The thing is, folks often forget about those expenses when they talk about how a product “should be cheaper because it costs pennies to manufacture”. The thing is, even if it does cost pennies to manufacture, all of the other business related expenses add up. If the company didn’t pay those other expenses there would be no product. I wouldn’t be surprised if the gross margin is somewhere in the 30-50% range, but the ultimate net margin might be closer to 10%.
Yep, but generally those other costs are not used as the basis for tariffs. People sometimes assume a 20% tariff is going to increase their retail price by 20%, but the mechanics of it doesn’t work that way (even if some companies try to explain a price increase using that logic). And there is often creative accounting going on to minimize tariff impact. It’s often not as simple as a US company buying from a supplier in China (or wherever) and just paying a tariff on the purchase price. If that company had a division in China buying those goods (or raw materials) locally and then using intercompany transfers to move the product to the US, there is a great deal of accounting creativity in the transfer pricing and how tariffs are applied (ie - they basically transfer at the lowest possible value to minimize tariffs). And I also remember there being ways to offset or defer tariffs similar to income taxes where certain things can cancel out others (kind of like deductions). I was never the guy who dealt directly with that stuff, but we had an entire team of people that did nothing but figure out how best to navigate global tariffs and trade law from a regulatory/accounting standpoint (this was at a fortune 100 company). Sometimes that meant shifting sourcing/manufacturing to another country, but often it was just creatively changing how/where value was added or accounted for. Small companies (like most vendors in the cycling industry) usually don’t have the expertise or scale to manage this stuff well, but I’d bet the big OEM’s are dealing with the tariffs much better than they are dealing with other business challenges like excess inventory and sales decline.
And here we go:
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Trying to not turn this political, but the only way this tariff mess gets fixed is if everyone with a Republican congressperson / senator relentlessly calls them up and complains for the next 2 years, and then factors this mess in when they next vote.
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“multiple international postal services to pause shipping as they await more clarity on the rule“
There will be no clarity on tariffs. US customs has no idea what to charge. No matter what classification the goods are. My wife does business with a Canadian exporter. They stopped shipping to the US. They were charged different rates on goods that were all under the same classification during a 2 week period. If customs has no idea, how do import/export companies navigate this.
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Exactly. You can’t blame carriers and vendors for not wanting to ship to the U.S. There’s no way they can set expectations with their customers, with arbitrary and ever-changing rules that vary like the winds based on the moods of an octogenarian toddler. Packages are going to show up at peoples’ doors with customs fees anywhere from 10% to 100% more than they paid for the item. Those buyers are going to be pissed and a lot of that anger is going to blow back on the vendors and carriers, rather than the moron responsible.
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Maybe when FedEx and UPS start asking us to pay tariffs we can have them send the bill to the U.S. Court of Appeals for the Federal Circuit… 
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Save your receipts for your future refund 
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Granted I haven’t followed every bike in the Specialized line-up but they just raised prices again (second time in 6-ish months) on the Tarmac and the Epic. Looks to be a 5%-10% increase. That follows earlier in the year when they rolled the “tariff” increase into their price (rather than a separate line item).
When a restaurant is in trouble, they either need to cut costs or raise prices. This in turn loses customers which they then have to… raise prices and cut costs. The cycle continues until ultimately there are no more customers left. Can’t help but feel this is happening in the bike industry. Prices keep going up but at what point is it going to be too much and pushes customers away? Are we already there?
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I know that it’s the sort of thing said every time prices rise, but I don’t see the death of the industry, but a change. The big two drivetrain manufacturers are no longer the only option, with a range of new brands, including electronic options. Same goes for frames/wheels and other bits.
They are hampered by a lack of European/US support, but this isn’t likely to last IMO. I know I’d love to trial them, but currently put off by the lack of support. However, if prices rise further, then maybe the next MTB frame comes from a Podium Panda-esque store that provides localised purchasing/support/warranty.
The best way for a business to work it’s way out of financial challenges is often sales growth. Easier said than done, but that’s almost always the best long term path. Crappy margins start looking pretty good if you sell enough units. You don’t have to reduce prices to sell more, often it requires significant investment to drive long term sales growth. But yeah, there are lots of businesses that attempt to keep the lights on by increasing prices and/or cutting costs. Those things can sometimes stop the bleeding for a brief period, but it’s usually a sign that they are out of other ideas or they can’t get the funds required to invest in or reinvent the business. The bike industry will probably get reimagined over time, it just seems too broken and it’s a big enough market that someone will step in and disrupt it.
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I don’t think the industry is in that much trouble. I see people buying tons of stuff whenever I go to a store. Bikes seem to have been more of a recreational item in the USA. E-bikes have kinda changed that, as I see more people commuting and running errands on them. Sales of those things are up. Raising prices is not always a sign of trouble. Just as lowering them is not a sign of trouble.
I noticed chicken in my local grocery store went up 17% just this month. It’s still selling. Inflation is here , no matter what the government statistics show.
I see UPS, FED EX, and Amazon drive down my road everyday. There is still a lot of money in the middle class, at least in the USA. For how much longer that’s a hard question.
Higher bike prices may affect sales. Time will tell.
For now we can all hope the tariff tantrum will go away soon so the world can get back on track.
Lengthy post . Plantar fasciitis so I can’t ride much.
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Food is a necessity, bikes (especially flight attendant equipped ones) are not. Luxury retail is showing signs of weakening. I’m guessing many of us are thinking twice before paying for yet another price increase.
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Anybody successfully not have to pay a duty tax? I ordered some parts from Merlin cycles, less than $800, and UPS just sent me a bill for 20% duties before they’ll deliver. I thought the de minimis was back on until the appeal was ruled on.
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So far, me. I took receipt of a imported dining room table this week $1200 via FedEx; I didn’t get a tariff bill, but it may be coming.
I’m glad that my ride is a titanium road bike, five years old. I’m also my own mechanic, so as my LBS keeps less inventory than ever, I can keep my bike(s) on the road with the shelf stock in my basement. I also don’t discard my upgraded parts. Sooner or later, I expect cycling parts “swap meets” to come back into fashion.
Again, the most frustrating part of all of this apart from paying extra, is the complete and utter chaos and disorganization. Some packages get through, some don’t. The Merlin package so far has been the only one where I’ve received a bill. AliExpress packages with Chinese parts, nothing. R2 Bike order of Darimo seatpost and Extralite parts, nothing. Direct from China carbon wheels (over $800), zilch. I have no idea if a package is going to get caught and receive a tariff. It makes zero sense.
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When I got concerned about my shipment, I contacted the seller. He was able to find out that UPS was holding everything in Customs, for lack of guidance on the policy; they ran out out of space and wouldn’t even pick up the shipment, so it was canceled and (successfully) shipped via FedEx.
Even that turned out to be a lie.
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I got a UPS order from Ekoi about a week ago with no extra fee/tax. It was held in customs for about a week though. I did reach out to UPS to see what was going on and that same day it cleared customs. I never did get an explanation as to why but the above makes sense.
Just fyi, there is a such thing as DDP shipping (Delivered Duty Paid) where there shouldn’t be additional cost to you after you receive the items. Not saying that explains all the discrepancies but I believe a lot of seller on Aliexpress uses that and the metal 3D prints from China I’m getting is also using that. So might be worth asking what kind of shipping they are going to use and how the items are declared.
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