I would like to know how MSRP retail pricing for new e-bikes work with relation to the actual selling price. What are the retail markups? Feedback from users regarding how they negotiated a discount from MSRP and how much it was would be really helpful. I have no idea how the dance works in this industry.
What does MSRP price mean in a practical sense?
- Thread starter WaltR
- Start date
Tim Hardman
New Member
My experience is from the motorcycle industry so my comments may be irrelevant but I’m just guessing the principals carryover pretty closely to the ebike business or any other business for that matter.
The big difference I see is that the ebike market is still in it’s infancy so there is less consistency in product quality and business practices. With components available to everyone, setting up “assembly” businesses that have low entry costs and potentially high margins is very attractive. As this industry matures, many of these component manufacturers will consolidate and the weaker ones will shake out with time. But for now, it’s still a bit of the “wild west - anything goes” atmosphere out there. For the consumer, unless they are willing to invest a huge amount of time researching the industry and products, it is a very confusing time for them. (I know I just went through Chapter 1 of this experience and still have MUCH MORE to learn) This confusion or lack of knowledge, which is a product of the conditions listed above create opportunities for low cost/quality players to flood the market. These conditions attract smart business people with a short term plan – big marketing investment, low selling prices, low wage sales staff, low cost retail space, little to no service, make a quick buck and then get out Retail Model (and possibly, a variation of this is currently happening on the wholesale Direct to Consumer model – Sondors/Storm). It also attracts the not so savy (Retail Location) business person who opens up a shop, is undercapitalized, doesn’t understand what it takes to run a successful business and closes within a year or two if not sooner. Both of those situations result in a race to the bottom regarding retail pricing. One of them is a strategy while the other is an unhappy consequence of survival by maintaining some cash flow and eventually liquidation. To the OP, I would have to guess that the best pricing deals out there are from the guy going out of business who has some high quality inventory available (that he owns*). But it takes a knowledgeable consumer, willing to be patient for the right deal and willing to work to find that deal. Most consumers don’t have all 3 of those traits. They want it now, they want the lowest price and they will only do limited research. Doing just “some” research can be a dangerous thing and I think that really applies to this ebike market. I consider myself to be very “aware” of ads/marketing campaigns and how they are trying to guide/educate/manipulate me but I recently was stunned by the effectiveness of the Sondors/Storm campaign and how close I came to pushing the button to order one even though it was not the right bike for me. I feel like I was the perfect candidate for this marketing brilliance. I knew just a little about ebikes, I wanted it this spring and for the price it was a no brainer. The only reason I stopped myself from pushing the button was that it’s not the right style of bike that I am looking for but I almost bought one anyway, even though it did not fit how I would use it. Why? – because of the slick marketing campaign, and low $$$ risk. We won’t know for a couple of months how the Sondors/Storm story turns out but even if it meets all of it’s advertised specs and timelines, it’s still not the right bike for me yet I almost bought one on impulse.
I think the really good retailers selling the ebike product do have the skills and experience and mature business model that has been developed by successfully selling non-ebike product. I see this type of retailer having the best potential for long term success in the e-bike business because they have a long term strategy which equates to offering the better quality products, the best trained sales staff and the best customer care during and after the sale which leads to a great reputation and repeat customers. It costs a lot of money to support this model so you can’t be a discounter and offer all this value at the same time. Unfortunately, these “really good retailers” have to endure at a very real cost (test rides and salesman time from the tire kicker low price buyer who’s only goal is getting the best price) and that will always be from somewhere else, from someone who doesn’t have the expense of stocking or servicing the bike…they only have to be good “order takers and fast shippers”. (Lenny in Madison may be an exception or hybrid since he seems to be one of the low price internet dealers but also runs a retail store at a pretty high level from what I have heard)
When it comes to MSRP it is a “suggested” price. Only a few brands out there have successfully enforced a “minimum” price and Apple is the first and only one that comes to mind. The really good ebike manufacturers will do everything in their power to persuade the retailer not to discount because it devalues the brand. To make this work, the Mfg. has to price the bike (MSRP) correctly in it’s category relative to the competition and give an adequate margin to the retailer to make the financial part of this work. I believe in most cases the Retailer can sell the bike for whatever they choose but some have limitations from the manufacturer on advertising prices on social media, TV, radio or print for less than MSRP. And I’m sure some of the more established and higher quality brands that have a retailer going out of business, make sure to take/buy back unsold inventory to protect the value proposition. (*In the Motorcycle business, if a retail location was closing, the manufacturer would take back the unsold new inventory on the floor and distribute it to other dealers before letting the closing dealer sell the inventory at a deep discount or less than cost, thus damaging the perceived value)
Sorry for the ramble here. This is an exciting time for the ebike industry. I’m sure it will look a lot different 5 years from now. I don’t own a bike shop or any business for that matter but my closing here will make you suspicious. We consumers can help move this ebike business into a mature industry more quickly by supporting your local, well run, long term strategy retail shop with a service department and well trained, well paid sales people that ultimately increase the sales price of the bike over the discounters but ultimately educate you on your purchase, helping you to pick the right bike the first time and being around and able to serve you for you next bike decision or service and repairs that you need in the future. This has value too. We consumers often fail to consider this and just focus on price. That kind of thinking fosters a different business model that can result in you getting the cheapest deal but in the long run, not the least expensive deal.
Also a big thanks to Court for this website to help reduce the “consumer confusion” regarding ebikes. It has sure helped me with Chapter 1 of many more to come in my education on this topic.
The big difference I see is that the ebike market is still in it’s infancy so there is less consistency in product quality and business practices. With components available to everyone, setting up “assembly” businesses that have low entry costs and potentially high margins is very attractive. As this industry matures, many of these component manufacturers will consolidate and the weaker ones will shake out with time. But for now, it’s still a bit of the “wild west - anything goes” atmosphere out there. For the consumer, unless they are willing to invest a huge amount of time researching the industry and products, it is a very confusing time for them. (I know I just went through Chapter 1 of this experience and still have MUCH MORE to learn) This confusion or lack of knowledge, which is a product of the conditions listed above create opportunities for low cost/quality players to flood the market. These conditions attract smart business people with a short term plan – big marketing investment, low selling prices, low wage sales staff, low cost retail space, little to no service, make a quick buck and then get out Retail Model (and possibly, a variation of this is currently happening on the wholesale Direct to Consumer model – Sondors/Storm). It also attracts the not so savy (Retail Location) business person who opens up a shop, is undercapitalized, doesn’t understand what it takes to run a successful business and closes within a year or two if not sooner. Both of those situations result in a race to the bottom regarding retail pricing. One of them is a strategy while the other is an unhappy consequence of survival by maintaining some cash flow and eventually liquidation. To the OP, I would have to guess that the best pricing deals out there are from the guy going out of business who has some high quality inventory available (that he owns*). But it takes a knowledgeable consumer, willing to be patient for the right deal and willing to work to find that deal. Most consumers don’t have all 3 of those traits. They want it now, they want the lowest price and they will only do limited research. Doing just “some” research can be a dangerous thing and I think that really applies to this ebike market. I consider myself to be very “aware” of ads/marketing campaigns and how they are trying to guide/educate/manipulate me but I recently was stunned by the effectiveness of the Sondors/Storm campaign and how close I came to pushing the button to order one even though it was not the right bike for me. I feel like I was the perfect candidate for this marketing brilliance. I knew just a little about ebikes, I wanted it this spring and for the price it was a no brainer. The only reason I stopped myself from pushing the button was that it’s not the right style of bike that I am looking for but I almost bought one anyway, even though it did not fit how I would use it. Why? – because of the slick marketing campaign, and low $$$ risk. We won’t know for a couple of months how the Sondors/Storm story turns out but even if it meets all of it’s advertised specs and timelines, it’s still not the right bike for me yet I almost bought one on impulse.
I think the really good retailers selling the ebike product do have the skills and experience and mature business model that has been developed by successfully selling non-ebike product. I see this type of retailer having the best potential for long term success in the e-bike business because they have a long term strategy which equates to offering the better quality products, the best trained sales staff and the best customer care during and after the sale which leads to a great reputation and repeat customers. It costs a lot of money to support this model so you can’t be a discounter and offer all this value at the same time. Unfortunately, these “really good retailers” have to endure at a very real cost (test rides and salesman time from the tire kicker low price buyer who’s only goal is getting the best price) and that will always be from somewhere else, from someone who doesn’t have the expense of stocking or servicing the bike…they only have to be good “order takers and fast shippers”. (Lenny in Madison may be an exception or hybrid since he seems to be one of the low price internet dealers but also runs a retail store at a pretty high level from what I have heard)
When it comes to MSRP it is a “suggested” price. Only a few brands out there have successfully enforced a “minimum” price and Apple is the first and only one that comes to mind. The really good ebike manufacturers will do everything in their power to persuade the retailer not to discount because it devalues the brand. To make this work, the Mfg. has to price the bike (MSRP) correctly in it’s category relative to the competition and give an adequate margin to the retailer to make the financial part of this work. I believe in most cases the Retailer can sell the bike for whatever they choose but some have limitations from the manufacturer on advertising prices on social media, TV, radio or print for less than MSRP. And I’m sure some of the more established and higher quality brands that have a retailer going out of business, make sure to take/buy back unsold inventory to protect the value proposition. (*In the Motorcycle business, if a retail location was closing, the manufacturer would take back the unsold new inventory on the floor and distribute it to other dealers before letting the closing dealer sell the inventory at a deep discount or less than cost, thus damaging the perceived value)
Sorry for the ramble here. This is an exciting time for the ebike industry. I’m sure it will look a lot different 5 years from now. I don’t own a bike shop or any business for that matter but my closing here will make you suspicious. We consumers can help move this ebike business into a mature industry more quickly by supporting your local, well run, long term strategy retail shop with a service department and well trained, well paid sales people that ultimately increase the sales price of the bike over the discounters but ultimately educate you on your purchase, helping you to pick the right bike the first time and being around and able to serve you for you next bike decision or service and repairs that you need in the future. This has value too. We consumers often fail to consider this and just focus on price. That kind of thinking fosters a different business model that can result in you getting the cheapest deal but in the long run, not the least expensive deal.
Also a big thanks to Court for this website to help reduce the “consumer confusion” regarding ebikes. It has sure helped me with Chapter 1 of many more to come in my education on this topic.
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Mike leroy
Active Member
I am trying to behave like one of the ideal consumers you describe. My consumer strategy is a Cost-Benefit Analysis. Your critique is greatly appreciated.
BTW -- if you google for "electric bicycle cost benefit analysis" my articles usually appear first in the Google search results, or in the top ten. As you mention, we are living the Wild West days..
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D
Deleted member 803
Guest
I agree with your dialog. MSRP is only a guideline and, in today's Amazon.com world serves only as a benchmark for discounting. Only thing enforceable by the FTC is MAP (minimum advertised price) but a dealer can sell the product for whatever is deemed competitive. Only area where I disagree with you is that the smart bike dealers will wheel and deal sideways, up and down, and anything in between to move inventory and keep cash flowing. Every retailer must compete with online suppliers. Vendors who want exclusive territories and limited distribution will get one thing: limited sales. As ebikes become more popular, more and more dealers will sell/service them. When one vendor has broad based retail distribution and another does not, the broadly distributed product will win every time. And, as the market matures and the differences between brands diminishes (as it does for every non-proprietary product), retail pricing and limited distribution will take both vendors and dealers out of business. The ebike business is 98% 3rd party assembly and 2% proprietary engineering. Perhaps an Apple like e-bike vendor will do everything in house, but given the tiny amount of ebike sales worldwide, I just can't see this happening. When I encounter any business that sells at full retail and won't budge, I walk out the door.
As an example, we have a ton of gas stations in my community all with fairly close prices. I approached an owner who runs a number of stations in the area and promised to buy all my gas from him and guarantee him a certain dollar volume each month if he gave me $0.05 off each gallon purchased. He said yes immediately. Whenever I buy a car, I shop all dealers within a 200 mile radius and then publish the pricing I receive back to the dealers contacted. I always find a dealer willing to deal.
Margin (operating and profit) are derived in many many ways only one of which is the price of the bike.
D
Deleted member 803
Guest
One more thing....any smart business person will welcome a customer with service, accessories, and support regardless of where the product was purchased as they can make more margin on stuff like maintenance and clothing than they can on the sale of the bike. I bought my Neo Carbon on the East Coast and my local California dealer loves to see me coming and renders terrific support.
Tim Hardman
New Member
To: 86 and still kicking azz,
Man I hope I am even half as sharp and half as articulate as you at 86 when I am 66. Your cogent analysis of the current state of the bike business is appreciated. I had no idea just how far skewed things are (98% 3rd party / 2% proprietary)...that is incredible!...even more "wild west" than I thought. I have no real word experience with ebikes...never rode one, never bought one, never sat on one, never even been in a store where they were sitting on the floor. I can easily understand and accept as necessary the business practices of "smart" dealers wheeling and dealing to stay in the game, moving inventory, flowing cash to get the next e-bike on the floor.
I also completely agree with you that a "smart" dealer will not get hung up on "loyalty" regarding the new bike purchase when it comes to servicing that new expensive bike that was purchased somewhere else. In the business I came from we had 5 distinct profit centers in each dealership (new vehicle sales, service, finance and Insurance, parts and accessories, general merchandise (clothes, helmets, boots, collectibles etc...) The owner of a new vehicle purchased outside the dealer territory still offered potential sales in Service, P&A and General Merchandise where frankly, the margins where higher than new vehicle sales. As a dealer you still have to love that customer and welcome them with open arms, even if you schooled them on the bike sale and they then took that info and bought somewhere else at cheaper price than you offered. You can be unhappy about it but you better not make your customer uncomfortable with their decision or they will make a point of going somewhere else for the rest of their business. I think a good salesman can make a good argument in a subtle way during the sales process for the new vehicle sale that helps a customer understand why they should buy from him. We instructed our dealers, who all sold the same product for the same price (more or less) to drill their employees with 3 reasons why the customer should buy from them. Every employee had to be able to articulate these 3 reasons automatically without thinking about it.
I would guess you are an outlier when it comes to the work you put into "not paying retail for anything". The deal with the gas station amazes me. It makes total sense, I just would not have thought to try to make that argument with a station owner for fear of being laughed at since my business represents what I perceive to be an infinitesimal percentage of what he/she sells. I do however get online pricing for genuine Honda parts for my Ridgeline pickup truck when I have an expensive repair to take care of. I get the pricing on-line for all the parts required to do the job(s) (this includes the big parts and the gaskets and fluids and fasteners) print them out from the supplier and bring them to the service manager when I drop the car off and ask him to meet the prices which they always do. It saves 35% to 50% on the parts portion of the bill. Labor is never discounted.
Man I hope I am even half as sharp and half as articulate as you at 86 when I am 66. Your cogent analysis of the current state of the bike business is appreciated. I had no idea just how far skewed things are (98% 3rd party / 2% proprietary)...that is incredible!...even more "wild west" than I thought. I have no real word experience with ebikes...never rode one, never bought one, never sat on one, never even been in a store where they were sitting on the floor. I can easily understand and accept as necessary the business practices of "smart" dealers wheeling and dealing to stay in the game, moving inventory, flowing cash to get the next e-bike on the floor.
I also completely agree with you that a "smart" dealer will not get hung up on "loyalty" regarding the new bike purchase when it comes to servicing that new expensive bike that was purchased somewhere else. In the business I came from we had 5 distinct profit centers in each dealership (new vehicle sales, service, finance and Insurance, parts and accessories, general merchandise (clothes, helmets, boots, collectibles etc...) The owner of a new vehicle purchased outside the dealer territory still offered potential sales in Service, P&A and General Merchandise where frankly, the margins where higher than new vehicle sales. As a dealer you still have to love that customer and welcome them with open arms, even if you schooled them on the bike sale and they then took that info and bought somewhere else at cheaper price than you offered. You can be unhappy about it but you better not make your customer uncomfortable with their decision or they will make a point of going somewhere else for the rest of their business. I think a good salesman can make a good argument in a subtle way during the sales process for the new vehicle sale that helps a customer understand why they should buy from him. We instructed our dealers, who all sold the same product for the same price (more or less) to drill their employees with 3 reasons why the customer should buy from them. Every employee had to be able to articulate these 3 reasons automatically without thinking about it.
I would guess you are an outlier when it comes to the work you put into "not paying retail for anything". The deal with the gas station amazes me. It makes total sense, I just would not have thought to try to make that argument with a station owner for fear of being laughed at since my business represents what I perceive to be an infinitesimal percentage of what he/she sells. I do however get online pricing for genuine Honda parts for my Ridgeline pickup truck when I have an expensive repair to take care of. I get the pricing on-line for all the parts required to do the job(s) (this includes the big parts and the gaskets and fluids and fasteners) print them out from the supplier and bring them to the service manager when I drop the car off and ask him to meet the prices which they always do. It saves 35% to 50% on the parts portion of the bill. Labor is never discounted.
D
Deleted member 803
Guest
I want dealers to make money and be profitable. It just requires a devotion to flexible business practices and a "customer first" attitude. Here is an anecdote for you: Years ago I was at the dentist getting a prophy and a checkup. The dentist came in and strongly recommended that I switch my brush to a new electric device called Sonicare (made in US before Phillips bought them). I asked if insurance would cover the device and he said that the carrier will only cover 60% of the cost of the toothbrush. I told him I would only take the toothbrush if he honored the insurance as payment in full. Upon paying my dental bill at the front desk the young lady handed me a new Sonicare toothbrush, smiled, and said the doctor has agreed to your terms. I went home and brushed my teeth...........
I am not hard nosed and take NO for an answer frequently and graciously. However, I live by the adage, nothing ventured, nothing gained.
I am not hard nosed and take NO for an answer frequently and graciously. However, I live by the adage, nothing ventured, nothing gained.
D
Deleted member 803
Guest
I do the same. I have a fantastic BMW service center that has no problem earning monies on labor. Their only caveat is that I use their approved parts brands (which I always do) when ordering. In fact, the owner sometimes orders the parts online for me........how is that for service.....very smart business person.
The eBike business is very precarious, with Bike manufacturers and retailers going belly up all the time. It probably depends on where you live, but huge discounts can be found if you know what you want and are ready to buy.
Bought my first ebike, an A2B Metro for about 30% off retail.. Nice bike huge warranty and a lot of problems... Both the retailer and the manufacturer went out of the eBike business within 2 years after purchase. Key was I knew exacctly what i wanted and I made it clear I was ready to buy.. they liked that.
Bought my second bike, a STromer Elite, for 60% off retail.. Inventory clearance by the new bike shop owner who wanted nothing to do with it.. No instruction, missing parts, but who cares? I got a warranty out of it and it's a great bike. I showed up, made an offer, and bought the bike in 15 minutes.. They liked that. Stromer was running out of cash and was bought by BMC, who is now trying to unload it on someone else.. more cash is needed.
From what I can tell, the best deals are at the end of the model year, or calendar year.. Don't settle for retail prices, ever!
D
Deleted member 803
Guest
A2B is out of business?????
Ultramotor filed the UK version of Chapter 11 in 2012, and were bought out by Hero, who is a huge Indian bicycle company.
D
Deleted member 803
Guest
Thank you for the clarity and education.
stevenast
Well-Known Member
Walt, with your approval I would like to start another thread, more specifically asking your question above. This thread has a lot of philosophizing in it but is very short on real life buying experience.
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