Articles about $10,000 bikes - What's the point?

[Moose McKnuckles]

And maybe his buying a bike helps to support an industry that benefits us all.

How exactly does the industry benefit us all? Is it by:

a) Outsourcing jobs to China and putting native workers out on the unemployment line?
b) Using resale price maintenance to maintain high prices for products?
c) Inundating every cycling magazine with an endless stream of garbage propaganda and marketing bs?
d) Cutting down on bike sizes to save money on molds, thus generating crappy geometries and limiting customer choice?
e) All of the above.

 

[ElChingon]

I don't follow your reasoning here. As per the blog post, bikes at the top end of a range used to cost significantly less, during an era when they were overwhelmingly produced in the West. And now today we have carbon bikes being produced in large numbers in the far East and the cost has skyrocketed.
...

If you recall the article about Campagnolo, you will remember they are paying union wage for their metal workers yet amazingly produce components that are competitive and priced reasonably similar to their competition.

So please, clarify what your vague post is supposed to mean; I'm honestly confused. There are many examples in the bike industry where you are paying for first world labor and yet shockingly these products are on par in terms of price with the big brands and their cheap labor force.

The top of the line or dream bikes have always been for the select few. They cost less but could you really afford one back then? Nope! Just because manufacturing has moved to the East doesn't mean the increased amount of middle men involved are not getting their cut or raising the price of these boutique bikes.

I bring up those custom steel frame makers, Vanilla, Independent Fab., etc. as "West" based manufactures who are pinching the pie as fat as they can. OR has steel all of a sudden gotten so expensive

This argument is just silly. The people making those bikes in China get none of those things. The markup on these frames is through the roof. Or do you not realize that the $$ you pay for Specialized goes to fund their sponsorship of pro teams? You think they're out there paying for people to get those things?

You know who does? Time. Cyfac. Colnago. Yeah, those manufacturers who do not outsource to China. You just made the argument as to why we should NOT buy Specialized, Cannondale, Giant, etc.

The low end Chinese worker may not get them in his pocket book but their communistic government is getting it to continue the cause, some to the workers benefits and some not so much (not my decision there, or more stuff for the Politics thread), how much we'd have to research. Different country, different government, different end game on money distribution.

Stupid expensive bikes play an important Marketing role. Keeping a retailer in business with employees making a living wage is not one of them. There are very few enlightened consumers willing to pay a premium explicitly for the purpose of supporting living wages. So, Trek and Specialized play along. If they don't someone else surely would. Meanwhile most consumers just pretend there is no impact to their purchasing decisions.

...

The "West" self inflicts these prices on us as well, most LBS's are also raking in some good dough on these bikes, why are all the "Support your LBS" people crying foul on this? The West has been r@ping us and will continue at its own expense (more Political thread stuff if I continue).

In conclusion, unless you all still make the same amount of money as you did when the prices were more reasonable (they were just as high for me back then as they are now) I could see your complaints but again NOPE you all make the same ratio of where prices are, unless you won the Lotto or hit it big (props to you if you have).

 

[BroDeal]

The top of the line or dream bikes have always been for the select few. They cost less but could you really afford one back then? Nope! Just because manufacturing has moved to the East doesn't mean the increased amount of middle men involved are not getting their cut or raising the price of these boutique bikes.

I could afford one then. I can afford one now. I don't have a problem with the price per se. I have a problem with what can be bought as an alternative for the same price. The halo bikes from the big manufacturers do not measure up. They are a rip off compared to the custom frames that can be purchased.

I bring up those custom steel frame makers, Vanilla, Independent Fab., etc. as "West" based manufactures who are pinching the pie as fat as they can. OR has steel all of a sudden gotten so expensive

Those frames are made by experienced craftsmen in first world countries, made to measure, custom whatever you want, and they are still cheaper than the stock frames made in third world countries by unskilled people hired off the street and paid virtually nothing.

The low end Chinese worker may not get them in his pocket book but their communistic government is getting it to continue the cause, some to the workers benefits and some not so much (not my decision there, or more stuff for the Politics thread), how much we'd have to research. Different country, different government, different end game on money distribution.

There is no such thing as communist China anymore. China is a capitalist country with one party rule. Instead of running for election, you join the party and work your way up. Funny enough, aside from the lack of an emperor, the system is not that different than what it used to be centuries ago.

The "West" self inflicts these prices on us as well, most LBS's are also raking in some good dough on these bikes, why are all the "Support your LBS" people crying foul on this? The West has been r@ping us and will continue at its own expense (more Political thread stuff if I continue).

LBSes are hardly raking in the dough. The bike industry has done everything it can to screw over the LBSes. I am amazed that any can stay in business.

In conclusion, unless you all still make the same amount of money as you did when the prices were more reasonable (they were just as high for me back then as they are now) I could see your complaints but again NOPE you all make the same ratio of where prices are, unless you won the Lotto or hit it big (props to you if you have).

The above is not true when prices rise faster than inflation.

 

[LugHugger]

Just as a counter point to the custom-made, West is righteous argument (which I'm entitled to make since I paid for a Western made custom frame) the cost of Columbus' best non-stainless tubeset Spirit - h/t, d/t, t/t, s/t, chain and seat stays and b/b - from one of the biggest tubing suppliers to custom builders, Ceeway, is give-or-take £150 ($230).

If I order a frame from a reputable UK framebuilder, I will be asked to pay a minimum £975 ($1,500). Mark up c 650%.

If I order the same frame from Dario Pegoretti, I would be asked to pay minimum £2,150 and Dario sources his tubesets directly from Columbus so doesn't pay a wholesaler commission. Even subtracting £400 for his new fork, that's £1,750. Minimum mark up 1,150%. I haven't even budgeted for a famous paint job.

Do these sound like reasonable mark ups? The 'West' is just as guilty as the 'East' and the off-shorers of gross profiteering.

 

[elapid]

Just as a counter point to the custom-made, West is righteous argument (which I'm entitled to make since I paid for a Western made custom frame) the cost of Columbus' best non-stainless tubeset Spirit - h/t, d/t, t/t, s/t, chain and seat stays and b/b - from one of the biggest tubing suppliers to custom builders, Ceeway, is give-or-take £150 ($230).

If I order a frame from a reputable UK framebuilder, I will be asked to pay a minimum £975 ($1,500). Mark up c 650%.

If I order the same frame from Dario Pegoretti, I would be asked to pay minimum £2,150 and Dario sources his tubesets directly from Columbus so doesn't pay a wholesaler commission. Even subtracting £400 for his new fork, that's £1,750. Minimum mark up 1,150%. I haven't even budgeted for a famous paint job.

Do these sound like reasonable mark ups? The 'West' is just as guilty as the 'East' and the off-shorers of gross profiteering.

You are just considering the cost of the tubing and not the design and customization process (as well as the experience, craftsmanship and man hours) that goes into putting all those tubes together into your dream ride.

 

[elapid]

The "West" self inflicts these prices on us as well, most LBS's are also raking in some good dough on these bikes, why are all the "Support your LBS" people crying foul on this? The West has been r@ping us and will continue at its own expense (more Political thread stuff if I continue).

I have not worked in a bike shop, but I have heard that your LBS will make very little on bike sales and that they make the majority of their profit from bike-related sales (helmets, shoes, kits, etc).

 

[LugHugger]

You are just considering the cost of the tubing and not the design and customization process (as well as the experience, craftsmanship and man hours) that goes into putting all those tubes together into your dream ride.

I have considered the craftsmanship needed to produce these rides. The man hours per frame alone for a master builder can not justify the mark up. I accept that years of 'apprenticeship' deserve their rewards though in a way that popping frames from a mould can never justify their cost. Which is why I will always pay a craftsman for their work. Some of their prices are over-inflated though.

 

[elapid]

I have considered the craftsmanship needed to produce these rides. The man hours per frame alone for a master builder can not justify the mark up. I accept that years of 'apprenticeship' deserve their rewards though in a way that popping frames from a mould can never justify their cost. Which is why I will always pay a craftsman for their work. Some of their prices are over-inflated though.

I too have a custom-made bike (titanium Lynskey). I appreciate my bike and the quality of the ride, so much so that I have bought and sold carbon bikes because they did not measure up to my custom bike. I am still riding my custom bike 6 years later with no desire to buy another bike. The cost of my frame was similar to factory line made carbon bikes, so I am not complaining about the cost of my bike frame even relative to the cost of the tubing. However, the cost of buying the componentry individually took the largest toll on my hip pocket.

 

[DirtyWorks]

Just as a counter point to the custom-made, West is righteous argument (which I'm entitled to make since I paid for a Western made custom frame) the cost of Columbus' best non-stainless tubeset Spirit - h/t, d/t, t/t, s/t, chain and seat stays and b/b - from one of the biggest tubing suppliers to custom builders, Ceeway, is give-or-take £150 ($230).

If I order a frame from a reputable UK framebuilder, I will be asked to pay a minimum £975 ($1,500). Mark up c 650%.

If I order the same frame from Dario Pegoretti, I would be asked to pay minimum £2,150 and Dario sources his tubesets directly from Columbus so doesn't pay a wholesaler commission. Even subtracting £400 for his new fork, that's £1,750. Minimum mark up 1,150%. I haven't even budgeted for a famous paint job.

Do these sound like reasonable mark ups? The 'West' is just as guilty as the 'East' and the off-shorers of gross profiteering.

The builder has to keep the lights on, rent paid, insurance up to date before she even miters a tube. After mitering the tube using expensive tooling there's more expensive tooling after that... After the the joint is complete it has to be finished triple a+ good and these days many completed frames need to be heat treated... I could go on but I think those margin numbers aren't that fabulous.

And to answer an open question, bike shops barely break even on new bikes. Barely at most price points. At high price points, demo's are usually a money loser. Service and accessories is where they make a little money. Just a little. No one is getting rich owning a bike shop. No one. Most are happier in the business it rather than something else. So, happy but not wealthy.

Moose,
Your lament about the work moving somewhere else, it's going to move again. And when it does, there will be fond remembrance of the quality Chinese/Taiwanese product. There was fond remembrance of some 'Italian' framesets being built in sunny San Diego, CA before that moved away. To be clear, Taiwanese mass-produced product is the best in the world right now and at amazingly low prices.

As for your other laments, I stopped consuming that media as a response to some of the ethics required to claim a 2012 model XYZ CLEARLY superior to a 2012 model ABC coming out of the same plant with SLIGHTLY different geometry and finish. I don't know any other way to deal with it.

 

[richwagmn]

I do my best. It's just that my best is better and a lot more truthy than yours. Don't think I didn't read what you wrote before you edited your post above.

Interesting that you could determine my weight through a forum. Please share with us how you do that. And no your insult wasn't remotely clever. its more along the lines of what a teenager would think up.

 

[BroDeal]

Interesting that you could determine my weight through a forum. Please share with us how you do that. And no your insult wasn't remotely clever. its more along the lines of what a teenager would think up.

A mirror of yours, eh?

 

[RDV4ROUBAIX]

ah-hem,.....anyway.

 

[RDV4ROUBAIX]

about the work moving somewhere else, it's going to move again. And when it does, there will be fond remembrance of the quality Chinese/Taiwanese product. There was fond remembrance of some 'Italian' framesets being built in sunny San Diego, CA before that moved away. To be clear, Taiwanese mass-produced product is the best in the world right now and at amazingly low prices.

Next frontier for cheap labor and cheap carbon,,,, MEXICO! It's going down as we speak.

 

[ElChingon]

Next frontier for cheap labor and cheap carbon,,,, MEXICO! It's going down as we speak.

Next? Where have you been, most of the USA has been running on Mexican cheap labor. Its next like the USA is next in dirty politics

 

[ElChingon]

I could afford one then. I can afford one now. I don't have a problem with the price per se. I have a problem with what can be bought as an alternative for the same price. The halo bikes from the big manufacturers do not measure up. They are a rip off compared to the custom frames that can be purchased.

I agree they are gimmicky but so were those old team bikes back in the day, just because it was made to look like the one used by so and so didn't mean it was anything like it.

Those frames are made by experienced craftsmen in first world countries, made to measure, custom whatever you want, and they are still cheaper than the stock frames made in third world countries by unskilled people hired off the street and paid virtually nothing.

Why is that any better than anything made by a 3rd world country? Just because its made in the USA does not mean its the best, only that it was made in the USA. Anyone in the USA can use a 3rd rate tube to make those supposedly fancy steel bikes and how would the layman know the difference? That was the whole discussion back in the day when any new frame maker made any noise.

There is no such thing as communist China anymore. China is a capitalist country with one party rule. Instead of running for election, you join the party and work your way up. Funny enough, aside from the lack of an emperor, the system is not that different than what it used to be centuries ago.

You may see capitalistic things but from those I know who want to exit stage left from there it is far from being that, I'm talking about people in choice positions and political views.

LBSes are hardly raking in the dough. The bike industry has done everything it can to screw over the LBSes. I am amazed that any can stay in business.

I see enough of the shops where the guy on the floor is making minimum wage and working way too many hours where the boss shows up in the fancy car to pick up the earning of the day never even seeing the ground floor or dealing with a customer. Then the boss sells the shop the moment he can and the thing goes in a tail spin for the guys on the floor.

The above is not true when prices rise faster than inflation.

If prices really rose faster than inflation only 1% of those bike would ever sell, yet more than 1% are out on the road. Or maybe my roads are paved in gold? Except for me...

 

[BroDeal]

I see enough of the shops where the guy on the floor is making minimum wage and working way too many hours where the boss shows up in the fancy car to pick up the earning of the day never even seeing the ground floor or dealing with a customer. Then the boss sells the shop the moment he can and the thing goes in a tail spin for the guys on the floor.

I think some of the bike shop owners who post here would like to know where this land of milk and honey is. When nearly everything can be found cheaper on the internet, with a much wider selection of goods there, and manufacturers selling product for sub-wholesale prices to large online retailers, LBSes have a poor business model--at least with regard to selling actual products. The entire industry is stacked against them. If the owners of these mythical bike shops are driving a "fancy" car then it's probably because they started out with two fancier cars.

 

[Moose McKnuckles]

Well, I count the owner of a very nice bike shop among my friends, and I don't see him driving any fancy car.

The idea that people are getting rich from owning bike shops is just ridiculous. I've seen the QBP prices. I've seen the retail prices and what bike shops will discount. It's not a huge margin. Overall, maybe a gross margin of 40-50% overall for a shop, I'd estimate. From QBP, maybe 30-35% margin.

Take out labor and other costs, and maybe you end up with a 20-25% net profit margin.

That's not huge. Consider a shop owner likely works 6 days a week and is in the shop all the time. It's not easy living.

 

[Moose McKnuckles]

Next frontier for cheap labor and cheap carbon,,,, MEXICO! It's going down as we speak.

Yep. I believe Reynolds was getting their carbon rims from Mexico for a number of years. Maybe I'm wrong, but I believe that was the case.

 

[ElChingon]

I think some of the bike shop owners who post here would like to know where this land of milk and honey is. When nearly everything can be found cheaper on the internet, with a much wider selection of goods there, and manufacturers selling product for sub-wholesale prices to large online retailers, LBSes have a poor business model--at least with regard to selling actual products. The entire industry is stacked against them. If the owners of these mythical bike shops are driving a "fancy" car then it's probably because they started out with two fancier cars.

Well I agree everything can be found cheaper on the internet and personally use it to my best advantage! BUT! And a very big **** indeed, some people go to these shops and just plunk it down without hesitation or haggling or at the very least looking over at the other shop for a possible deal. These shops are again "boutique" shops with autographed photo's of the local and even Euro Pro's in the shop on some random day with the owner. Then the jaw dropping customers who are into that just buy in with blinders on. I've seen it first hand and could only imagine building the same bike for almost half the price (with some time to get the deals in line) not that I liked those bikes but...

I can PM the shops, as they exist. Don't get me started on the shops in France down by the Chumps Elise (that's what I call it), they are the same.

 

[Moose McKnuckles]

I can PM the shops, as they exist. Don't get me started on the shops in France down by the Chumps Elise (that's what I call it), they are the same.

I'm amazed you were able to visit those shops when they were open between 10am and 12pm and then between, what, 3pm and 5pm. Nothing like peeking in and seeing the owner look at you like WTF do you want?

Good living right there.

 

[DirtyWorks]

LBSes have a poor business model--at least with regard to selling actual products. The entire industry is stacked against them. If the owners of these mythical bike shops are driving a "fancy" car then it's probably because they started out with two fancier cars.

All correct.

For example, nothing like $10,000 sitting on your floor losing value every day it's not sold for 6-12 months.

 

[Bustedknuckle]

Well, I count the owner of a very nice bike shop among my friends, and I don't see him driving any fancy car.

The idea that people are getting rich from owning bike shops is just ridiculous. I've seen the QBP prices. I've seen the retail prices and what bike shops will discount. It's not a huge margin. Overall, maybe a gross margin of 40-50% overall for a shop, I'd estimate. From QBP, maybe 30-35% margin.

Take out labor and other costs, and maybe you end up with a 20-25% net profit margin.

That's not huge. Consider a shop owner likely works 6 days a week and is in the shop all the time. It's not easy living.

20% NET profit-not likely. Most bike shops(like mine) operate on a margin of about 37%. That is, take the cost a something and divide by .63, that's a 37% margin. 37% is what keeps the lights on, meaning at the end of the year your net profit is ZERO, you break even. No profit, no more debt.

Owners work long hours, pay themselves but no more than the industry standard of a percentage of the gross for total labor('About' 8-15% of gross should be your labor costs). ADD rent, insurance(liability AND workman's comp), utilities, operating expenses like paying for property tax, snow removal, outside maintenance, phones/internet......

The manufacturers don't make it easy, bicycles are by far the lowest margin 'thing' in a bike shop. Service is the best, soft goods.

Labor of 'like' for sure.

 

[ElChingon]

There is no such thing as communist China anymore. China is a capitalist country with one party rule. Instead of running for election, you join the party and work your way up. Funny enough, aside from the lack of an emperor, the system is not that different than what it used to be centuries ago.

Looks like we'll be paying more and more as they move out of the red and into the fake red:

U.S. Shoppers Foot Bill for Soaring Pay in China

Looks like the beginning of the end of our Chinarello's.

 

[BroDeal]

Looks like we'll be paying more and more as they move out of the red and into the fake red:

U.S. Shoppers Foot Bill for Soaring Pay in China

Looks like the beginning of the end of our Chinarello's.

It sounds like it's time to invest in Vietnam.

 

[kiwirider]

Looks like we'll be paying more and more as they move out of the red and into the fake red:

U.S. Shoppers Foot Bill for Soaring Pay in China

Looks like the beginning of the end of our Chinarello's.

Didn't read that article because the link required a log in ... But read a similar piece in a French business newspaper last month when I was on the way to China for work ...

The other article was focusing on Guangdong province - where most of the manufacturing we see is centred. Businesses were complaining about skyrocketing labour costs and losing production to areas in the interior of China.

Couple of points I'd make about the article:
- first, Paul Samuelson (Nobel winning economist, author of one of the most widely used text books in the world) was right. Outsourcing production on the basis of cheap labour and cheap production costs will always come back and bite you in the **** in a matter of years. It is no substitute for efficiency and a lack of greed - I mean, accepting a normal organic growth path for your business.
- second, what we're seeing is nothing new. Japan had the same problem in the '70's and '80's when it went from being a producer of low cost crap to being undercut by the Koreans. They reinvented themselves as producers of well priced quality goods - still cheaper than the brands that they displaced, and still good quality. Korea had the same problem (remember the first Hyundais or LG products anyone??) - and what do you know, took the same approach as the Japanese. What do you think the Chinese will do???
- lastly, "soaring pay" is all relative. The article I read noted how the average monthly wage had gone from C$150 to C$700. Translate that to a per unit of production basis and you're still talking about two parts stuff all.

So overall, this change in labour costs should have absolutely no impact on bike costs - since anyone who has looked at prices with any sort of critical eye knows that the primary determinant on bike pricing is what the market will bear ...