UKC

Read a lot over the years about the onesided relationship between supermarkets and there suppliers.

After a conversation this morning in a cycle shop a comment tweeked my interest. I was left wondering if the savings on 'Sale' bikes were being funded by the manufacturer/distributor rather than the bike shop taking a lesser profit.
Anyone know what the actual situation is?

In reply to Antigua: I suspect that it depends on the size of the cycle shop in question. If it is a one-off independent, I doubt that the "sale" would be supported by the manufacturer. It is more likely to be funded by the retailer, to clear space/old stock or to generate more trade in the form of a loss-leader (although unlikely to be making an actual loss). The point-of-sale material may well be supplied to the store by a manufacturer, but not necessarily.

If the retailer is part of a larger chain, then they are likely to have professional buyers who will have negotiated reduced prices for "sale" items. This is often done via year-end rebate, when the retailer hits a target volume with that manufacturer. The reduced price will be done to help the retailer hit that volume.

In reply to Antigua:
Depends when the shop bought the bike.

If they bought it while the distributor was selling at full price, i.e. before the lead up to the next model year, then any sale offer will reduce the shop's profits, however the shop will need to get rid of the bike to make room for next years.

Alternatively, if the distributor still has sock near the end of the model year (if its a popular bike they usually sell out in the first few weeks), then they will offer it to shops at a reduced price. If the shop manager thinks they can be shifted easily, then they might buy some. The shop will probably still make a smaller profit, depending on what mark-up they go for (its not likely to be big) but the profit will be better than in the first scenario.

Bigger shops tend to keep their own stock somewhere which they will buy at the start of the model year, based on how many bikes they estimate they can sell (if its a chain then at a central warehouse, otherwise in a celler/attic/back room), so are more likely to have bikes they need to sell off cheap at the end of the year. Smaller shops probably won't keep much more than what they have on display. Though a small shop is under more pressure to sell off its stock as each bike represents a greater proportion of the shops capitol and it also creates more storage problems.

Hope this makes sense

In reply to Antigua: contributory mark down occurs in a lot of businesses, come the end of the season, the manufacturer will agree a credit for the store to clear stock and keep some profit, but the other thing to cloud the real price of something is when the retailer is the manufacturer/importer of the goods, then they can set their own SRP high and discount accordingly maintaining margin, for example of this in outdoor shops see Sports Direct and Karrimor branded goods, or Go Outdoors and North Ridge

HTH

In reply to gear boy: Or Richer Sounds and Cambridge Audio.