Erik Tonkin, the owner of Sellwood Cycle Repair in Portland Oregon recently published an opinion article in Bicycle Retailer and Industry News (USA).
Here is some of that article:
Bike shops need to charge for their new bike assemblies, and they need the support of bike industry manufacturers to make it happen. Building a bike is not part of its sale. In fact, we already lose margin on bike sales because we have payroll tied up in selling them, as well as ordering and receiving them. In some cases, we pay staff to move bikes around to different locations. The back-end of a basic bike sale is a real operation. To lump in the assembly labor is unreasonable. We provide a valuable service, and we should be paid for it.
Our shop has started charging. We’re telling customers that most bikes under $600 get a $40 build charge. (Note that we do not have sales tax in Oregon but do have a $15 bike tax.) Almost all adult new bikes we sell are $600 and more. We now charge $75 at a minimum for them. More complicated bikes get a more expensive build fee. Bikes that are really expensive do, too: a $300 build fee for a $6,000 road or MTB is just 5%. High-end customers want and expect more out of their bikes and their sales and service providers. And so they should pay for it.
The answer isn’t “better margin.” We make good margin on the new bikes we sell.
I think of it this way: we don’t buy bikes from our manufacturers; we buy boxes filled with potential. I’m not sure if there’s another industry that depends as much on its dealer network to complete its manufacturers’ products — and to do so free of charge, and provide post-purchase product support, too. A bike in a box is just not that useful to most consumers. It’s not even a bike. We bike shops not only make that box useful but fun and, of course, safe for the consumer.
At our shop, we prefer to have more experienced mechanics build bikes; we’ve found that to be more efficient and reliable. It’s rare that one of our mechanics can build more than four bikes per eight hour day. My math tells me that we spend as much as $160 per mechanic per day to build four bikes “for free.” This equates to roughly $40,000 of payroll per year for one full-time bike builder, and we have more than one, of course. It’s conservative to say bike builds alone consume 20% of our payroll.
There’s more: Our mechanics could be working on profitable repairs instead of building bikes. If they optimized our $80 per hour service rate, that’d be $640 of earned labor dollars per day. I’d rather keep at least some of that, versus none.
The question is how, then, to get paid for our bike-building labor. The answer is by an additional fee, paid for by the consumer, a fee that our bicycle manufacturing partners directly message to the consumer public through their channels, helping bike shops prepare our shared customers for institutional change.
The problem we bike shops face is one of volume and dollars. The more bikes we can sell, the more money we make, in theory. There’s always enthusiasm to sell more! But to believe in that solution is just a hard way to go. What we really need is to capture more dollars per sale. A $700 bike at a 40% margin generates $297 dollars that is currently intended to cover all associated costs to ship, receive, build, move, floor, and sell it. A build fee would really help!
The time has come to make this change. The public is used to paying for additional fees on top of the price of the purchased items and experiences themselves. I no longer understand why we should be excluded.
Plus, the current pandemic has conditioned everybody for all sorts of change, and change is hard to come by. When I see an open window of opportunity to make real change, I ride right through it.
Speaking of windows and the like, we’re still not inviting customers through our doors and into the store; they’re not really buying bikes off the floor, anymore. We’ve started referring to bikes we already assembled as ‘floor models.’ Like many shops this year, many of the bikes we’re selling are essentially ‘special orders’ because they’re purchased before the box even arrives. The customers know they’re buying a bike in a box and that it needs to be built, and that it will be built specifically for them!
Customers have really shown their hands this year, by expanding their budgets and their willingness to wait in both literal and figurative lines. Let’s please make this change while the change-making is good!
A longer version of this article was first published in Bicycle Retailer and Industry News.