Is MSRP/MAP holding back ebike sales growth?

[Deleted member 803]

I have gone on record as opposing those who advocate on this forum the purchase of a regular bicycle over an e-bike. Of course regular bicycles have their place in the market, they dominate it! ...but ebikes have a place too!

That said, the ebike critics have a point when they discuss missing value: high cost vs low quality. The quality e-bikes seem to have a price that is sky-high, and the lower cost ebikes seem to use bottom- end components.

But, is this because ebikes inherently lack value, or is it due to marketing strategies? Obviously I think it's marketing. My experience indicates the MSRP is greatly inflated, probably so dealers and manufacturers can fatten up on those consumers who fail to negotiate strongly enough.

"That's capitalism", you say. Okay, sure, sellers have the right to charge whatever they can get. However, I believe that when consumers look at these list prices, many of them just give up on the idea of an ebike - too expensive for what you get! The effect of running this "wild-west" marketing system, while completely within the rights of the manufacturers and dealers, is inhibition of the entire marketplace for ebikes.

By prohibiting dealers from advertising whatever price they want, the manufacturers are damaging the overall market.

By using the MSRP as a negotiating crutch, dealers are also harming the market, although making what I'm sure they perceive is a necessary profit right now.

By overpaying for what is admittedly a very exciting product, consumers are also playing a role in holding back growth of the ebike market.

I don't know the answers, but I think letting dealers advertise whatever price they want is a good start. I also think consumers who are informed that the MSRP is hugely inflated will also help make things better.

Wow....not one word of your opinion is true in terms of market development and best business practices. Pricing is one small component of value and seldom deters a purchaser when all other value factors are high.

 

[stevenast]

not one word of your opinion is true

...and your opinion is true?

Do you want people to overpay to prop up shops that will be out of business in five years, maybe much sooner?

Wasn't it you who posted that an average person expects a $750 price for a good e-bike? It can be done, soon, with economies of scale and reasonable profits.

 

[Deleted member 803]

end of discussion............

 

[stevenast]

end of discussion............

............thanks for the dialog!

 

[Cameron Newland]

Allow me to throw my hat into the ring...

I think that the healthy markup from wholesale to MSRP does serve a purpose that benefits the industry. It serves to provide shops a financial incentive to actually stock ebikes so that people can take them on a test drive.

I researched ebikes voraciously for months and bought without test riding even one ebike. Why? Because I'd never even seen a single bike shop that stocked even one electric bike (after buying my ebike, I've now visited several shops that stock ebikes and have gone on numerous test drives).

For instance, the shop I bought my bike from, Hollywood Electrics, focuses on electric motorcycles and not ebikes. They are authorized dealers for many big ebike brands, but when I picked up my bike from the shop, I noticed that they didn't have a single demo ebike on their showroom floor. The more often that they're able to sell an ebike at MSRP, the more likely they'll be to see ebikes as an integral part of their product offerings, and hence the more likely they'll be to have demo bikes available for customers to test. That'll mean more visibility for ebikes, more opportunities for people to hop on an ebike, and more ebike sales.

In the future, I think that veteran ebike buyers/owners will simply buy their bikes from online dealers that offer a discount from MSRP, but they'll still need to rely on nearby ebike shops when it comes to test driving demos, so they'll likely support those shops by paying to have their bikes serviced there. Buying an ebike at MSRP from a retail shop offers a good experience, but veteran ebike owners know they can probably get a better price buying online.

The ebike market is still small, and the number of veteran ebike owners is even smaller, so I think that brick-and-mortar ebike shops will always have a place in the market. They serve as many people's first point of contact to ebikes, and that is crucial.

So I guess what I'm saying is that yes, enforcing MAP does hurt those who want a good deal, but once those buyers figure out that they can send off a few emails to online ebike vendors and get a better deal, they're suddenly benefiting from the system as opposed to being burdened by it. And what about those people who are pushed away from ebikes due to their high MSRPs? I don't deny that those people exist. In a perfect world, the industry would do anything they could do to get those people buying an ebike. But at some point, the industry has no responsibility to try and serve people who don't have the money to buy an ebike and cannot offer to give the retailer a fair profit on the sale. The industry is not just about buyers. The industry itself can only exist if retailers, manufacturers and distributors can extract a healthy profit that allows them to continue to operate their business. If you reduce profit margins to entice Paul, you may be robbing Peter in the process. The other thing that needs to be said about cheapskate ebike buyers is that there are already plenty of ebike companies that offer products that they'd be interested in. They can buy a 'Baba Bike' from Alibaba. They can get a ProdecoTech bike for under $2,000. They can buy a used ebike. These buyers have options, and the industry is directly responsible for providing these reasonably priced options, so clearly, the industry itself is not to blame. The industry is simply pursuing the opportunities available to it in order to grow, and if that means selling a bunch of bikes with big markups over wholesale and giving a preference to profitability over sales volume, who's to blame them?

 

[George S.]

A couple of years ago, looking at reviews over here, I felt the prices were too high. I got a bit of a deal on a demo Prodeco X3. It's sort of a truck, but a very competent and trouble-free ebike. It's not 'cheap' anywhere, which suggests it is low margin. The dealer was closing them out, which isn't reassuring.

There are different tiers to the market. I credit @flymeaway with showing exactly how to make a good ebike for reasonable amounts of money, using kits. I think some of the builders may drive the inexperienced away, but you use the information on any forum with care.

Once you break the spell of something being an ebike, a pretty Euro model or whatever, things open up. You start to see the bike as a bike and then you see how you add the motor and power system. For me it's like 'cost to build', any bike I look at. Maybe a Stromer is special, way out there at that price level, but most bikes are parts, to me, anymore.

You can sell 'value' as perception. If you push speed far enough normal bikes may not be useful as a platform for an ebike. You can convince people the rough edges of kits are 'bad'. You probably can't build a high end bike. The way they close off the platforms is more daunting than the pricing policies, but you need to know what is essential. The retailer is being attacked on all sides. It's easy to sidestep that system.

Now they are selling speed, something kit builders always 'did'. How is that even going to work out?

 

[stevenast]

The industry is simply pursuing the opportunities available to it in order to grow, and if that means selling a bunch of bikes with big markups over wholesale and giving a preference to profitability over sales volume, who's to blame them?

As usual, a well-conceived and written post.

But change the word "grow" above "seize short term profits at the expense of growth"!

Most electric-bike-specific shops that exist now won't be in business in a few years, so I understand why they want to grab the most they can.

 

[Deleted member 803]

For clarification:

-MSRP is manufacturer suggested retail price...............Unless a manufacturer/dealer agreement (for all dealers) specifically states the listed retail price, the pricing is suggested.
-MAP can be enforced and refers to minimum advertised price, with the emphasis on "advertised." Again if a dealer sells a product for less than advertised price this is ok unless the manufacturer has a strict selling price policy in place for ALL dealers.

Manufacturers may not collude with other manufacturers to control pricing nor may dealers collude with other dealers to control pricing.

Brick and mortar has collided with click and order with the result being widespread discounting since internet sales companies typically have less infrastructure and overhead costs. If a manufacturer allows just one retailer (either internet of brick and mortar) to sell either across territory or at reduced pricing, it must allow this for all dealers (online and brick and mortar). Most vendors want volume and are lenient on infractions. To be compliant with federal law, a manufacturer must:

a. have pricing guidelines and restrictions in EVERY dealer agreement
b. assiduously enforce the guidelines, but only vertically (meaning to its dealers) and must never collude with other manufacturers.

If a manufacturer does adhere to the above, the remedy is to discontinue to sell to the dealer. In a very nascent market like ebikes, it would be suicidal to enforce pricing policies across all territories and all dealers. There are very few vendors who can command strict adherence to pricing policies and enforce it across markets and territories. Most vendors simply turn a blind eye. Once they allow a dealer to reorder (even one bike) when it has knowledge of a violation of its written pricing policies leaves the vendor almost no legal defense.

 

[stevenast]

Once you break the spell of something being an ebike, a pretty Euro model or whatever, things open up. You start to see the bike as a bike and then you see how you add the motor and power system. For me it's like 'cost to build', any bike I look at.

That's a good point, looking it as "cost to build" whether it's a premade bike or a kit.

Just a hypothetical example: take an existing bicycle worth $300 and a $1,500 kit ...no charge for labor because you're doing it as a labor of love. Compare this to a high quality e-bike purchased for the same $1800, but that retails for much, much more.

Same "cost to build".