Do you think the price of bikes will come down?

wyadvd

hey christophe... thats a great idea. just don't tell GS cos bike prices will surely double overnight!

Prechter said go short october 2007 go long feb 2009 and hes saying go seriously short now and hold for 2 years at least. everthing all comodities. and buy us dollars.

Chicane-UK

I'd love to say yes, but I can't see it... prices have gone up massive amounts, and kit levels have generally dropped on equivilant bikes year on year. I can't see how this would suddenly go in reverse.

I was pondering a cheap Langster for commuting on back in 2008 - think they were <£300 in my LBS.. the 2010 model is £450!! No longer a cheap 'hack' at that sort of price

DonDaddyD

Thing is I struggle to see the logic of pricing entry level bikes for £600 - £700. When you can get a bike with a better frame and 105/Ultegra components for £999.

If the gulf in quality is merely £300 difference between components (2 levels above up the range Sora - 105 and Tiagra to Ultegra) then where is the value in the £4,500 Wilier Imperiale over say an Izoard that can be bought at half the price with nearly the same componentry?

It would seem that bike manufacturers are putting more focus into the top end and luxury price points as oppose to focusing on injecting true quality and value for money at the entry level. - I dont see this approach as sustainable and I know that manufacturering bikes is a drip down market/process but this is only sustainable if people can initially access cycling through affordable means like I did.

Sewinman

Just reading this thread it would seem that the current bike prices are beyond the price inelastic point on the demand curve i.e people are deciding not to buy a bike they would previously have bought at a lower price.

If that continues it is inevitable that prices will fall due to (short-term) over-supply. I would not be suprised to see massive discounting when ever the sales occur for bikes.

DonDaddyD

Sewinman wrote:

Just reading this thread it would seem that the current bike prices are beyond the price inelastic point on the demand curve i.e people are deciding not to buy a bike they would previously have bought at a lower price.

If that continues it is inevitable that prices will fall due to (short-term) over-supply. I would not be suprised to see massive discounting when ever the sales occur for bikes.

This should happen but brands are under-supplying bikes at lower price ranges to counter-act this.

While the more expensive bikes are available. This demand in more expensive bikes is keeping sustaining the premium prices.

:x

Sewinman

DonDaddyD wrote:

Sewinman wrote:

Just reading this thread it would seem that the current bike prices are beyond the price inelastic point on the demand curve i.e people are deciding not to buy a bike they would previously have bought at a lower price.

If that continues it is inevitable that prices will fall due to (short-term) over-supply. I would not be suprised to see massive discounting when ever the sales occur for bikes.

This should happen but brands are under-supplying bikes at lower price ranges to counter-act this.

While the more expensive bikes are available. This demand in more expensive bikes is keeping sustaining the premium prices.

:x

That would only be sustainable if there was a massive price fixing agreement amongst the bike companies. It seems a fairly healthy market with little monopoly, so such an agreement would of course be illegal but also very difficult to organise.

p.s My Wilier has gone up 15% and is now out of the £1000 C2W scheme range - I bet their sales drop significantly.

alfablue

Sewinman wrote:

That would only be sustainable if there was a massive price fixing agreement amongst the bike companies. It seems a fairly healthy market with little monopoly, so such an agreement would of course be illegal but also very difficult to organise..

I have been told that there is price fixing, i.e. that some top name brands suggest to dealers that they may have trouble getting stock if they discount too far. Whilst this is not between brands it would still be illegal. As for pricing between brands, the absence of any agreement does not mean that prices will fluctuate wildly - aggressive pricing by one brand is likely to trigger a price war that no manufacturer will want, so even without a formal agreement there is likely to be a tacit acceptance of certain conventions for models/price points.

DonDaddyD

Sewinman wrote:

DonDaddyD wrote:

Sewinman wrote:

Just reading this thread it would seem that the current bike prices are beyond the price inelastic point on the demand curve i.e people are deciding not to buy a bike they would previously have bought at a lower price.

If that continues it is inevitable that prices will fall due to (short-term) over-supply. I would not be suprised to see massive discounting when ever the sales occur for bikes.

This should happen but brands are under-supplying bikes at lower price ranges to counter-act this.

While the more expensive bikes are available. This demand in more expensive bikes is keeping sustaining the premium prices.

:x

That would only be sustainable if there was a massive price fixing agreement amongst the bike companies. It seems a fairly healthy market with little monopoly, so such an agreement would of course be illegal but also very difficult to organise.

p.s My Wilier has gone up 15% and is now out of the £1000 C2W scheme range - I bet their sales drop significantly.

I agree with you. However, collectively the market is seeing a trend in the production and release of bike ranges in the upper echelons of the price range. It would seem that sale in this area are increasing and bike manufacturers are trying to exploit that market.

Jay dubbleU

Interesting - my Genesis which is the 2009 model had carbon forks and a full 105 drivetrain - the 2010 version which is the same price has chromo steel forks and a mixed 105/Tiagra drive train - looks like they're building down to a price

UndercoverElephant

Jay dubbleU wrote:

Interesting - my Genesis which is the 2009 model had carbon forks and a full 105 drivetrain - the 2010 version which is the same price has chromo steel forks and a mixed 105/Tiagra drive train - looks like they're building down to a price

That price being the nice, round, C2W tops out price of £1000?

Headhuunter

I'm late to this debate but prices have shot up! Since the demise of my Apollo commuting hack in the accident in Nov 09, I have started to shop around and am shocked at prices!

The last time I bought a brand new bike was my full carbon, 105 groupsetted, Focus Cayo in 2007. I got it for, if I remember correctly £800, although it was the end of the year and prices were discounted. Looking around now, a basic aluminium Giant road bike with a bit of Sora and perhaps a Tiagra rear mech seems to hit about £600 odd!

As has been pointed out, Cable has dropped against other currencies, but the hikes we're seeing are enormous! I suspect that the government B2W scheme has had an effect, people would previously spend a couple of hundred on a bike for getting to work, but now they can afford £500-700 because that efectively equates to £200-300 and you can pay over 12-18 months!

I mean how many threads do we see here from complete newbies looking to drop £600 to a grand on a bike to get to work? That would never have happened a few years ago...

DonDaddyD

Thing that gets me is that there hasn't been enough technological advances in groupsets or componentry to justify Sora or Tiagra on a bike (now) costing the same as a bike 2years ago that came with 105 or ultegra.

Headhuunter

Just to hammer this home, I just popped round to Condor (my LBS from work) for a bit of window shopping. They seem to have a bit of a sale on at the moment but I was shocked to see that a pair of Ultegra SPD SL pedals at about £80-90 or something reduced from list price of £120!!!

I bought a pair exactly like that - Ultegra SPD SL - in December 07 over the net, from WIggle I think, for £50! They have almost tripled in price!

DonDaddyD

Shimano stuff has had the biggest price increases IMO.

Technically Campag should be a bargin, which is why I could believe that a Kharma with Centaur cost more than a Kharma with Ultegra sl.

biondino

DonDaddyD wrote:

Thing that gets me is that there hasn't been enough technological advances in groupsets or componentry to justify Sora or Tiagra on a bike (now) costing the same as a bike 2years ago that came with 105 or ultegra.

Yeah, but you have to judge prices relative to the current alternatives and relative to your own spending ability - you can't compare to past figures because they're not going to happen again!

Sewinman

As previously mentioned I think the price hikes are probably down to the effect of the weak pound filtering through the market. If the pound strengthens we may see a drop in price, or at least some stability.

Headhuunter

Sewinman wrote:

As previously mentioned I think the price hikes are probably down to the effect of the weak pound filtering through the market. If the pound strengthens we may see a drop in price, or at least some stability.

Not sure about that. As the Pound strengthens, so will the economy and we'll see the return of good old inflation and higher interest rates...

DonDaddyD

The blonde one wrote:

Yeah, but you have to judge prices relative to the current alternatives and relative to your own spending ability - you can't compare to past figures because they're not going to happen again!

Guess what! I think your right but I'm going to disgree.

If we take the console market. Computer consoles have been rocking in at around the £300mark since the Playstation One. Hell the Nintendo 64 was £250.

Same as the car market, despite cars taking leaps in the technology found within them the price has stayed relatively the same throughout the past five years.

In two years not much has changed in the bike market except the weak pound and demand. Demand has risen and so has the price. Normally a high premium is set to encourage interest and demand and as demand increases the prices should drop (or have I got that the wrong way round, been a long time since school).

Headhuunter wrote:

Sewinman wrote:

As previously mentioned I think the price hikes are probably down to the effect of the weak pound filtering through the market. If the pound strengthens we may see a drop in price, or at least some stability.

Not sure about that. As the Pound strengthens, so will the economy and we'll see the return of good old inflation and higher interest rates...

I think you are both right. which is why I think no one knows what is going to happen.

bails87

A high price won't encourage demand, it will discourage it. Hence why C2W schemes lowering the cost of new bikes has caused an increase in demand. With the same levels of supply, increased demand means prices will rise, as you've got more people fighting (with their wallets) for the same number of bikes.

Jay dubbleU

UndercoverElephant wrote:

Jay dubbleU wrote:

Interesting - my Genesis which is the 2009 model had carbon forks and a full 105 drivetrain - the 2010 version which is the same price has chromo steel forks and a mixed 105/Tiagra drive train - looks like they're building down to a price

That price being the nice, round, C2W tops out price of £1000?

£999.00 to be precise

DonDaddyD

bails87 wrote:

A high price won't encourage demand, it will discourage it.

New stuff when released is set at a premium this encourages desire and stimulates demand. It helps that when new there isn't a lot of the item available this helps to sustain demand and subsequently the premium price. Not all businesses try to undercut each other. Some price their products up (Rolex) to create a premium brand as this helps their product appear to be the best, whereas too low a price could make the product appear cheap and lacking in quality.

Specialized price their products at a premium but can anyone say that the Allez frame with lesser groupset is better than the price equivilent Focus Varido?

tailwindhome

DonDaddyD wrote:

bails87 wrote:

A high price won't encourage demand, it will discourage it.

New stuff when released is set at a premium this encourages desire and stimulates demand. It helps that when new there isn't a lot of the item available this helps to sustain demand and subsequently the premium price. Not all businesses try to undercut each other. Some price their products up (Rolex) to create a premium brand as this helps their product appear to be the best, whereas too low a price could make the product appear cheap and lacking in quality.

No, new stuff is set at a premium to recover R&D costs and to exploit being first to market. The price falls through the product life cycle as economies of scale and competition kick in.

Rolex's cost more to make, advertise and continually develope. Its also expensive to sell your product trough high end distribution chains

bails87

DonDaddyD wrote:

bails87 wrote:

A high price won't encourage demand, it will discourage it.

New stuff when released is set at a premium this encourages desire and stimulates demand. It helps that when new there isn't a lot of the item available this helps to sustain demand and subsequently the premium price. Not all businesses try to undercut each other. Some price their products up (Rolex) to create a premium brand as this helps their product appear to be the best, whereas too low a price could make the product appear cheap and lacking in quality.

Specialized price their products at a premium but can anyone say that the Allez frame with lesser groupset is better than the price equivilent Focus Varido?

You're talking about Giffen goods which are very rare. If you had that Specialized available from 2 equally good LBS next door to each other, and one had it for £50 cheaper than the other, would you really say that you'd choose to pay more for it? If they doubled the price, would you buy two?

Some manufacturers do use the 'reassuringly expensive' aspect to their advantage.

New stuff is set a premium because it's new, and there will always be people willing to pay to have the newest and 'best' kit. Once that wave of early adopters have 'blown their wad' then the manufacturer can lower the price and start selling to normal people! Being expensive doesn't make it better, but the exclusivity that comes with it, I agree, is a benefit for some.

Headhuunter

I agree with what DDD said there, games console market and car pricing has remained pretty constant (despite currency fluctuations), yet innovation has improved products. However in the bike market, nothing much has changed in a couple of years but prices have risen enormously, in spite of low interest rates, cuts in VAT and nearly zero inflation!

Is this down to the C2W system? I suppose the only way to tell is by comparing UK price increases since 007 to price increases overseas. Has anyone been bike shopping in the US or continental Europe? Are prices significantly cheaper?

bails87

But who's putting the prices up? Shops (because there's demand from C2W customers), distributors (because there's increased demand from shops), or manufacturers (because there's increased demand from distributors)?

If it's the last one then prices will presumably have risen everywhere. Why sell a bike for 1000 Dollars/Yen/Euros to the US distributor when you can sell it to the UK distributor for 1500 Dollars/Yen/Euros?

Headhuunter

Well with all these bikes selling through the C2W scheme at the moment, in a couple of years we should see a booming 2nd hand market (which should bring down new prices perhaps) as people who bought bikes to commute to work on either upgrade and sell their old bike after a few years or decide that commuting is not for them and decide to offload that bike which is taking up space in the garage/shed

Sewinman

bails87 wrote:

You're talking about Giffen goods which are very rare. If you had that Specialized available from 2 equally good LBS next door to each other, and one had it for £50 cheaper than the other, would you really say that you'd choose to pay more for it? If they doubled the price, would you buy two?

Some manufacturers do use the 'reassuringly expensive' aspect to their advantage.

New stuff is set a premium because it's new, and there will always be people willing to pay to have the newest and 'best' kit. Once that wave of early adopters have 'blown their wad' then the manufacturer can lower the price and start selling to normal people! Being expensive doesn't make it better, but the exclusivity that comes with it, I agree, is a benefit for some.

He is talking about Veblen goods not Giffen goods.

theblender

My house was £125,000 in 2000, the identical one next door is now £175,000 for a 2 bedroom shoebox made from lego.

Polo's were 7p back in the 80's
The Beano was 7p back in the 80's
The 1st issue of MBUK was £1.10, now it's £4.90
A pint of bitter in my local was £1.10 in 1993, it's £3.00 for a 330ml bottle of bitter now

I was being paid £1.70 an hour in 1993

Things go up, that's the way it is.

Sewinman

Right - just checked out the GBP - CNY (China) FX history and GBP has fallen by 29% against the Chinese Yen since Jan 2007. In Jan 2009 the GBP had fallen by 38% against the Yen.

Given that most cheap bikes are made in China I reckon that is exactly where the price hikes have come from, plus a few % for inflation. I doubt bike companies are big enough to hedge currencies and will have been exposed.

DonDaddyD

<<Cracks nuckles and goes into comic-debate response mode>>

Wheezy wrote:

No, new stuff is set at a premium to recover R&D costs and to exploit being first to market. The price falls through the product life cycle as economies of scale and competition kick in.

Yes, these are all variables in pricing but so making a profit and marketing the product, which drives the price. When a product is released it is often set at a premium price. The maximum price that people would be willing to pay for it. Sometimes the price exceeds this rationale.

I'm seeing £600 sora equiped bikes set at a premium because I don't think for a second that manufacturers are setting that price to undercut competitors.

Wheezy wrote:

Rolex's cost more to make, advertise and continually develope. Its also expensive to sell your product trough high end distribution chains

I can guarantee you that Rolex's don't cost more to make compared to other prestige brands, advertise (when was the last time you saw a Rolex advert or bill board? They don't contiually develop Rolex's they've had the same models for decades that's the whole point of them and part of the reason why they hold their value. Rolex is not known for innovation. It's not hard to sell the product through distributions. Rolex actually pick the stores and set the stipulations of their displays to Signet (who own H.Samuels, Ernest Jones and Lesley Davis Jewellers).

bails wrote:

You're talking about Giffen goods

Veblen Goods. Which, aren't that rare also the theory drips down into affordable goods. Would you buy a Nokia phone or a Matsui?

Would you buy a Sony TV or a WellTech if you had to make your choice on the brand identity alone. Sony TV's tend to be more expensive than LG's despite having little to no better and sometimes worse picture quality.

If you had that Specialized available from 2 equally good LBS next door to each other, and one had it for £50 cheaper than the other, would you really say that you'd choose to pay more for it? If they doubled the price, would you buy two?

But that is the point, there isn't price war going on between shops or from manufacturers. I don't see Giant going on the offensive and dropping £100 off their lower ranges to undercut Specialized. I don't even think shops are allowed to drop prices of the bikes publicly. In the same way you can't sell Rolex's for less than the rrp in legitimate shops.

bails wrote:

New stuff is set a premium because it's new, and there will always be people willing to pay to have the newest and 'best' kit. Once that wave of early adopters have 'blown their wad' then the manufacturer can lower the price and start selling to normal people! Being expensive doesn't make it better, but the exclusivity that comes with it, I agree, is a benefit for some.

We agree. And kinda part of my point.

But the thing is that bikes (the main brands) are priced at a premium. So we can only talk about them as a premium priced product. We've seen from lesser known brands that bikes and components can be sold for a lot less.

I think this pricing strategy will make it less accessible at the entry level in the long run. Would I spend £600 for my first road bike? would I spend that much on my son? That's more than anyother item in my Flat and almost half the price of my car.