An Open Letter To Chain Reaction Cycles

[pharmaboy]

Is the thought that the increased bulk purchasing power of a distributor a myth then? How is a single non-franchised LBS going to order the volume of stock to obtain these discounts that are bandied about?

It's also been mentioned before, but what about international price standardisation? People have mentioned that Shimano in Australia are extremely expensive compared to the rest of the world.

Well, perhaps some ACCC decision that makes parallel importing legal. and exclusive distributorships illegal.

I cant for the life of me imagine that bikeshops arent ordering some gear from CRC - particularily when they have their sales, like the other day - i'd be all over cassetttes and chains and things from CRC - you just have to cover warranty yourself.

On other products, you choose companies that parity price - eg stans wheelsets are reasonable here, mavic are a ripoff, therefore dont stock mavic, and quite frankly not that wish they were a brand company asking $500 for rubbish wheelsets, and $20 for crap plastic bidon holders etc.

It was said above as well, that their is a tendency to price in oz as if there is no competition - I fully blame that on the ethos in australia that "you get what you pay for" - frequently posted here as well: its a monumental load of bollocks.

To give an example of an online bikeshop here, i give you pushys, they can supply schwalbes at a competitive to CRC price on special, but stock suntour components and no shimano - now I assume that their failure to supply shimano cassettes is because they are unable to parallel import, but they can with schwalbe. All of the euros supply everything except maybe specialized and mavic which they wont ship. This leads me to suspect that its nothing to do with laws in europe

 

[Dozer]

It's also been mentioned before, but what about international price standardisation? People have mentioned that Shimano in Australia are extremely expensive compared to the rest of the world.

Example:
CRC buy from Shimano - Shimano makes their profit.
Australian bike store buys from Bobby's Bits who buys it from Terry's Tassles who had to buy it from an importer who had to seal the deal with a distributor for Shimano in the Netherlands who had to deal with the guy selling SHimano in Europe who then got it from the northen hemisphere rep who had to source the gear from the southern hemisphere after they sold it all to the guy in Argentina who thought he could do better than CRC by buying it in bulk who now has decided that bike stores aren't department stores who should stock every part you need but stick to selling bikes and servicing bikes and arranging rides that they can demo new bikes to people and encourage riding at a grass roots level instead of bitching and moaning and whining and complaining about the bloody online shop that can sell things cheaper than them.
My advice to bike stores? Fuck the distributor, buy the parts from a store like the rest of us or dream up some other way of making a buck. You look like such a bad business person when you slag anyone who buys stuff elsewhere and you're only harming yourself. Embrace it, forfeit a warranty on a part and buy it from an online store and charge a dude to fit the part. You all claim you're knocking prices down to barely any profit margin so you aren't going to lose anything anyway. Who knows? You may even make enough profit to educate some people on correct bicycle mechanics instead of putting a punk kid on who bodges most jobs...............

 

[Hugor]

When you buy off CRC you do not pay VAT (UK tax) or GST.
It is near impossible for an Aussie business to be competitive with a tax free competitor.
Even if their markups were identical it would still be way cheaper from CRC by the tax benefit alone.
The playing field is not equal.
If the government applied GST to online purchases then this would even things up somewhat and give the small franchises a chance.
Other countries like the UK do this.

 

[static_X3]

Or the government can scrap the GST all together? Ha! Fat chance.

 

[StanTheMan]

When you buy off CRC you do not pay VAT (UK tax) or GST.
It is near impossible for an Aussie business to be competitive with a tax free competitor.
Even if their markups were identical it would still be way cheaper from CRC by the tax benefit alone.
The playing field is not equal.
If the government applied GST to online purchases then this would even things up somewhat and give the small franchises a chance.
Other countries like the UK do this.

Perhaps you should do the numbers.


Stan's bus rant's since 2011. Now on 4S

 

[pharmaboy]

Perhaps you should do the numbers.


Stan's bus rant's since 2011. Now on 4S

YEP - if the price from an online aussie was 10 or even 15% more expensive, i'd never have even discovered CRC or their ilk, i discovered them to save 50% - just about to go shopping now actually, no need to do any price comparisons, i know i will be getting within a couple of % of the best price on the net by using my chosen provider - that is great piece of mind. Tonight is CRC as it happens, mainly because its slightly speciality stuff i'm after, and the best range is there

 

[frensham]

When you buy off CRC you do not pay VAT (UK tax) or GST.
It is near impossible for an Aussie business to be competitive with a tax free competitor.
Even if their markups were identical it would still be way cheaper from CRC by the tax benefit alone.
The playing field is not equal.
If the government applied GST to online purchases then this would even things up somewhat and give the small franchises a chance.
Other countries like the UK do this.

From TBSM online: Shimano XT Cassette $135 delivered (rrp $150)
From CRC online: Shimano XT cassette $65 delivered. Add 10% GST: $71.50
From Wiggle online Shimano XT cassette $68 delivered. Add 10% GST $74.80

So, even if I pay 10% GST from CRC I am way ahead. It's NOT about GST. Paying GST does not even things up. I can do better; if I buy 2 cassettes I get them delivered (including GST) for $123 - that's TWO for less than the discounted TBSM price.

 

[static_X3]

From TBSM online: Shimano XT Cassette $135 delivered (rrp $150)
From CRC online: Shimano XT cassette $65 delivered. Add 10% GST: $71.50
From Wiggle online Shimano XT cassette $68 delivered. Add 10% GST $74.80

So, even if I pay 10% GST from CRC I am way ahead. It's NOT about GST. Paying GST does not even things up. I can do better; if I buy 2 cassettes I get them delivered (including GST) for $123 - that's TWO for less than the discounted TBSM price.

Yeah but the rrp is $150 so you actually save yourself $15!!!

:nono:

 

[StanTheMan]

GST has nothing to do with it. Harvey Norman was deluded saying that it was. He's still winging. He has a Website OS, to avoid the GST. But he's charging Australian priced. Duh!

I work in Australian Retail although not in the bike shop industry.
My industry has been shaken up by Spec Savers. People think prices have come down.
The sad news is. Perhaps prices have come down a little. it would a small fraction. The rest of it is because you are getting crap. Not just from Specsavers but all if the places trying to complete with cheap prices.

Yes I'm the first one to admit Retail in its old ways is a dead duck. Next few years will be interesting with technology improving & choosing specs over the Internet. Optical Dispensing has been deregulated in Australia so another few years you'll have nothing but crap sales assistants. You may as well order online. Because you'll get the same crap online. Except cheaper.

The model we have now will not last much longer with all the mark up of each profit margin along the way from the manufacturer to the consumer.

CRC has it right. As much as I hate to admit it. So does specsavers

Time to get out of retail for me.





Stan's bus rant's since 2011. Now on 4S

 

[StanTheMan]

Yeah but the rrp is $150 so you actually save yourself $15!!!

:nono:

Not sure what you are suggesting.

Australian price is $135 including GST delivered.
CRC price is $71.50 delivers with GST included if the Australin gov charged for GST.

Now should I calculate the difference between $135 & $71.50 ? And how much GST affects price?


Stan's bus rant's since 2011. Now on 4S

 

[agentninety3]

If the government applied GST to online purchases then this would even things up somewhat and give the small franchises a chance.
Other countries like the UK do this.

The reason why the GST works in it's current form is retailers collect the GST for purchases from the consumer, and then the govt collects it from retailers. For overseas purchases, the onus is on the govt to collect it itself, and for many small purchases I'd believe the administrative costs would outweigh the benefits. I'd be interesting to see how it works in other countries, anyone know?

 

[Slowman]

Well, perhaps some ACCC decision that makes parallel importing legal. and exclusive distributorships illegal.

...

The whole exclusive distributorship for a country is a creation of contract. Certain anti-competitive behaviours are prohibited under the Trade Practices Act while others my be reviewed by the ACCC commissioner and prohibited if found to be anti-competitive and detrimental to consumers. Such exclusive country wide distributorships are set up using contractual terms in the distributorship agreement that prevent distributors in one country exporting to another country. Now since Shimano is not the only groupset on the market the ACCC would see that there are alternatives in the market and deem the arrangement acceptable.

The trick to getting around this is importing whole bikes. The manufacturers in Taiwan deal direct with Shimano in Japan and hence get components much cheaper both because of this and the bulk at which they buy. So sometimes if you want a good groupset and some other parts you buy one of the value brands with top of the line components like XTR in MTb or DuraAce in road, and put them on your frame and sell the one of the new bike. Some bike shops would do this too.

 

[Oliver.]

This is a commonly debated topic amongst people in the bike industry. Holmes's letter has merit in that he has a good understanding of how a huge company like CRC are changing the local scene. Gone are the days of quick turnarounds at LBS and there is certainly a trend away from really high end part purchases as these items are so appealingly cheap from overseas.

However, despite the fact that I have spent years in the employ of a LBS, I don't have a problem with companies like CRC.

We are swiftly watching a changing bike scene unfold. Recreational MTB is exploding, and more and more people are getting onto high end bikes for less money. To me, that's a great thing.
But yes, we are seeing longer turnarounds for repairs. The LBS I work at does not stock as wide an array of aftermarket parts, because nobody buys them. They buy them from CRC. So if a bike is broken and a part is needed, we usually need to order it. Cue 5 day turnaround. Customers know this and expect this, but they don't mind because they know we will fit it properly and get it right.

At the same time, there are many things that a LBS can offer that CRC cannot. People need to realise that there is a key word in this argument that is commonly forgotten: Competitive Advantage.

The reason CRC exists is because it has realised a competitive advantage: selling parts at low prices online in HUGE volumes to overseas consumers. But before we get our panties in a knot about this and how it will destroy the LBS, we must also recognise that the LBS has a competitive advantage in almost EVERY other area:

1. We sell full bikes, that are assembled and ready to ride. You can literally hop on them and ride into the sunset. CRC cannot do this.
2. We fit full bikes, we turn a situation you describe into what bike you need. You tell us what you want to do on a bike and with our decades of experience, we can tell you what we think will work best. CRC cannot do this.
3. If you want to see, touch or try on something before you buy it, you can only do that at a LBS. We have the stuff in Stock. We can give you something to touch and to try right there. CRC cannot do this.
4. If you want something right away, if we have it in stock, you can take it home right there and then. CRC cannot offer this
5. We fix your bike if it's broken. We diagnose what has gone wrong. We can also give you excellent advice on what you should do to fix it. CRC cannot do this

Those are some pretty serious competitive advantages.
Furthermore, I think that there are some LBS's and employees that have the wrong attitude toward CRC and their role in the local bike scene. We as a LBS need to realise that because of our competitive advantages above, we need to rise to those standards so that customers don't shop online. For example, we need to have stock of important things, we need to have stock of the right bikes in the right sizes, and we need to give you good advice. If we do those things right, CRC should be running scared.

If we don't have stock of the right things (bikes and accessories), then we are no different to an online store except that we cost more and that you have to wait even longer to get your part. I don't mean stock everything, I mean stock the right things. Simple things like helmets, and basic accessories. My favourite is shoes. We need to carry the sizes so you can try them on. If we don't, who are we but an expensive online retailer? (And to those that come in to try shoes on and buy online...don't worry....I foresee fitting charges in the future! Of course, if you do buy the shoes the fitting charge is free! But shame on you anyway...)

Expensive accessories? Well we won't stock them because you (customers) won't buy them from us. But that's the way the world is now. That's CRC's turf. It's their competitive advantage not ours. We can't match CRC prices because we don't sell enough of them in bulk.

Many of our customers are happy to pay the extra because they know they will get good advice, and they know that we have plenty of stock of things that they can touch feel, and ride away with if they want to. That's what our role is in the bike scene.

 

[MARKL]

I remember when I first got into mountain biking in the 1990's and I would read American magazines that had mail order parts, standard and exotic parts that we had only seen pictures of in a magazine, for a quarter of what we were paying in Australia. They also had adverts for shops that were twice the price of the mail order companies (still 1/2 what we were paying) that were still competing for customers based on service. Unfortunately in those days no pay pal and extraordinarily difficult to buy overseas with currency conversions, more difficult customs etc.

As far as I am concerned all Ebay/CRC/Wiggle/PayPal have done is give Australians access to what Americans have had for decades - in addition to the full retail environment there is an alternative lower overhead model where knowledgeable consumers could save considerable amounts of money - money they probably wouldn't have spent at the LBS.

As for the bullshit argument about carrying spares? Sorry but most LBSs can't service a shock or fork - so why the fuck would they need to carry parts for something they can't do? Hell some of them can't even change a DU bush. Build a wheel from scratch? Unlikely. Hell I have service kits for Fox 40s, 36s and 32s in my garage, DU bushes, spare spokes, bearings etc - why can't a specialist shop? I am not saying carry every part for every brand but how hard is it it to cover one or two brands? Or at least not look confused when somebody asks for a help with a shock or bleeding a brake.

 

[driftking]

I didn't even bother reading the whole letter yet.
It is misdirected though. CRC are a business and they have the edge, they aim to grow the business and give riders what they can, CRC are not to blame. The issue is in Australia all the channels we to through and all the price mark ups, some shops are still surviving. Why, they get as low as they can and offer good support afterwards, I have seen two fox 40s at two stores with a 300 buck difference in price.
The issue does not lye with CRC or LBS but it the way we get products from overseas and the profit mark ups on those items.

I would agree that advertising CRC in a magazine is not ideal for our shores.

 

[rone]

This is a commonly debated topic amongst people in the bike industry. Holmes's letter has merit in that he has a good understanding of how a huge company like CRC are changing the local scene. Gone are the days of quick turnarounds at LBS and there is certainly a trend away from really high end part purchases as these items are so appealingly cheap from overseas.

However, despite the fact that I have spent years in the employ of a LBS, I don't have a problem with companies like CRC.

We are swiftly watching a changing bike scene unfold. Recreational MTB is exploding, and more and more people are getting onto high end bikes for less money. To me, that's a great thing.
But yes, we are seeing longer turnarounds for repairs. The LBS I work at does not stock as wide an array of aftermarket parts, because nobody buys them. They buy them from CRC. So if a bike is broken and a part is needed, we usually need to order it. Cue 5 day turnaround. Customers know this and expect this, but they don't mind because they know we will fit it properly and get it right.

At the same time, there are many things that a LBS can offer that CRC cannot. People need to realise that there is a key word in this argument that is commonly forgotten: Competitive Advantage.

The reason CRC exists is because it has realised a competitive advantage: selling parts at low prices online in HUGE volumes to overseas consumers. But before we get our panties in a knot about this and how it will destroy the LBS, we must also recognise that the LBS has a competitive advantage in almost EVERY other area:

1. We sell full bikes, that are assembled and ready to ride. You can literally hop on them and ride into the sunset. CRC cannot do this.
2. We fit full bikes, we turn a situation you describe into what bike you need. You tell us what you want to do on a bike and with our decades of experience, we can tell you what we think will work best. CRC cannot do this.
3. If you want to see, touch or try on something before you buy it, you can only do that at a LBS. We have the stuff in Stock. We can give you something to touch and to try right there. CRC cannot do this.
4. If you want something right away, if we have it in stock, you can take it home right there and then. CRC cannot offer this
5. We fix your bike if it's broken. We diagnose what has gone wrong. We can also give you excellent advice on what you should do to fix it. CRC cannot do this

Those are some pretty serious competitive advantages.
Furthermore, I think that there are some LBS's and employees that have the wrong attitude toward CRC and their role in the local bike scene. We as a LBS need to realise that because of our competitive advantages above, we need to rise to those standards so that customers don't shop online. For example, we need to have stock of important things, we need to have stock of the right bikes in the right sizes, and we need to give you good advice. If we do those things right, CRC should be running scared.

If we don't have stock of the right things (bikes and accessories), then we are no different to an online store except that we cost more and that you have to wait even longer to get your part. I don't mean stock everything, I mean stock the right things. Simple things like helmets, and basic accessories. My favourite is shoes. We need to carry the sizes so you can try them on. If we don't, who are we but an expensive online retailer? (And to those that come in to try shoes on and buy online...don't worry....I foresee fitting charges in the future! Of course, if you do buy the shoes the fitting charge is free! But shame on you anyway...)

Expensive accessories? Well we won't stock them because you (customers) won't buy them from us. But that's the way the world is now. That's CRC's turf. It's their competitive advantage not ours. We can't match CRC prices because we don't sell enough of them in bulk.

Many of our customers are happy to pay the extra because they know they will get good advice, and they know that we have plenty of stock of things that they can touch feel, and ride away with if they want to. That's what our role is in the bike scene.

All very well, but 1-5 are pretty much the same thing. I blame rotorburn. In the old days people went to the LBS with a problem. Now they come here and are screwing the bike shops out of their profits.

Screw you Rotorburn.

 

[Dozer]

1. We fit full bikes, we turn a situation you describe into what bike you need. You tell us what you want to do on a bike and with our decades of experience, we can tell you what we think will work best. CRC cannot do this.

I crack up when shops claim a bike fit is an essential part of riding. It's such a load of shit.

I blame rotorburn. In the old days people went to the LBS with a problem. Now they come here and are screwing the bike shops out of their profits.

Screw you Rotorburn.

Hahahahahaa, the internets is bad!

 

[Registered Nutcase]

[/LIST]

I crack up when shops claim a bike fit is an essential part of riding. It's such a load of shit.

For top end bikes I think it is, however how many times has the recreational mountain biker bought and needed fitted a baby seat, lights, comfy saddle etc etc

 

[mtb101]

This is .........................cognise that the LBS has a competitive advantage in almost EVERY other area:

1. We sell full bikes, that are assembled and ready to ride. You can literally hop on them and ride into the sunset. CRC cannot do this.
2. We fit full bikes, we turn a situation you describe into what bike you need. You tell us what you want to do on a bike and with our decades of experience, we can tell you what we think will work best. CRC cannot do this.
3. If you want to see, touch or try on something before you buy it, you can only do that at a LBS. We have the stuff in Stock. We can give you something to touch and to try right there. CRC cannot do this.
4. If you want something right away, if we have it in stock, you can take it home right there and then. CRC cannot offer this
5. We fix your bike if it's broken. We diagnose what has gone wrong. We can also give you excellent advice on what you should do to fix it. CRC cannot do this

Those are some pretty serious competitive advantages.
Furthermore, I think that there are some LBS's and employees that have the wrong attitude toward CRC and their role in the local bike scene. We as a LBS need to realise that because of our competitive advantages above, w.................... the bike scene.

great post, just to add my experience to this.

first up, 'price rules' when it comes to competitive advantage, the differences are so significant that I'd rather wait and buy online - delivered, you just have to plan your buying i.e. have a stock of common parts, chains, tubes and tyres - so I always bump up my order to get free delivery with a chain, lube etc.

1. We sell full bikes, that are assembled and ready to ride. You can literally hop on them and ride into the sunset. CRC cannot do this.
   
   Last year I brought a Boardman CX online from Wiggle, great price, delivery in 10 days, pretty happy with that. This could be the future for bike purchases, think the distributors better wake up and have pricing aligned to rest of world.
   
2. We fit full bikes, we turn a situation you describe into what bike you need. You tell us what you want to do on a bike and with our decades of experience, we can tell you what we think will work best. CRC cannot do this.
   
   I fit my own bikes, it aren't rocket science, basic measurements, ride and adjust, probably better to fit as you ride than in a shop anyway.
   
3. If you want to see, touch or try on something before you buy it, you can only do that at a LBS. We have the stuff in Stock. We can give you something to touch and to try right there. CRC cannot do this.
   
   true,! ... although video reviews and blogs are pretty informative.
   
4. If you want something right away, if we have it in stock, you can take it home right there and then. CRC cannot offer this
   
   But they can get it there in 3-4 days as I said earlier if you plan your buying this aren't an issue.
   
5. We fix your bike if it's broken. We diagnose what has gone wrong. We can also give you excellent advice on what you should do to fix it. CRC cannot do this
   
   well with youtube, forums, email to tech at CRC/Wiggle/Jenson, you can teach yourself pretty quickly how to service your bike. If something is broken or suspect I replace it rather than mess with a worn part, can do that now that prices are more competitive.

the part that worries me is the LBS alienates cyclists when they see the ridiculous prices that the distributors have forced them into paying.

 

[scblack]

If we don't have stock of the right things (bikes and accessories), then we are no different to an online store except that we cost more and that you have to wait even longer to get your part. I don't mean stock everything, I mean stock the right things. Simple things like helmets, and basic accessories. My favourite is shoes. We need to carry the sizes so you can try them on. If we don't, who are we but an expensive online retailer? (And to those that come in to try shoes on and buy online...don't worry....I foresee fitting charges in the future! Of course, if you do buy the shoes the fitting charge is free! But shame on you anyway...)

LBS service can be APPALLING, and the reason why many of us buy online for expensive stuff.

My favourite crap service story is this:

• I was looking to buy some new road shoes - Sidi Genius 6.6 carbon ones and was definitely looking to try them on, not buy online as for such a personal fit item no way was I just picking a size on the 'net. Anyway I head to a smaller store in the Sydney CBD as they have some of them in stock. Walk over to these shoes, have a good gander, pick them up, look around for an assistant. He sees me so I sit down on the seat nearby and hold the shoe I'm after. After a few minutes I go back to the display and find the one on display is hopefully my size - EU42. Assistant has someone with him so I wait a bit longer. Then after they leave I try the shoe on. Fits like a glove. I know my size now. I walk out.
• NEXT DAY I go back. Go through precisely the same routine, but still receive no customer service. Shoe size is now double confirmed, and I took extra time to make sure all the velcro is tightened correctly, ratchet is cinched correctly, ratchet anchor is correctly placed. Took quite some time going through this. Still, no customer service. Quite some time spent in store this day. Shoe size is perfect.
• That afternoon, log onto Bike Shed Mortdale, they have them in stock and I order online. Perfect service from them, I also had to confirm a couple of things on the phone.
• I have ZERO problems having done that, as I tried twice in the store and received zero service.

LBS's reading - thats one reason we buy online.