Have you been in a discussion with bicycle fans that at some point raise the issue of their local bike shop is a rip off? The source of this inspiration stems from online shopping. “It is so much cheaper online” starts the ball rolling. Anyone who has browsed the web for bicycle gear knows that there are deals to be found. Does this mean that the local bike shop is gouging customers? the answer is a resounding NO!!!
The basic premise can be logically reached by observing the lifestyle of the average bike shop owner. They certainly make much less than what a “gouger” would be making. As a matter-of-fact, chances are they are getting by with a reasonable income, but not much more.
Let us examine this a little more closely. The physical building the shop is in usually fits into a niche that does not include the likes of Macy’s, Best Buy, or JC Pennies. They usually sit in modest surroundings. Watch the owner and see what kind of car that they get to work in and that will tell you more about their means.
The fact of the matter is that most bike shop owners work long hours, scrape meager earnings from wafer thin profit margins, and do it more out of a love of all things bicycles. The average bike shop makes 90-100% of their profits on 50% of the items they sell. Repairs account for about 15% of the overall revenue. Bikes account for about 45-50%. Unfortunately, bikes do not yield much profit after the cost of shipping, putting together the bikes out of a box, sales people to sell them, and extras that come with the bike such as free tune ups, and other overhead. Accessories yield about 30-35% of the profits. So, if bikes do not make money, that means a bike shop must rely on the other 50% for 100% of its profits. The source of this information comes from a closely guarded report published the National Bicycle Dealers Association-Cost of Doing Business Study. So, keep in mind that a typical bike shop makes ZERO from selling a bicycle!
Something else to consider, compare your local bike shop labor rates with other labor rates in town such as your car mechanic, your home remodeler, or waste hauler. According to Red Kite Prayer, ”
Apple makes almost double the margin on an iPhone 6 that your bike shop does on all the accessories in the store, on average. A mainline company like Starbucks makes something like five times the net profit margin on every dollar earned as a bike shop.” How often do we consider the value of that cup of jo? Your local beer supplying establishment makes, on the average a 400% margin or more on a beer. the average cost of a pint of beer is $1.00 and most places swell it for $5.00 and up. That’s reeling in the margin!
So, the next time that you start scouring the Internet for the ubiquitous bike deal, keep in mind that your local bike shop owner would love to do business with you, not because they are getting rich, but because they are passionate about getting people out on bikes. Being around people that rub off on you like that is worth more than the satisfaction of waiting for that online purchase to come dropping at your door step. Your local bike shop has much to offer. Check them out!