More on discounting

Frame and Wheel discussed discounting in a previous post and returns to the topic after receiving numerous emails from on line retailers about year end deals available. Below is table that summarizes the discounts on some complete bicycles and framesets from one retailer:

Brand	Model	Bike	Components	Year	Previous ($)	Current ($)	Disc. (%)	Sizes (cm)
Cervelo	R3	Complete	DA 7900	2010	5,900	3,500	41	3
Cervelo	R3	Complete	Ultegra 6700	2010	4,000	2,400	40	1
Cervelo	RS	Complete	Ultegra 6700	2010	3,600	2,400	33	1
Cervelo	RS	Frameset	-	2010	2,500	1,500	40	1
BMC	SLC 01	Complete	SRAM Force	2010	4,200	2,800	33	17
BMC	SLC 01	Frameset	-	2010	2,600	1,600	38	15
Pinarello	Prince	Frameset	-	2008	5,500	4,000	27	10
Ridley	Noah	Frameset	-	2010	3,250	3,150	3	6
Ridley	Excalibur	Frameset	-	2010	1,900	1,800	5	4

Frame and Wheel assumes that the IBS can obtain a Dura Ace 7900 build kit for about $1,500, and that the IBS purchased the Cervelo R3 frameset for $1,500, or a total cost to the IBS of $3,000. At the beginning of 2010, the Cervelo R3 retails for $5,900; the bike is the same as the previous year, but the finish is different. For whatever reason, there are no buyers for the R3 and in early 2011, the on-line retailer needs to make room for the new 2011 R3s (again the same bike, but with a new finish), and thus wants to recoup its investment in the frame and build kit before it becomes even more dated. Based on Frame and Wheel's assumptions, which are not too far off the mark, it appears that this on-line retailer is selling the 2010 R3 at the beginning of 2011 for $500 more than it bought it for or 16% above its cost compared to almost 100% more than its cost had the IBS been able to sell it at the beginning of 2010. The point is that bicycles lose their value very quickly, even when they sit on the floor of an IBS.

Bike Snob excoriates road cyclists for being "free-loading cheats" and "product-grubbing discount hunters". This seems a bit harsh. Frame and Wheel learned long ago that the best value for a bicycle is obtained by purchasing last year's model right before the arrival of the next year's model. This is not grubbiness, it is ruthless intelligence. Bike Snob has the conservation part right, but the "push"nature of the industry, the huge capacity of the factories in Asia and the industry's tactic of planned obsolesce has conditioned the road cyclist into searching for and demanding discounts. A friend of Frame and Wheel observed that cyclists very rarely pay "full price" for their bikes and accessories. How right he is.