This is some really good insight, Aaron, and it gives us a lot to think about. Coming from the perspective of someone who doesn't really follow racing, it seems like this would change the incentives for EVERYONE, from aspiring racers, to marketing departments, to engineers.
That explains the racing side of the industry very well. There are many other problems with the industry too. One of the biggest is the ridiculously high prices for what is a comparatively simple product. (There are manufacturers still selling suspension designs that are over 25 years old. E.g. variations of single pivot designs! Can’t be much R&D for those manufacturers). Bike manufacturers are gouging customers with five-figure prices for top end models. The high prices trickle down to lower end models. The industry needs to get real with prices and stop the gouging. If you can’t sell a good product at a fair price, get out of the industry.
I think you're underestimating how narrow the margins are already. Everyone I've ever heard from in the industry describes this. They're not just marking up arbitrarily. The fact is (as far as I can tell) that the manufacturing processes for high-performance bikes (even base models) are expensive, despite the perceived "simplicity." If you have practical ideas about how prices can be reduced, I'm sure we'd all benefit.
Thanks! There are a bunch of different models like that in the marketing world, all with the same approach (roughly). That's the one we used at Red Bull, and I think it helps give perspective to the decision-making process that we're seeing.
Ben, what do you know about the margins, really? If you are part of the industry, educate me. Otherwise, you are just spouting what the industry says. Before I retired, I represented manufacturers and bike shops and understand their business models well, I can tell you through experience that bike shops mark up a bike, generally 50% when they put the bike on the floor, unless they have a special deal with the manufacturer. So, a $3,500 bike becomes $7,000 retail. I just don’t accept that the manufacturer has a low margin in its sale to the bike shop. No manufacturer will ever share this information. Want to spur growth, reduce prices wholesale and retail and generate sales? Cut the margins. Yeah, sounds crazy, especially when you accept what the industry says. I challenge any bike manufacturer to prove me wrong.
This is some really good insight, Aaron, and it gives us a lot to think about. Coming from the perspective of someone who doesn't really follow racing, it seems like this would change the incentives for EVERYONE, from aspiring racers, to marketing departments, to engineers.
That explains the racing side of the industry very well. There are many other problems with the industry too. One of the biggest is the ridiculously high prices for what is a comparatively simple product. (There are manufacturers still selling suspension designs that are over 25 years old. E.g. variations of single pivot designs! Can’t be much R&D for those manufacturers). Bike manufacturers are gouging customers with five-figure prices for top end models. The high prices trickle down to lower end models. The industry needs to get real with prices and stop the gouging. If you can’t sell a good product at a fair price, get out of the industry.
I think you're underestimating how narrow the margins are already. Everyone I've ever heard from in the industry describes this. They're not just marking up arbitrarily. The fact is (as far as I can tell) that the manufacturing processes for high-performance bikes (even base models) are expensive, despite the perceived "simplicity." If you have practical ideas about how prices can be reduced, I'm sure we'd all benefit.
I know nothing about the racing side of riding bikes. Very interesting read about it. Thanks for the insight Aaron.
I never heard of PESO before. Was interesting to read. Thanks for your insight Aaron!
Thanks! There are a bunch of different models like that in the marketing world, all with the same approach (roughly). That's the one we used at Red Bull, and I think it helps give perspective to the decision-making process that we're seeing.
Ben, what do you know about the margins, really? If you are part of the industry, educate me. Otherwise, you are just spouting what the industry says. Before I retired, I represented manufacturers and bike shops and understand their business models well, I can tell you through experience that bike shops mark up a bike, generally 50% when they put the bike on the floor, unless they have a special deal with the manufacturer. So, a $3,500 bike becomes $7,000 retail. I just don’t accept that the manufacturer has a low margin in its sale to the bike shop. No manufacturer will ever share this information. Want to spur growth, reduce prices wholesale and retail and generate sales? Cut the margins. Yeah, sounds crazy, especially when you accept what the industry says. I challenge any bike manufacturer to prove me wrong.
Aaron, what's your theory about why GT has sponsored Hans Rey for 37 years, including a new three-year contract?
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