Profit Margins

[Sierratim]

An individual who just started making bikes can undercut the price of a similarly or less equipped bike from a big company by 30-40 percent, that is how huge profit margins are.

True, for a realtively short time. A newcomer has less overhead in terms of warranty, marketing, retirement plans, etc. The new guy avoids all of this, for awhile.

 

[Sierratim]

Bike shops are about as old as horse "tack" and buggy shops . They have a full century of market optimization.

Same for auto manufacturers. Your point being?

 

[Art Deco]

Same for auto manufacturers. Your point being?

And like other old industries these are very disruptive times. Ebike shops will have to be different from bike shops or car lots, margins may not change much, sales will peak but service will still make money. I expect a shake out caused? by ebikes. 2 cents.

 

[Sierratim]

And like other old industries these are very disruptive times. Ebike shops will have to be different from bike shops or car lots, margins may not change much, sales will peak but service will still make money. I expect a shake out caused? by ebikes. 2 cents.

I do agree that shops that provide good support will prosper. Our LBS has a tech dedicated to ebikes. Definitely one of the reasons we went with them.

I will say that seemingly in protest their long time lead mechanic left and went on to help form a new local shop dedicated to 'hard core' cyclists, i.e. no ebikes. They both seem to be doing well in our small town.

 

[FlatSix911]

This post from ~2 years ago offers an insight into gross and net profit margins on bike sales, https://www.quora.com/What-are-the-profit-margins-on-bicycles.
Basically it's like new car sales, the real money is in the accessories and service.

Here is another perspective on bike margins...

Quality Bicycle Products

www.qbp.com

“Expenses are clearly the biggest difference-maker when it comes to profitability.
The average store pays 42.2 percent of gross sales in overall expenses, compared to 34.9 percent for high-profit stores.
This means that while some fail to cover their costs when they sell a bike for a 36 percent profit margin, others make some money on a similar transaction.”

And the number one recommendation by Industry Insights, the firm that conducts the study? Manage and stay on top of expenses.

 

[byunbee]

Here is another perspective on bike margins...

Quality Bicycle Products

www.qbp.com

“Expenses are clearly the biggest difference-maker when it comes to profitability.
The average store pays 42.2 percent of gross sales in overall expenses, compared to 34.9 percent for high-profit stores.
This means that while some fail to cover their costs when they sell a bike for a 36 percent profit margin, others make some money on a similar transaction.”

And the number one recommendation by Industry Insights, the firm that conducts the study? Manage and stay on top of expenses.

They key word here is store. Online retailers/vendors don't have nearly as much overhead as traditional LBS.

 

[Sierratim]

Here is another perspective on bike margins...

Quality Bicycle Products

www.qbp.com

“Expenses are clearly the biggest difference-maker when it comes to profitability.
The average store pays 42.2 percent of gross sales in overall expenses, compared to 34.9 percent for high-profit stores.
This means that while some fail to cover their costs when they sell a bike for a 36 percent profit margin, others make some money on a similar transaction.”

And the number one recommendation by Industry Insights, the firm that conducts the study? Manage and stay on top of expenses.

Staying on top of expenses is always a good business practice. Spend a piece of each day working on this...

 

[Sierratim]

They key word here is store. Online retailers/vendors don't have nearly as much overhead as traditional LBS.

To some extent true. Online retailers do suffer the cost of indivdual bike shipments to the buyers while your LBS gets bulk rates. Several online retailers also offer onsite assembly by 3rd party contractors. Much more expensive than LBS labor costs. Physical stores do suffer building lease and utility costs that are probably higher than online retailer warehousing costs. Overall a difference probably in favor of the online retailer, until you need service.

 

[FlatSix911]

Here is another interesting article on the changing EBike market landscape in the US.

Vosper: The e-bike brand map is shifting

It's amazing how much has changed in just one year.

www.bicycleretailer.com

Five market-leading e-bike brands
According to Benjamin, the five leading e-bike brands (in no particular order) are Rad Power, Pedego, Trek, Specialized, and the Alta Group — Raleigh, IZIP, et al. These five collectively enjoy about 70% of the total e-bike market in 2020. (The reason for including all Alta brands as one is simply because that's the way the import documents are labeled; no further breakdown is possible.)

Trek and Specialized, of course, are well known to BRAIN readers and fiercely competitive, with respect both to each other and other players in the market. But I wanted to know more about the other brands, especially their target audiences and sales strategies.

"We're used to growing by 30-40% per year and suddenly it's triple digits," said Pedego's founder, Don DiCostanzo. "Fortunately we have good control of our supply chain. Ninety percent of our bikes are from Vietnam, and the supply is steady, so we have inventory. Nobody can keep 3–4X inventory in stock, but we try to keep up.

"Our customer is radically different than the IBD customer. It's people who don't think of themselves as cyclists. They think Schwinn is the biggest brand in the U.S., and they've never heard of Trek, Specialized, or Giant. Our customer is that other 85-90%, and that's the broader, bigger market."

 

[Johnny]

True, for a realtively short time. A newcomer has less overhead in terms of warranty, marketing, retirement plans, etc. The new guy avoids all of this, for awhile.

Newcomers also give warranty on their products. Operational cots increase but volume increases more and per product cost actually decrease.
As an example most car companies on average make around %5 on each car(expect a few fancy brands like Porsche).