A new financial study confirms a sad truth about bicycle retailing: most bike shops do not make a profit on the sale of new bicycles.
This may be old news to many, especially retailers wrestling with unruly income statements and stiff price competition, but the new report uses hard numbers to show that the failure of new bicycles to generate retail profit is much more than urban myth.
In fact, the report shows that new bicycle margins do not even cover their share of the basic operating costs of the average bike store. Overall store profitability is only possible because sales of higher margin items such as parts and accessories drive the averages up, categories now facing increasing price competition from on-line retailers.
The source is the NBDA Cost of Doing Business Survey, conducted by market research firm Industry Insights every two years since 1993. It is different from many surveys Continue reading “Are Bikes the Black Hole of Bike Shop Profitability?”
The average bike shop today is bigger than in the past, both in dollar volume and physical size, according to a new retail study from the NBDA conducted early this year.
The Specialty Bicycle Retail Study, published annually since 2004, reports average store sales of $997,761 in 2013, average store size of 5,562 square feet, and $179 in revenue per square foot, all record highs.
While these numbers are incrementally higher than the previous year, comparing the latest study to the one done a decade ago illustrates some of the striking changes in the bicycle retail marketplace. In the 2004 report, the average store average dollar volume was just $540,000, average store size was 4,822 square feet, and the average store produced just $111 in sales per square foot.
Clearly, the retail marketplace has changed, and mostly in good ways. The bad news? There are a lot fewer stores to enjoy the ride. There were 4,704 Continue reading “Bike Shop Metrics Are On the Rise”
Recalls have been much in the news lately, and the bicycle industry has not been immune with recent fork recalls from Trek and Scott.
Retailers play a central role in assuring that defective products are identified and removed from use, and that consumers are protected. They also have ongoing obligations to protect the public from defective products.
As part of the NBDA’s Bicycle Mechanics Certification program development, project director Rich Kelly asked attorney Jim Moss to take a look at the mechanics of recalls, and to clarify the legal rights and obligations of the retailer. Moss specializes in legal work in the outdoor market, and is advising the NBDA on legal issues related to certification.
Here’s his overview of dealer obligations in recalls that can be applied to today’s recalls, as well as those in the future:
Product Safety and Recalls: Your Obligations as a Retailer
Retailers are a key part of the process of producing, selling Continue reading “Recalls Call for Retailer Action”
Last week’s recall of 125,000 bicycles for defective forks was bad news for everyone involved.
But the solution has been energetic and purposeful, as bike shops nationwide leap into action to notify the public, fix the recalled bikes, and file the paperwork.
All this is necessary and even heroic, but many shop owners are expressing dismay at what they say is inadequate reimbursement being offered by the manufacturers for this huge and important effort. One compay has offered to reimburse dealers either $5 or $15 per repair, depending on the fork model ($5 for replacing skewer with washers, and $15 for fork or fork leg replacement).
Many dealers are saying their hard costs are much higher than that, and that the recall is a significant financial burden as they venture forth to solve a problem they did not cause.
The overall financial impact on an individual dealer goes way beyond the time a recalled bike spends in the repair stand, they point out. One Texas dealer estimated it takes about 45 minutes of dedicated shop time to process and repair a recalled bike needing the simpler “washer/skewer” repair, and maybe 70 minutes for fork or fork leg replacement.
Even if the time estimate is a little high or a little low, the fact remains Continue reading “Dealers Question Recall Reimbursement”