But that is part of the process for “Supply & Demand” theories…you raise the price to the point where you start to lose customers and then adjust.
Here’s a recent real world example - local training center opened in 2013 and was doing gangbuster business. Started at ~$99 / month and as there was no other center close by, membership grew quickly. Got to the point where getting trainer time was difficult…so the owner started raising the membership dues to better distribute his resource (trainers and trainer time). Got all the way up to $150 / month before demand started dying off.
As Zwift and TR have taken over the world in the last few years, they are dying for new members and have dropped the price down to $79 / month (pre-Covid).
Same “item” / resource…but vastly varying prices according to the demand at the time.
I get there is a pandemic effect.
This is text book example of “luck” The opportunity presented itself for bike manufacturers to increase prices without a major backslash of consumers and they were prepared for it.
Am I saying it is all greed?
Am i saying they shouldn’t do it?
There is a combination of “greed” and supply chain problems.
If we were not in a middle of a pandemic and suddenly we had a bike boom, i bet the prices would have gone up too.
I think companies are using the “supply chain” problems as their go to reason for the increase.
A more honest answer would have been “supply and demand” theory. Higher demand = higher prices.
And this is not JUST on bike manufacturers. I can almost guarantee that part makers are using the same “supply chain” reason for price hikes.
So all the hikes roll down to us.
This is true. But also, I want to imagine other companies kept employees on roll, while the initial shut down happen back in the spring. But lets be honest. Most didn’t.
The supply chain issues seems real.
Go to any online bike store, look for drivetrain parts, and put on the “in stock only filter” and see what happens! Getting hard to find basic parts in my experience
Many are confusing initial shutdown with supply chain issues.
There is/was a supply chain issue with many items when things shutdown earlier this year.
But the most part the supply problem is that they didn’t have the inventory.
That cause a “shortage” not because of “slow” production, but because they were not ready for the massive increase in demand.
Now here we are with double digit increase across the board.
It is what it is I guess.
They are kinda related though aren’t they? China shut down first for 3 months basically, and even if a company’s parts weren’t made there, the packaging was, or their tier 2 or 3 supplier was there. So then the US/Europe shutdown happened, and nothing was done for a while, so no inventory wasn’t being created. Then almost immediately, demand went through the roof. So no inventory, and extreme demand happened, double whammy.
On another note, been trying to get an Epic Evo…Bike has been on order since August, Spec doesn’t have a delivery date at all. So maybe I get it next year at some point?
It was a perfect storm for the bike industry.
I would expect Giant’s financials to look good at this point…they experienced massive demand and sales. But that doesn’t mean that there isn’t a component cost increase being one of the factors in driving prices up.
That doesn’t make logistical sense…demand skyrocketed so they reduced staff?
there are a lot of ways profit margin can go up…let’s start with product mix. Sell more of your profitable bikes during peak demand and your margin goes up. If you have a limited resource (production capacity) doesn’t it make sense to prioritize your higher margin product lines, especially since every bike produced is basically a guaranteed sale at full pop? Of course it does…and doing so will increase your profit margin.
And you missed the point entirely…
The same “common sense” that said that if demand is skyrocketing you reduce staff? C’mon…
The POINT was that there are a lot of ways to increase profit margin (of which one is product mix). Another is to reduce your inventory carrying costs…guess what dropped significantly with the surge in demand.
In April…IOW, bikes that were already produced, likely in late 2019. NOT produced post-COVID.
Not sure why this comment made me think of Trump playing golf
Link to where Giant did this?
Exactly the point I have been making.
Well, no…that is from May, only one month later. And only goes to serve my point. When people couldn’t find bikes in the price ranges they came in for, they were naturally forced up the price continuum. These were bikes that were already on the dealers’ floors, not bikes produced after the lockdowns hit.
And let’s be clear…I am just highlighting one way profit margin may have increased even without price increases. I am not saying this 100% occurred this way…just that there are many, many ways margin can go up without it being the sign of something nefarious.
Seriously? Because any product that came into the warehouses was immediately shipped out to stores! The local Giant DC was (is) so empty you could tee off with a driver down the aisles and not hit anything. Inventory turns go up, less $$ holding goods means profitability goes up. Again, one of many ways for this to happen.
No one is ignoring the financials…what I am saying is you don’t know the drivers of those numbers!! I really don’t know how many times I can repeat that and have you keep moving the goal posts.
Maybe they have an increased profit because they charge Trek, Scott and Colnago more - which then will increase their prices… I would rather be shocked if Giant wouldn’t have an increased profit during these times.
Thanks for the entertaining thread. I’m out of here because it’s unclear to me what people are complaining about. The truth is somewhere out there. Probably a mix of increased costs and the opportunity to make more money lead to price increases. In the press releases companies emphasize the first point. Not really shocking nor surprising.
Well, I was gonna bring up their role as a industry supplier and not just as the Giant brand, but if you can’t get agreement on certain basic facts, trying to expand seems kinda fruitless.
Wait…what? I literally said the exact opposite. I specifically said that a change in the mix of business, towards higher margin products, results in a higher margin percentage.
Please quote me where I said differently.
I present to you this article from Cyclingtips in March. It’s actually quite interesting to look back on, as basically everything was predicted, the interesting parts are quoted below:
Most of you are likely pretty familiar with how global supply chains work these days. In perpetually seeking to cut costs and maximize efficiencies in every way possible, everything is interconnected now. A frame might be welded in one factory, but painted in another. A component might be forged in one location, but final machining work is done somewhere else. And then there’s the anodizing, the laser etching, and so on. Oftentimes, those processes cross international borders
Ok, so you might think a company that makes their carbon frames in Taiwan — or the United States! — should be immune from all of this. But when was the last time you thought about stuff like cardboard boxes? Owner’s manuals? Cables and housing? Cable ends? Water bottle bolts? Inner tubes? Rim strips? Decals???
A ton of that crap comes out of China, and the factories that are running at all are still only operating at about one-quarter their normal capacity. Not so much because the workers are sick, but more because they’re under strict quarantine instructions from the government, or are just too afraid to go outside
That’s true, but the figures from Giant seem to suggest that by far the biggest driver of the margin was increased revenue.
Beyond that, I’ve not got much to add to what I said earlier. In short, while it may make perfect sense in economic terms to raise prices now, I’m not sure that long-term it’s a smart idea. At work, our costs have marginally gone up, but we have frozen prices for the next quarter at least and have emphasised that in our communications to our customers. We’re trying to retain as many as we can and have stated that now is not the time to hike prices, in our view. We’re still profitable, and we’d rather take a slightly reduced margin now but retain market share and keep customers happy. Of course, i don’t work in the bike industry, who have far more complicated supply chains, and we aren’t listed, which would complicate matters, but I’d maintain we’re taking the smart approach.