strong for distributors in those countries to bump sales up a point or two or twenty by supplying product to other markets.

From the online retailer’s viewpoint, the supply of potential gray-marketing partners is effectively infinite.

At the end of the day, online retailers undercut mainline pricing by exploiting weaknesses in the cycling industry’s business mechanics, specifically in its distribution channel. Strategies include huge supplier discounts, closeouts driven by forced obsolescence, loss leaders in various guises; house brands, sales tax or VAT avoidance, and (in North America, anyway), MAP violations achieved through gray marketing.

Not one of these strategies is illegal. Online retailers achieve high sales volume at very low prices—and make significant profits in the doing of it—because of the very nature of the bike industry’s factory/ supplier/ retailer business model as practiced in North America and Western Europe. And the cost of online retailers’ success is disproportionately subsidized by independent bike shops, including the one you frequent on a regular basis.

So next time you pick up a screamin’ deal from your online retailer, be sure to thank the owner of your local bike shop. Because he paid for it. Literally.

24 comments

  1. publico

    I stopped reading this about halfway through because it was overly long, but how is what is happening to bricks and mortar bikestores or others businesses any different that what traditional grocers being squeezed out by supermarketers, tailors being squeezed by department stores, or any one of hundreds of other busineses being squezed by technological or market changes?

    1. Rick

      Correct, Publico. It *is* the same for any number of other businesses–drycleaners, shoe repair, golf pro shops, gun stores, outdoors (camping/backpacking) shops; funeral homes, pawnbrokers, florists, mom-and-pop bars and restaurants, and plenty more.

      There are two differences with bike shops. The first is one of degree; As I pointed out in the part of the article you didn’t read, there is likely more polarity (fewer midsize players) among businesses in the bike industry than in, say, pizza joints. The second is that RKP readers tend to be deeply passionate about bikes and bike shops, not so much about funeral homes or pawnbrokers. Saying that what’s happening to bike shops is less important to us because it’s also happening to florists kind of misses the point.

      Of course, probably somebody over on a site for people who like flowers is saying the same thing right now about bicycles.

  2. Jay

    It is even more complex than that. Online retailers can offer lower prices because their costs are lower in terms of on-hand inventory and limited shelf space. Those that have their inventory kept in a “just in time” status have next to zero inventory cost, plus they can offer a virtually unlimited inventory, without having to utilize gray market products. Where online retailers cannot compete well is in the area of customer service. I would love to see someone develop a business model that allows customers to shop online for product delivery at their local bike shop so that they can generate some revenue based on the service component (I am not thinking of Performance Bike/Bike Nashbar as examples, but rather a cooperative of independent retailers).

    The reality is that slightly less than 50% of online retailers sales (across the board, not just cycling related items) are of products that are not even offered in brick and mortar businesses.

    There is an interesting book entitled “The Long Tail” by Chris Anderson that gives a very good insight into what drives the online marketplace. While it looks at giants such as Amazon, iTunes, and Netflix more so than any specific niche, the concepts and explanations of how things work is quite interesting and very readable, even if you are not a business major (which I am not).


  3. Author
    Rick Vosper

    Hi Jay, and thanks for mentioning these.

    It’d be interesting to calculate the relative savings of zero inventory at a high purchase price versus the much higher inventory cost at a lower price via gray marketing. (Or it might be interesting for some people, just not for me.)

    The other advantage to gray marketing, of course, is to dodge MAP,and that’s becoming more and more important.

  4. Frank B

    Rick –
    Awesome read, as always. Keep the knowledge flowing our way. We’re in a crazy place right now with the disparities between traditional and e-commerce retailers and their suppliers trying to figure it all out.

    I’d like to add one more cause of the (extreme) pricing differences between on line and brick and mortar and your thoughts on it: Original Equipment (OE) pricing. Technically, this might fall into the grey market category, but it’s effect is important to highlight. This is something that is pretty unique to the bike industry in that there is a whole other lower level of pricing below wholesale that is offered (ostensibly) to bicycle manufacturers for installation on their complete bikes for sale. I can think of no other industries with a similar situation.

    Access to OE pricing has traditionally been blamed on bike brands over-forecasting how many bikes they were going to sell in a given year, then offloading the excess parts to a discounter. I think there’s more intent now to secure OE pricing by some online dealers specifically to use for aftermarket sales. This is what truly facilitates the extreme price differences that we see, in my opinion. Especially from component brands like Shimano who seem to just look the other way as it happens. When the OE price for a part is 1/3 of the MSRP, there’s a lot of room for big discounts down to below wholesale levels – and still reap profits for the online dealer.

    In my opinion, Shimano needs to be more diligent in monitoring who is getting access to OE pricing and how much of that product is actually ending up on complete bikes. As you mentioned, these practices are not illegal, technically, but surely skirt the spirit of honest business dealings and the intent of the programs.

    Thoughts?

    1. Rick

      Funny you should mention that, Frank. I originally planned OE as a seventh category, but the article was already plenty long enough (as at least one commentator has quite reasonably mentioned). Also I’m just not seeing a lot of OE-packaged parts out in the wild, certainly not like back in the wold west days. Are you?

    2. Randal

      Addressing both the above as well as Rick’s reply, I agree and I do see OE parts out there, just not in the box. If you know how to hang parts it’s pretty easy to buy a complete bike from a direct seller (I’m trying to be careful about naming names), harvest the OE groupset for less than buying it retail, especially the high-end stuff. Then you can dump the frame, fork, and cockpit components on eBay and recoup even more. Working at a shop, trying to sell components is extremely difficult. Adding insult to injury are the folks who come in asking for all kinds of advice on components from us and then walk out the door to order online.

  5. Pat O'Brien

    I shop value, not price. The service and advice, along with maintenance and warranty support, that comes with a purchase from your local bike shop has considerable value, especially if you are not an accomplished bike mechanic with the required set of tools. Also, I prefer to have a new bike custom built by my local shop with components picked by me with their advice. The last time I did this, the cost was a little less than a comparable bike from the big three.

  6. Trent Nix

    Suppliers have the option of making certain products available in certain regions and prohibiting their sale outside those regions. You see it commonly practiced with media – Blu-Ray, DVD, Video Games, etc. You also see some suppliers excel at maintaining MAP – Apple, Garmin, etc. In both cases, discount retailers and distributors know that, if MAP violations are found, there is real bite behind the bark.

    Often, suppliers will complain that, in the case of Apple and Garmin (there are many, many small suppliers with similar success but let’s ignore those for now), MAP enforcement is a privilege afforded to the successful. On the contrary, I’d argue that those brands maintain perceived value and are successful partially because of their excellent MAP enforcement. It maintains the consumer perspective that those brands are special, while opening their supply chain up to large retailers and retailers that, in most cases, would be considered discounters.

    Suppliers have options. They just have to choose to use them. Wheelman61 nailed it when he said:

    “Remember, when it comes to explaining the motives of any manufacturer for a given strategy or distribution policy there are two main questions to ask
    1-Does it increase our total number of units sold?
    2-Does it increase market share?”

    Dealers have to reward those suppliers that enable their businesses to sustain, and punish those that don’t. Then everyone wins – suppliers move units and get market share, B&M retailers make a living.

    The thing that makes B&M retailers in cycling unique is that they are the primary catalysts for creating cyclists and, therefore, creating the market for cycling products. Without B&M retailers, everyone loses – suppliers, B&M retailers, and online retailers.

  7. jorgensen

    I believe Campagnolo has attempted to curb “grey market” importation to the USA of its products by denying warranty claims made in the USA with respect to products tagged to be sold elsewhere. Don’t know how that operates, perhaps product ID or serial numbers.
    Long ago an acquaintance self imported a Mercedes coupe that was not available in the US market at the time (500 SEC), black car, black interior, San Fernando Valley Ca heat… the plastics inside all warped. Denied by MB USA, he had to ship the car back to Germany to get the interior replaced.
    Unless independent retailer figure out a co-op approach to purchasing, this will persist. An alternate way to be involved in the bicycle business will eventually result. Just saw one of those Velofix vans recently…

  8. Jeff Koenig, 2nd VP, NBDA

    Rick wrote a very good technical article and should not apologize for length. It takes explaining for the sake of clarity. Yet (you who are non-bike-biz-employed consumers out there), do you care about our technical challenges? No, and why should you? Not your problem, you just don’t want to pay any more than someone else gets to, right?

    But, on behalf of consumers, thinking bike-biz folk should care. Do consumers like how durable your excellently balanced and comfortable snow shovel is? The customer service at their cable/sat/phone/internet provider? Their bug-free computer software? Everything rickety plastic thing they buy today that was once a natural material that lasted ten times longer? Stroll though the Wal-Mart aisle or on an Amazon shopping trip, find as many different products as you can, and ask yourselves what kind of small business used to sell that item. Then ask yourself what the experience used to be like with that item compared with what you can expect of it now? (Durability, QoE, warranty support, ability to repair rather than replace, etc.) These are all commoditized items for which you only get to choose between cheap and worse, because, for reasons Rick points out, better is no longer profitable to sell.

    That is, except when better still exists in a product category for which quality is dying but not yet dead. That is today’s bicycle business. Consumers can get “nice” Shimano “cheap” today because bike shops hang on — nevertheless losing another 100 to 200 storefronts steadily per year. When consumers no longer have a bike shop near them, other people who live near them will ride less and less. Events will disappear. Their local biking scene will evaporate. They will lose interest too because everyone else has. Anyone who wants to try the two-wheeled thing will just have online and big box choices between bad and worse.

    But not only do consumers lose (and shopkeepers, of course), but so do brand owners. Brand death follows shop death because “new” cyclists cannot be made from scratch through website video content and online purchasing. The product is too complex. Unlike a snow shovel, a bicycle is not a need, even the poor who still have feet or buses to resort to.

    So while Rick is right on many points, the one that rings loudest is that of brand profitability suffering if it DOESN’T sell in bulk to online sellers. This could be challenged, technically, in that a few brands that “get it” do indeed shun the online game and still profit, but perhaps most today have drunk the post-1996 internet-apocalyptic Kool-Aid that they don’t have the luxury, so they bleed online like an open vein. These brands are all on the chopping block. Without small retailers far and wide to explain and introduce the product to consumers (so they know what to go and buy online-bad joke), a massive amount of brand belly-up & consolidation will come from the shift to online retail. Look at the industry news and the big consortiums buying up brands into big families. It has already begun.

    Next will be the ongoing cheapening of the quality of manufacturing and the complexity of the product by the oligopoly of remaining brands. It is necessary so that products can be sold without small retailers, with a minimum of explanation, with a minimum of service before and after the sale, with minimal expectations before throwing it away and buying it again. Commoditized products are disposable products. How green of consumers to demand cheap stuff to keep throwing away and buying again.

    Consumers are never to blame. They always flow with the current over the waterfall wherever gravity (discounting) takes them. It is brand owners (is, was, always will be) who control their quality and market image & positioning. A brand can be profitable being special for specialty shops only and I call B.S. on anyone who claims otherwise, which is just lazy thinking and analysis. But if most brands jump in the water with consumers and let the current take them, over the falls they all will go, taking quality retailers, and ultimately, quality choices altogether with them.

    Next, Schwinn, Gravity, Huffy, Windsor, Vilano (all made in the same place with different decals) won’t be merely the cheap alternative, but the only quality option available, along with Diamondback, Raleigh, and probably eventually Cannondale, Haro, Torker, Niner, you-name-it, even Trek. Any specialty brand left today can eventually be painted on the same cheap stuff by a conglomerate who bought out the brand name when specialty brands lost their access to specialty distribution and their reason for being special.

    1. Rick

      Thanks for the response, Jeff, and for the kind words. I’m going to let those stand, but I would note that Schwinn and Huffy have completely separate ownership and operations. As for factories, I believe these are still separate, too (my information is from 2010 and may be out of date),

      Speaking of factories, an interesting article for consumers (I’m sure most industry folks are already well aware of this) is which factories make which bikes for which brands. Since the BR&IN folks have already done the heavy lifting on this one, it should be pretty easy to write.

      But, as I like to say, the bike business is both small and incestuous.

    2. Pat O'Brien

      Your explanation is worth reading. But, I respectfully disagree with your point that consumers only care about price and are swept along with the discounting current. I don’t, and I think many cyclists agree with me. I don’t shop at Wal-Mart either. Please don’t paint consumers, your customers, with that broad brush. We have two shops in our small town. I don’t think the owner’s are getting wealthy, but they have been in business for decades. Frankly, I think the big three are the ones going down the road to ruin. I won’t pay the money they demand for a frame made from buzz word marketing bullshit materials in an unknown factory in an unknown country and completed with the components, again with their wacky marketing names, made by the lowest bidder. There is only one big three bike in my garage, and that frame will soon be replaced by one where the company says what it is made from and where.

    1. Rick

      Hi, Les. Short answer, not to my knowledge. That’d put them in a criminal position and I’m not sure the heat would be worth it.

    2. Dave

      It would not surprise me. Nor would it surprise me if some online and mail order merchants were selling goods that fell off the proverbial truck.

  9. Bikelink

    Thank you for the long article…so much is too short these days…some of us actually want to hear all the details, nuance, and more!

    I’m dedicated to buying everything possible from my LBS and that ends up being let’s say 90%. I need them to be around to work on my bike(s) when it’s too complicated for my modest mechanical skills, and have an actual store to handle objects and try on/out stuff, and just be a place where I can walk in and breath bike air and talk to bike people. However there are some areas where at least some online stores are better in areas other than price. One in particular I’ve used has full (or close to it?) retail pricing (other than smaller amount of discounted stuff) but I occasionally buy from them since: 1) I can sometimes get stuff that’s not available locally…even as a ‘special order’ locally (I also use that often to get close to 90% for my LBS), 2) if it’s a local special order it can take an unpredictably longer period of time to get which sometimes is a problem, and 3) I can’t return a local special order (I don’t blame the LBS for that..that’s not their business…but that is the business of the online store). #3 is especially important for clothing. If it’s not locally available, special ordering it online means I can order multiple sizes to try on then return the bad size for a modest shipping cost. Finally, strangely enough, 4) the online retailer has *more* knowledgeable staff than my LBS (this was mentioned) about at least some specific products, so is a good option for at least the special order stuff.

    Perhaps this is capitalism at work. You’d think they local stores would almost all go out of business, then we’d realize we want them, then (more people would) be willing to pay more (the ‘real cost’…but as with car gas and many other things we Americans seem fine with not paying the real cost of things). But the other factor is many of these stores being a labor of love for the owners who are then willing to barely make money…so they don’t give up in large enough #s to affect the business. Final thought: a cohesive, strong, single voice organization of LBS’s (I assume one/some exist but they must be too weak)?

  10. Dirt Merchant Bikes

    Some thoughts:

    Small bike brands will survive, but they need to be sold in the right way. Trying to sell through brick-and-mortar bike shops while also selling via e-commerce is a death spiral for all but the e-commerce retailers. Brick-and-mortar shops that do the right thing to sell these brands (e.g., having demos & creating customer awareness/preference) are just patsies for driving e-commerce sales. Even if retail pricing is the same based on a “MAP” policy, consumers buying through e-commerce save at least the sales tax.

    Yet, I do believe that brand passion is driven by the local level. If buyers are unable to see, let alone try out a bike, what’s to differentiate one bike brand from other online-only “brands” such as Motobecane, Dawes, Windsor and seemingly legitimate brands such as Canyon. Do you just want a Shimano XT bike or are you actually concerned about getting a bike that rides well? For sure, there are some buyers that care only about price and they will buy the BikesDirect bikes as the best “value”. But what about the buyers that care about what they ride. Despite their good reviews, would you buy a $4,000+ Canyon full-suspension bike without trying it out first? How much is it worth to be able to try out a bike? Again, some buyers will care and others will not.

    The Specialized model works for bikes, but those shops still face margin pressure on the other parts, accessories, and clothing that were a critical driver of bike shop profitability.

  11. Spiff

    A lot of comments here.
    My thing is that The main distributor has a choke home on the inventory that LBS need. For most items the price is already higher than ordering any one thing online.
    As mentioned earlier, service is the LBS bread and butter. The best shop on DC is all about service.
    My mechanic is all services and very limited sales. He’s the hardest working guy I know.

    1. Craig P

      I agree – I buy what I can from my LBS, and have him do wheel service etc. But some items he either can’t or won’t stock. IRC tubeless tires – I tried to get them through him. He wouldn’t do it. So I ordered them from an online store in Japan. So these days I use the ” spread the wealth ” method. I buy what I can from my LBS – helmets, shoes, sunglasses, some repair ( what I don’t do myself ), and I order some things online – often from other brick and mortar outfits that have online stores. I do what I can for my local guy! But he needs to do his part too.

  12. Brad

    Nice article; I wanted to drop-in a note about my experience with LBS’ over the last few years and how my perceptions have evolved.

    I’m a Boulder native (the last one still here, I think) and have had the good fortune to get serious about cycling at a time in my life where I had the disposable income (pre-kids) and when some of the higher profile shops in town had some really good people. People that could have an wide-ranging conversation about road, mountain, ‘cross – whatever you needed. People that rode and raced those disciplines seriously and that could help you grow with your aspirations in the sport. Those people are sorely lacking ATM, replaced by people with knowledge so superficial its worthless to all but the most neophyte customers.

    I buy most everything online these days but it has little to do with LBS prices, it’s because the value behind that price point (no pun intended) has evaporated. I want expert knowledge and parts availability – most LBS’ in Boulder have neither consistently. I’ve had much more informative conversations with guys at Competitive Cyclist over the phone than in person at my LBS lately. I could care less about warranties… I had an easier time warrantying a Niner frame I bought online than I did a Cervelo I bought off the showroom floor. I want to walk in, have a 10 min conversation with an expert and walk out with the parts I need. I understand that most LBS’ can’t hold a lot of inventory, but in this day and age, why in the world would I wait until your next “Wednesday shipment” from QBP for derailleur cables?

    Just last month I was in a Boulder LBS that ends in ‘Sport’ whom I had bought 2 bikes from and been a regular patron of a few years back. I asked the mechanic how difficult it was to trim or replace an XTR brake hose and he smiled, looked at the ceiling and asked me, “Well, if you asked your dentist how hard a root canal is, he would say it’s pretty easy… but how easy would it be for you?”

    I had no idea a 5-minute YouTube video is all you need to perform a root canal.

    Online vs. LBS is a simple value proposition for me: convince me I’m paying for something I can’t get anywhere else and I’ll pay the freight. Just don’t expect me to stand in line and pay 2x so a hipster in skinny jeans, an undergrad ‘triathlete’, or crusty old-timer can regurgitate the latest Bicycling magazine article on laterally stiff but vertically compliant.

    BTW, I think it’s a bit funny that many of the people I knew working in LBS 10 years ago were doing it just so they themselves didn’t have to pay LBS retail…

  13. SteveP

    I often read BRNews and find there is a whiff of communism from American retailers these days. (We like competition when we win, but hate it when we lose.) Change is inevitable.

    I live an hour outside a major city with hundreds of bike shops (some chains) and two LBSes just a few miles away. I’ve been back into cycling in a big way for the last five years or so (I went from two bikes to six) and I’ve spent thousands on bikes, parts and other kit. I took a course and built my own frame and I ordered two different custom steel frames, all three of which I built up myself.

    Much of the money I spent was on tools – mainly because the LBSes were so useless. Not only did each break stuff I asked them to fit (and one didn’t even replace what they broke) they also discourage you from just “dropping in” for help and prefer you to book a service – like you would for your car. Well, you *could* for your car. But there are plenty of places that have steeped in for “while-U-wait” service – especially for simple stuff (like oil changes).

    As best I can tell, the local shops are a bit like a club you might be able to join if you ask nicely. One has a decent selection, but woe betide if you want something esoteric – like a 25 or 28mm road tire. Nope. Can order. Not sure when it will arrive. Honestly – how can they compete (regardless of price) with online sales/selection? To go back to my Communist comment – maybe we should all just ride the Statebike, in gray, with approved components. Put your name on the list, comrade.

    Online suppliers are riding the wave of a perfect storm. They offer great selection (especially viewed in total) but no service other than supplying a product, so if an LBS could actually provide what a customer considers “service” that would be a plus. But so many can’t. I know LBSes don’t particularly like it when a customer shows up with parts bought elsewhere, and they certainly drive that point home when they break things. I still try and buy stuff from LBSes, but I don’t worry about it any more. I have, on the other hand, become a much better bike mechanic.

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