How do online bike shops sell the same products for less?

When the online sales boom started, one of the biggest effects was the online businesses could significantly reduce the traditional overheads; high street’ retail premises, skilled floor staff and many of the costs involved in running a bricks and mortar business. When bicycle parts and accessories have mark-ups up to 100% (of the wholesale purchase price), eliminating the expensive shop costs has a big impact on profit margins.

Selling online is cut-throat and in Feburary 2013 Wiggle posted a 2012 turnover of 140 million pounds. But after costs and overheads the retained profits were just under 9 million pounds. The constant  discounting by online shops means that they are reaping obscene fortunes.

But big online bike shops have a few tricks up their sleeves to remain competitive and consistently undercut smaller shops on price. The approach will vary from shop to shop, but here are a few in brief:

• Bulk Buying: large volume purchases give big online retailers  power to negotiate on prices.

• Old Season Stock: brands with old and hard-to-sell stock can offload to online shops who buy cheaply and can quickly sell.

• OEM Equiptment: accessories that are officially purchased for assembly on complete bike, but are never assembled (or even disassembled) and then sold seperately.

• Grey Market Sales: bikes, parts and accessories which are purchased via unofficial agents or routes. Also making wavailable to customers in countries that are otherwise served by official distribution partners and dealers.

• Tax Breaks: Online shops may locate to countries, regions or districts with low taxes and exemptions.

• Wheeling and Dealing: using loopholes, unsanctioned or even dubious channels to acquire cheap stock.

Some brands actively try to manage their distribution, and explains why they are hard to find with the big name shops, but many have traditional distribution agreements which fuel price discrepencies between distributers and online retailers.

How online bike shops make you buy more

It is no secret that “Free Shipping” is the biggest motivator for online shops to get shoppers to buy. They have known for years that their Free Shipping offers have two significant effects, firstly for undecided shoppers, it can be the deciding factor. If you have been thinking about new gear for a while, these real savings on the cost of shipping are enough to make you press that buy button.

Free Shipping promotions are usually based on a minimum purchase value which induces that second effect. The majority of online purchases are low value purchases under $100 (ca. 75 Euros and 60 pounds), so creating a Free Delivery incentive for purchases above $99 makes shoppers add extra items to reach the quota.

Considering that the largest online retailers such as Wiggle and Chain Reaction Cycles each have an annual turnover in excess of $250 million each, the small increases in the average sale amount have a real effect on annual turnover.

Buying Cycling Gear Online Locally or Overseas?

The chances are that you are already spoilt for choice between online bike shops located in your country online bike shops overseas.

There is the impression that the overseas online retailers have lower prices on bikes, parts and accessories. The online shops are running a tight operation with low margins and high volumes and can also pass on tax savings to their customers. As an example, if you reside outside of the United Kingdom and order from a UK retailer such as Wiggle or Chain Reaction Cycles, you don’t pay VAT (Value added Tax). And depending on your local tax regulations and trade agreements between your country and the origin country – you may escape local taxes and / or customs charges entirely on your ‘imports’.

While the item you want may be marginally or significantly cheaper overseas (don’t forget shipping), a very important consideration is the warranty and your consumer rights. If something does go wrong, the local bike shop (LBS) and brand distributer can rightly reject your warranty claim. Instead you probably need you organise this directly with the online shop who may give you the ‘run around’, may make you pay shipping charges and it can simply become a big hassle, especially for high priced gear and bikes. Buying locally provides certainty with regard to your consumer rights whereas overseas purchases means that your rights can become blurred.

Keep in mind, when purchasing online, make sure you also check out the prices of your local online bicycle shops. When there is a price difference, weigh-up the value of local support, valid local warranty and protection under your local consumer laws. In hindsight we are all clever, but smart thinking in advance can help you make a smarter choice for your online purchase.