I recently came across this amazing article, explaining Shimano’s current marketing practices from a dealer perspective. As a bike shop consumer, I had heard some similar complaints (albeit not as detailed) from friends who work in the bike industry. I highly recommend clicking through, but in essence, the complaint is that Shimano sells bike parts, in bulk, to online resellers that buy in huge volumes. The discounts that Shimano gives those high volume resellers are so significant that the online resellers can sell Shimano parts for less than the wholesale cost that brick and mortar stores pay.
In other words, a brick and mortar store’s cost to buy Shimano components is more expensive than the customer can buy the parts for online (not to mention free shipping and no sales tax).
So a customer has the choice of spending $150 to buy a component online, or going to the bike shop…but the bike shop has to pay $165 for the same part (their cost), and then pay to light, heat and man their store, and then charge sales tax on top of it all…so they end up charging $200 when it’s all said and done.
Capitalism! Free Market Economy! you shout. Shortsightedness! I respond.
Those consumers that buy the components online…where do they get the components installed? Sure, some self-install, but a great many do not–where do they go? And if a part breaks, where do they go for warranty service? Do you think they’re shipping stuff back to sleazybikeparts.com, or do you think they’re going to their local bike shop and complaining?
Separately, does Shimano think that most customers will pay 30% more to buy locally, rather than having parts dropped at their doorsteps? Buying online is cheaper and often faster and more convenient, in terms of getting the parts in your hands. Shimano’s discount practices not only ensure that online parts are cheaper–they make it impossible for a local bike shop to compete in the marketplace. So what’s the long-term result of this? Is it anything other than forcing local bike shops out of business? Does Shimano really believe that LBS’ can stay afloat just charging for the price to install parts that customers buy elsewhere online?
The end result is to push the margins of LBS tighter, to drive up service costs, and to generate more unhappy consumers. The end result is to push more LBS out of business. Service and repair industries are fundamentally based on providing the service–and the parts–necessary to keep a product operational. Profit is made (hopefully) on both components of the transaction. Taking away product sales by making LBS prohibitively priced in comparison to online retailers cuts one of the bike shop repair business’ two legs off. So what does that mean?
That means, for me, a return to SRAM. Candidly, I’ve viewed Shimano parts as often being superior to SRAM in the past, based on a few not-great experiences with SRAM. But the actions of Shimano undercut my values so sharply that I don’t wish to support them any longer. Where it’s practical to do so prospectively, my business is going to SRAM. For the same reasons that I don’t wish to support bike brands that undercut their dealer chain by selling bikes direct online, I don’t wish to support bike brands that undercut their dealer chain by driving sales online in an indirect fashion.
So long, Shimano.