The business plan: Who is the competition

Frames and Wheels ranks the framesets of the competition according to the price to weight ratio. This ratio is the retail price of the frameset divided by its weight; it gives an indication of how many dollars the consumer is paying per gram of weight. Based on the universe of framesets below, the average weight for a performance road frameset is about 955 grams and the average retail price is $3,100 per frameset.  The price to weight ratio for this universe of framesets is 3.2x. In other words, the consumer is paying about $3.20 for each gram of frameset weight. Frames and Wheels will continue to expand this analysis to broaden the universe and add more detail.

In this analysis, the most costly frameset is the Pinarello Dogma 60.1 at $5.80 per gram of weight. This represents a 78% premium to the marketaverage (3.2x) and can be explained by Pinarello's position in the market as the ultimate brand in racing, or at least among the oldest(but not the most common in New England anyway). Right behind Pinarello is the Trek 6.9 Series which retails at a 32% premium to the market average. The premium on Trek frames perhaps can be explained by its strong association with Lance Armstrong and the Tour de France.  The BH G5 is priced at a 26% premium to the market and is comparable to the premium of the Cannondale Supersix Ultimate (22%). BH is relatively new to the US market, but is nevertheless positioning itself with other premium brands. It does have the advantage of being a frame used by professional teams in the Tour de France.
Specialized Tarmac and CerveloR3 are priced at 5% and 2% premium to the market. This is a small premium and explains the high market share for these brands: Frames and Wheels sees many Specialized Tarmacs and Cervelo R3s at the races. Clearly, these frames are not cheap but on a price to weight basis and relative to the market, they represent good value. Both frames also benefit from the tremendous exposure they receive from the Tour de France (Contador and Schleck both rode Tarmacs and Cervelo has its own Team) and the brands have comprehensive warranty programs, crash replacement programs and cusotmer support (important for the IBS). Ridely is priced at similarly low premium to the market, but has not yet achieved the same kind of market penetration. However, Frames and Wheels sees more of these frames at the races.

Brand	Model	MRSP (USD)	Weight (grams)	Price to weight (x)	Premium / (discount) %
Pinarello	Dogma 60.1	5,500	950	5.8	78
Trek	Madone 6.9	3,500	815	4.3	32
BH	G5	3,300	810	4.1	26
Cannondale	Super Six Ult.	3,800	960	4.0	22
Scott	Addict R1	3,000	800	3.8	16
Ridely	Helium	3,100	900	3.4	6
Specialized	Tarmac SL3	2,900	850	3.4	5
Cervelo	R3	3,100	940	3.3	2
Fuji	SL	3,000	920	3.3	0
Jamis	Xenith SL	2,800	890	3.1	-3
Cervelo	S2	3,100	1000	3.1	-4
Giant	TCR Adv SL	2,750	900	3.1	-6
Fuji	SST	3,100	1040	3.0	-8
Ridely	Noah	3,500	1200	2.9	-10
Parlee	Z4	2,500	890	2.8	-13
Guru	Evolvo	2,500	990	2.5	-22
Austro-Daimler	Superleicht	2,500	1000	2.5	-23
Look	585	2,250	990	2.3	-30
Felt	F1 Sprint	2,700	1210	2.2	-31
Colnago	CLX 2.0	2,200	1050	2.1	-35
	Average	3,055	955	3.2

The Colnago CLX is priced at a 35% discount to the market average of 3.2x whcih makes it the best value in this analysis. However, the big discount could also mean that the brand is not in favor with the market, despite its Italian origins, its long racing history and its use by professional teams. Perhaps Frames and Wheels is not conisdering the right frame in this analysis, but given that its weight is comparable to the Cervelo S2 and the Fuji SST, it seems justifiable to include it. Colnago is very much a premium brand and it may be the case that the brand appeals only to the consumers who are purchasing higher end models. Meanwhile, the Felt F1 Sprint is priced at a 31% discount to the market average and represents very good value for the consumer. However, Frames and Wheels does not see too many Felts at the races and is puzzled by this: the frames are used in the Tour de France and they are understood to be good frames. Frames and Wheels gets the sense that the frame is more popular with the middle portion of the market. For example, Felt bikes can be found at Eastern Mountain Sports whcih is not a cycling specific retailer.

This analysis helps quantify the premium effect in cycling: The Pinarello Dogma weighs 950 grams and retails fro $5,500; the Parlee Z4 weighs 890 grams and reatils for $2,500. The Dogma is priced at a massive 78% premium to the market and the Z4 is priced at a 13% discount; yet consumers still buy the Pinarello (although Frames and Wheels has only seen a few).Clearly, the reputation of the Pinarello brand is at work here. Pinarello has been around for years and is understood to be the luxury brand of frames. However, it is heavier than the relatively new Parlee and more than 2x as costly. Despite this glaring difference, Frames and Wheels beleives that many consumers are reluctant to buy a new brand of frame for fear that they will be perceived as riding something of less value or junky even. It is similar to the markets reaction to a giveaway: something given away for free is perceived as junk; something for whcih a massive premium is demanded is perceived as valuable. It is counter intuitive in a way but Frames and Wheels that this phenomena is at work in the frameset market and will consider it when setting the price for its frames. Frames and Wheels remains committed to the notion of matching supply and demand and will work this in to its pricing strategy. Stay tuned.