>I think you are wrong on the number of small ticket items vs the big
> ticket items. Take the cyclo computer for instance. I am sure that they
> sell 10 of these a week. While they probably only sell 3 or 4 bikes per
> week. So if they are only $45 per bike and only selling 3 or 4 a week
> that only $180 a week. And if the computer costs the shop $10 and he
> sells them for $40 and sells 10 a week, thats $300 gross profit on the
> computers.
Ken: I won't tell you what our margin is on our most-profitable bicycle
computer, but I *will* tell you that it is less than a 50% margin. In other
words, if we bought it for $25, if would sell for less than $50. Absolutely
guaranteed honest-to-goodness truth. There is simply no way, in a
competitive retail environment, that a shop could mark up a bike computer in
the manner you suggest. Somebody down the street would sell it for less, and
still make money. And then somebody else would come in and sell it for even
less, and so on down the line, until you reach the point where there's no
profit left and people go out of business.
But this ignores the other reality, which is that we're not just pricing to
make profit on an individual item, but also to be competitive with
mail-order operations, where the barrier to entry is EVEN LESS than for a
retail shop. So their incentive to price closer to cost is even greater,
which brings down the maximum price that I could charge even more.
Please don't make assumptions about the bicycle business based upon how
things work elsewhere. There may be some parallels, but there are also
significant differences. And from the information you have at hand, I'd say
there are *very* significant differences between the bicycle and
office-supply biz. My guess is that the bicycle business is heavily
populated by people who really love bicycles (which is generally a good
thing) and probably don't have a huge amount of business savvy. The office
supply biz, I'll bet, is the opposite. And that might explain why things are
so different in your world and mine.
--Mike Jacoubowsky
Chain Reaction Bicycles
www.ChainReaction.com
Redwood City & Los Altos, CA USA
"Ken M" <
[email protected]> wrote in message
news:
[email protected]...
>I think you are wrong on the number of small ticket items vs the big
> ticket items. Take the cyclo computer for instance. I am sure that they
> sell 10 of these a week. While they probably only sell 3 or 4 bikes per
> week. So if they are only $45 per bike and only selling 3 or 4 a week
> that only $180 a week. And if the computer costs the shop $10 and he
> sells them for $40 and sells 10 a week, thats $300 gross profit on the
> computers.
>
> About starting with $20million if you want it to be worth $10million in
> five years. Best not to start the business in the first place!
>
> Ken
>
