[leak]

I'm not sure if you've ever been to a bike shop when they are having a sale. The bike shop I was at had some bikes listed for $999 on sale for $739. That's more than $200 off a bike and they're still making money. The guy selling me the bike doesn't lose that $200 difference. They are making higher profit ratio on a bike than a car dealership does on a car.

If you get treated differently if you have issues in the future because you bargained then that's an issue with the business not the price you paid.

Btw, I paid full price for the bike as it wasn't on sale. My guess is they made 30% profit from the $800 purchase.

[jacquesm]

> My guess is they made 30% profit from the $800 purchase.

No, they made a 30% gross margin. Their profits would likely be substantially less.

[kaliblack]

It's more likely that items on sale are sold at a net loss. The cost of simply having stock is more than you'd think. As an example, I ran an ecommerce site for a hardware company and after 30 days in stock laptops were no longer profitable, even if sold at full price.

My understand is that bikes have a pretty slim margin and stores make their money on accessories and servicing.

[jacquesm]

You got it just about right. Bikes now have annual updates, just like cars do. Any bikes not sold end-of-season will be worth roughly their second hand resale value the next year. Hence the stock clearance sales. This effect is stronger for racing bikes and mountain bikes than it is for evergreens (for obvious reasons). If a bike store is borrowing at 7% (good deal with the bank) to buy their stock then a $500 bike that retails for $649 (30% gross margin) will have cost the store ~20 bucks in interest after half a year. If they sell it during clearance they will probably drop the price to $549 or $499 depending on how much inventory they have to move. At $550 they're still making some money, at $499 they're losing.

And they still have to put the bike together, give it the '0' service (mostly checking if everything is tight, re-inflating tires and setting it up for the customer) and a warranty. And clean it up after every jerk that goes puddle hopping with a new bike during their test-drive, after which they won't buy it.

There is not a whole lot of money in selling discounted bikes.

Then after the first year you have hopefully a loyal customer that can't fix their own punctures and that keeps coming back over a long time for fixes and eventually an upgrade. It isn't rare for a sale to make more on accessories than on the bike itself, compared to the price of a bike a bag set, seats, lights (usually mandated by law to be on every new bike) and clothing are sold at much higher margins.

[sliverstorm]

How do you know they were still making money on the $739? How do you know the bike manufacturer wasn't offering incentives, much like with a car dealership?

[dedward]

It's a business - you don't sell stuff if there is no money in it. It made you more money being out of the store for that price than sitting in the store... whether it was through rebates from the manufacturer, some contract deal, etc is irrelevant - the business made money.

[jacquesm]

Not necessarily true. Old stock is sold at a loss quite frequently because keeping it will cost even more than getting rid of it. Space is a real problem in bicycle stores (and capital an even worse one) if you can't show next years models in March then you're not going to be selling any bikes at all.