Outside the Bike: How much value your bike loses each year

Frame and Wheel eBay Store transactions: 2011

Item	Purchase price ($)	Selling price ($)	Change ($)	Years owned	Value per year ($)	Value per year (%)
2009 Colnago EPS 11-Spd Campy Bora Ultra wheels	15,000	5,500	9,500	2	4,750	32
2009 Time RXR Campy 11-speed EC90 Power Tap wheels	10,000	4,500	5,500	3	1,833	18
2010 Parlee TT frame set	3,500	1,200	2,300	2	1,150	33
2011 Specialized S-Works Tarmac SL frame set	3,000	2,125	875	1	875	29
2008 Cervelo P3C Zipp 404 clincher 650c	6,000	2,791	3,209	4	802	13
2010 Parlee Z5 frame set	3,500	2,082	1,418	2	709	20
2010 BH G5 frame set *	3,000	1,225	1,775	2	888	30
2008 Cervelo Soloist Ultegra Mavic Ksyrium wheels	4,000	1,250	2,750	4	688	17
2008 Specialized Epic marathon DT Swiss wheels	3,000	1,405	1,595	3	532	18
2008 Cervelo P2C Ultegra Shimano WH-R500 wheels	3,000	1,900	1,100	4	275	9
2008 Lemond Poprad Cyclocross bicycle *	2,000	720	1,280	5	256	13
Average	5,091	2,245	2,846	3	1,160	23

Frame and Wheel sold the bikes listed above on the Frame and Wheel eBay Store over the past 12 months. All of the auctions were reserve price auctions, with the exception of two offerings: the BH G5 frame set and the Lemond Poprad. The Colnago EPS did not sell for the price asked by the seller; the highest bid was $5,500. The average purchase price is $5,100. The average selling price is $2,200. The average holding period is three years. The data implies that these items lost an average of 23% of their value each year. The fact that a performance bicycle loses so much value so quickly is shocking for some sellers. But this is the nature of the industry: demand is created by brands pushing new models into the market each year, some of which have real innovative improvements to them while others simply have new paint jobs and graphics. Brands obtain their economies of scale only by executing huge production runs in Asia, thus they have a strong incentive to deliver as many units to the distribution network as quickly as possible. Indeed, retailers are buying in October inventory for the following year. This characteristic explains why retailers discount so much at the end of each year, and it is the reason why performance road bikes lose value quickly. 

Frame and Wheel will explore finally a business model that changes the industry from a push model of demand to a pull model of demand in a series of posts titled Outside the Bike. Frame and Wheel has been making oblique references to this idea in posts and in person for over a year now and now has the time to quantify it more thoroughly. Indeed, the question “Would you consider paying for your bicycle like a Netflix subscription” on the Frame and Wheel blog resulted in 5 Yes, 6 No 7 Maybe and 16 Please elaborate in a post responses. So there is interest and Frame and Wheel will oblige.

One client wondered why he should pay $5,000 on a bicycle when it is going to sell for only $1,000 four years later. The reasons are intangible and emotional, but Frame and Wheel’s practical philosophy on purchasing performance road bicycles given the industry’s current model was crystalized in response to the question. Here it is: 1) Do not spend wild amounts on a bike. A very light and fast road racing bike with fine wheels can be had for about $6,000. A good rule of thumb is buy last year’s model. 2) Purchase a standard package that will appeal to the secondary market. Go for main stream brands with a single group. Avoid elaborate customization and group mixing. 3) Hang on to the bike for two years or three years at most. If its any longer than three years, hang on until it falls apart. 4) Concentrate all time, effort and resources on that one bike. The bicycle is losing value wether or not you ride it; might as well enjoy it and extract as much value out of it for yourself as you can. Get rid of the winter bike, the group ride bike the spring weather bike, etc. 5) Take comfort in knowing that the bicycle can be sold for something on eBay when you are done. If you spend $5,000 on a bike and sell it for $1,000 after four years, take the view that you are only spending $4,000 and then ride the bicycle like mad.

Vittoria Tires exposed to floods in Thailand

Frame and Wheel reads with great interest about the flooding in Thailand. The flood waters are apparently on their way towards Bangkok after having flooded already much of the land in the northeast. The authorities are scrambling to clear the canals and put up barriers to divert the encroaching waters. Friends and family living in Bangkok report that all is well so far, but somehow Frame and Wheel cannot believe that this is true. The floods have already done $4.8b in damage and that is expected to increase if the flooding reaches Bangkok where forty percent of Thailand's economic output is concentrated. 

Frame and Wheel notes that Vittoria Tires is one of the many tire manufacturers that produce their tires in Thailand. This is because of lower costs and better access to rubber markets. Should the flooding swamp Bangkok, it could very well disrupt production. Additionally, Bangkok's infrastructure and ports could be affected to the point that it becomes difficult for the factories to ship goods out of the country. These bottlenecks could make some types of Vittoria tires harder to obtain or more costly.  Hopefully, this will not be the case, but better order your EVO Paves now while there is still some inventory kicking around.

Frame and Wheel rode to the soccer tournaments on Sunday. Temperatures were in the 80s. It felt like mid June, but the air was cool and the shadows were long, a subtle reminder that winter is on its way. The route out to Waterboro is familiar territory. Today, Frame and Wheel heads south on Route 202 and 4A over to Sanford in order to make the games on time. A more challenging and far more scenic route is to push east through to Shapleigh and then drop down into Sanford. There are some great climbs and the roads are peaceful. This area is the beginning of the more mountainous territory of western Maine, but it is at the edge of Frame and Wheel's maximum range which makes it hard to push to far into this area.  The way forward is to drive to Waterboro and set out from there, but then if there are multiple flats or a serious mechanical, it becomes difficult to call for help. This was perhaps one of the last warm weekends of the year.

Frame and Wheel will migrate the Internet of Bikes to its own page on the website sometime soon. Once that is done, all the rides will be automatically uploaded to that page. This will save a lot of time. Frame and Wheel will use the blog for posts that require tables and more thought. 

The Mount Cadillac Century Challenge was indeed that because of the wet and cool conditions. In the past twenty years, there have been only two times that it has rained. Nevertheless, 120 riders turned out this year for the ride. Frame and Wheel rode with Richard and Ben, who are nearby residents, for the first three hours. The final two hours were solo.

Frame and Wheel discovered that with Di2, when the battery is getting low, the front derailleur goes out first. Frame and Wheel had to ride two thirds of this ride in a small chain ring which actually worked out fine. If it had been a race it would have been a problem, and if the front derailleur had been stuck in the big ring, there would have been a problem getting up Mount Cadillac in a 53 x 27. Otherwise, the Austro-Daimler Superleicht rode very well and was very comfortable. This was its first long, wet ride.

The last section through the park road is very nice and there are some striking vistas. Frame and Wheel would like to return and spend more time looking and hiking around. Visibility on the way up Mount Cadillac was very limited and there were quite a few buses going up and down. Coming down the mountain was very wet and cold, and the traffic coming up the road was over the yellow line to get around bikes going up. For this reason, the organizers were quite wisely recommending riders to think twice about making the ascent. Frame and Wheel thanks to the Downeast Cycling Club and the supporters and volunteers who organizer this ride. Next year the weather will be drier, hopefully.