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

[Moose McKnuckles]

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 ...

It's interesting to see how several companies are walking down their demand curve to figure out their pricing after miscalculating it so badly.

Two prime examples are BMC and Reynolds. The former priced their Fourstroke FS at $3299 for the frameset. Competitive Cyclist, seeing no interest, cut the price to $1999. Now, it's at $1699.

Every year, Reynolds trots out their carbon wheels and prices them somewhere around $2500. Sure enough, they end up on Bonktown for between $899 and $1199. Nothing against Reynolds, as I've owned many wheels from them, and I've never had a single problem, but it's amazing how some bike companies can be so poor at calculating what the market will bear.

 

[kiwirider]

It's interesting to see how several companies are walking down their demand curve to figure out their pricing after miscalculating it so badly.

.... but it's amazing how some bike companies can be so poor at calculating what the market will bear.

Agreed.

I saw a similar pattern - although due to addition of new models rather than miscalculation of pricing - with the Cannondale Six13 that I ride.

Back in NZ, this was a NZ$10k+ bike when it first came out. (I should say - never been so stupid as to get sucked into that sort of money on a bike. I picked up a frame directly through Cannondale for a reasonable price and swapped the gear off my Bianchi - which had split while I was riding it.)

With the release of the System Six, the price on the Six13 dropped about $2k. Spec was still the same level as before - other than that the Record option disappeared and we were left with Dura Ace only on the top model.

The real drop came when the Super Six was released. Price on the Six13 dropped to about NZ$5k.

So in a couple of years, price had effectively halved. Production costs can't have really changed - bike was made by building the trusty old CAAD alloy frame (which remained in the production line - and has well repaid any R&D costs) and cutting out the sections that became carbon tubing. Only thing that changed was that there was a need to put a new "top model" bike in the line up within a cap for what the market would bear ...

Here's hoping that when all of the reformed golf-ists get sick and tired of cycling and return to their natural habitat (ie., whatever happens to be the next latest "must do" past time) some sanity is able to return to the pricing polcies in the market. Thing is though, it'll be accompanied by some blood on the floor as companies that have over-invested in marketing - which includes most R&D departments - suddenly find that they need to deliver quality rather than hype. Will be interesting - and maybe even a little sad - to see who the casualties are ...

 

[Pete Subs]

What exactly is the point of this tread?

The way I see it is that everyone is passionate about different things. If you have the financial freedom to realize your material dream why shouldn’t you? Also, nowadays it really doesn’t matter anymore what kind of income you have, as many other posts I have to agree that many people drive a cheap car but invest their money in an expensive bike.

The other and for me most important question is that whatever you buy has value for you. When I bought my last bike I thought about it long and hard. I realized that spending thousands of $ on a bike that is made by people who make a 30 cents and hours was something I couldn’t live with. I ended up buying a Battaglin for around 9K.

Whatever it is you are passionate about don’t listen to anybody else but yourself. Spending 9K on a bike is probably for many people not the smartest thing to do. For me personally it was a great choice.

 

[LugHugger]

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

So it's ok to fake heritage in Vietnam but not in China?

 

[Moose McKnuckles]

What exactly is the point of this tread?

The way I see it is that everyone is passionate about different things. If you have the financial freedom to realize your material dream why shouldn’t you? Also, nowadays it really doesn’t matter anymore what kind of income you have, as many other posts I have to agree that many people drive a cheap car but invest their money in an expensive bike.

The other and for me most important question is that whatever you buy has value for you. When I bought my last bike I thought about it long and hard. I realized that spending thousands of $ on a bike that is made by people who make a 30 cents and hours was something I couldn’t live with. I ended up buying a Battaglin for around 9K.

Whatever it is you are passionate about don’t listen to anybody else but yourself. Spending 9K on a bike is probably for many people not the smartest thing to do. For me personally it was a great choice.

The point of this thread, as I see it, isn't that you shouldn't spend money on things that are important to you. The point is, IMO, if a bike is important to you, spend it where the money gives you the most return in terms of quality, workmanship, etc., not where you get the most marketing bs.

If we end up seeing that Specialized takes over the bike business, we'll have proven that ignorance is indeed bliss.

 

[DirtyWorks]

If we end up seeing that Specialized takes over the bike business, we'll have proven that ignorance is indeed bliss.

Moose,

Between Trek and Specialized, I'd say they have the vast majority of middle/high end cycling dollars in the West. So, ignorance is amply rewarded. Just advertise alot.


Behind them though are the much bigger OEM's (Merida, Giant, Kinesis, etc.) who would enter the market in a heartbeat should Trek, Specialized, maybe a Fuji walk away. In the U.S., when Schwinn walked away from Giant, Giant entered the U.S. market and pretty much ended Schwinn selling 'Schwinn' builds for a big discount. Not all fun and games funding Pro teams at Trek and Specialized, that's for sure. Other countries may have different well-known bicycle brands, but same idea.

Also Moose, the brands set an SRP just to position the product in consumer's mind. From there, it's like selling produce, get what price you can today because tomorrow you'll have to charge less.

Finally, stuff from China should be getting more expensive for a good while. It's important to remember that the U.S. is trying to increase exports by trying to introduce some parity to the US dollar/YMB. That means stuff produced in China gets more expensive in USD. In China, it means American goods are cheaper in YMB's. This is a longer macro-economic discussion.

 

[BroDeal]

So it's ok to fake heritage in Vietnam but not in China?

Soon Rapha will be publishing articles about how the Chinese are not good enough to make Rapha clothing so they had to go to Vietnam.

 

[kiwirider]

What exactly is the point of this tread?

The way I see it is that everyone is passionate about different things. If you have the financial freedom to realize your material dream why shouldn’t you? ...
The other and for me most important question is that whatever you buy has value for you. ...
Whatever it is you are passionate about don’t listen to anybody else but yourself. Spending 9K on a bike is probably for many people not the smartest thing to do. For me personally it was a great choice.

There's a lot that's right in your logic - although I'd wonder how much you actually hold to it?

By that I mean - you're right, we all have different value profiles. And this is a good thing - otherwise we'd be a bunch of boring clones!

And you're right, we should all use our internal preferences as the principal guide to our purchasing decisions - be those the weekly vege shop or a once in a lifetime bike purchase. Now have a look around your house and see how many things you've got that you didn't really need, but bought because friends had one/marketers convinced you "you need it!!!"/you couldn't replace the 10c part on the thing that broke/impulse buy/etc. You may be surprised - and a little disappointed - at how much fits those categories

However, even if you did solely listen to your internal voice, I'd agree with Adam Smith (father of modern economics - although he was actually a moral philosopher first and an economist second) that we need to overlay a bit of social conscience on those decisions. And that's where your arguments fall down.

Sure, it's OK for you to spend a **** load on something that has a true cost of significantly less if you assign a high value to whatever intangible factors are used to justify the premium. Put another way, it doesn't matter that your bike only cost a couple of grand to build, so long as you're happy paying the extra $5-$6k and feel that you got value for money.

The problem comes in that your paying what you do for any product helps to set the market price for that product. In a perfect market where all buyers and sellers have all necessary information and there are heaps of competitors, this isn't an issue. However most markets aren't like that.

So, as manufacturers have found people who are willing to pay the exorbitant prices that they set for their halo bikes, the only thing that has truly trickled down through the market is the impact of that pricing. If the top level bike in any range is $18k, then that leaves a lot of scope to price a mid range bike at $4-$8k. Sure, if a manufacturer is too greedy, then they'll get hammered ... but if they are careful in their pricing policy - and play a 2-3 year game - then they've got you. Actually, they've got all of us. They are making what is typically called "economic rent" - which is a fancy way of saying "they're ripping us off".


So, to answer the question in one sentence rather than an economics 101 lecture:
The point of the thread is that these bikes are priced significantly above cost and their very existence allows the manufacturers to make those economic rents across the majority of their range.

Or, as RDV said it back in post 3:
And the crazy thing is that not too long ago top tier, pro caliber bikes were very attainable for the masses when they were made of metal, carbon totally changed the demographics of cycling. While attending college in 1996 from the money I saved during my summer job landscaping I bought a Colnago MasterXLight with a Record grouppo and I think there were no less than 3 entire teams riding the same exact bike, most of them with stock geometry too. Currently the only way a college aged kid could even consider a pro level bike is if their parents are loaded. Bummer.

 

[Parera]

Very well said kiwirider; only part you left out is the whole limited sizing thing...that's the other gripe. Not only is everyone getting hammered by prices, but there are less sizes (5-6) to work with and poor fitting issues as an element of that. And stupid tall headtubes. /grrrr

I'm starting to notice a trend with consumer goods. I think Apple may have been the first to successfully exploit this particular paradox of human psychology, but I notice that people in large numbers suffer from apparent Stockholm Syndrome when it comes to bikes. They willingly let them rip them off and attempt to rationalize why it's OK. This is true in most consumer goods now (especially Apple...) but it's frustrating in the bike industry since really, for the road cycling business, not a whole heck of a lot changes. Unlike computers, where things get faster and progress is undeniable, cycling is just a series of sidegrades save the occasional baby step in performance and convenience here & there.

My hope is that smaller companies dealing in custom frames and the OEM frame dealers can force the industry giants' hands, making them re-invest in a more valuable consumer product than what they are currently offering. It basically has no chance of ever happening; the advertising thrust is simply to strong to repel especially in a media rich country like the United States. But I can still hope!

 

[biker77]

So given that most bike companies are way overcharging for frames, what part do the component manufacturers play?

 

[elapid]

So given that most bike companies are way overcharging for frames, what part do the component manufacturers play?

Interesting question. I would guess the same role as the frame manufacturers. I bought a custom titanium frame for $4K, for which I have no regrets because of the workmanship and the continued enjoyment I get out of this bike, but the wheels and components, which were not outrageous (Zipp 303 and DA) ended up costing me almost double the frame. This was in 2006. As per the arguments on frames, I would not be surprised if there is a huge markup on the cost of some of this componentry (at the manufacturer level, not LBS). There are two scenarios which may support this assumption:

1. The R&D on most componentry from established companies (such as Campy & Shimano) is well established (except maybe for luxury items such as Di2 or 11-speed, which both could be argued are as unnecessary for your average rider as a $10K bike) and their output would be much greater than bike frames, so I would have thought that the costs would be much lower than they actually are.

2. The cost of a complete bike is much lower than the equivalent bike frame built up with the same components purchased separately.

 

[mr. tibbs]

Before I list my likes, let me list my ultimate dislike. Trek, Spec, and Felt (et al) have all been mentioned herein, but CN's perennial grand prize winner in the annual poll every year has been left out: Cervelo. Cervelo is a f***ing scam. Their frames are silly s**t marketed to people with too much money. If you can't see that, cool. Peace. But do try to see that.

Likes, though: 105 and Centaur are worth their weight. Anything above these levels really is just stickers. "But I love the shifting of whatever X!" Cool, but admit that it in no way impacts performance while costing you a huge amount of money for the privilege of carrying around a brand name. A brand name. At $250 per character.

High-end cycling products have become NASCAR: a simple exercise in branding targeted at a specific market. And it works. (For Cervelo.) ;(