A little chain of 4 or 5 bike stores just closed up. I don't know them but imagine the hell they are going through, so I wrote an article:-

See you all at Lano!


No wonder Cranks Bike Stores went under.

Your average aussie retailer has a taxation burden unlike any other in the world. He is taxed around 31% more on cost than any other industry whether he makes a profit, loss, or indeed is going broke, and going broke he is, not just because of the tax, but also because the industry is undergoing the most rapid change you could possibly imagine.

Most commentators believe that a simple 10% GST difference cannot explain the high cost of goods bought locally, well it can't, but retailers have it a lot worse than that.

As the likes of Amazon and in the cycling world Chain Reaction Cycles offer the greater range of products that consumers desire, its pretty obvious that the local shops want to take them on in their own backyard. They all buy from the same manufacturers in theory it's a fair game. That is until the bureaucracy steps in, if Amazon.com want to buy a bike part wholesale at $500, mark it up 30% and sell it into Australia they will make $150 gross profit and you will pay $650. If crank.com.au wants to do the same thing, they will pay $25 duty, $55 for the importing fee (IPDC) and then have to add GST on top of their 30% mark up, you now pay $829, that's a lot more. It works out to be a 31% tax on wholesale cost compared to 0% for Amazon, in this middle of the road case.

This industry has been singled out, there's no one player with enough clout to save it and the Government will happily let any spokesman die on the stake of public opinion, for what public benefit I cannot fathom.

Just as perplexing is the willingness to avoid billions in revenue collection, in this example alone it's $155, how many of these per day do you need to process to pay for a customs clerk? They are making the same margin as the retailer.

And for the poor owners, whilst they salvage their financial wreckage a stream of bloggers will put the boot in saying how they should have 'moved with the times', 'gone more online', 'had more sales staff'. Reality is they have done the only thing the system allows them to do.

If you can't keep a bike store open in the current era you're doing something wrong, there are a metric shirttonne of bikes sold in Aus these days. My local store just just relocated, tripled the size of their store and are going extremely well, have been for years.

The problem is a lot of stores that I see focus on the wrong thing, trying to compete with CRC and Wiggle, who's bread and butter is medium to high end components. It's not going to happen. Ever. Even with parity wholesale pricing they will still beat you because they shift that much stock they can run super lean margins, economies of scale and all that.

The good stores, the ones that concentrate on their strengths; excellent service, advice and a good range of bikes always do well. You build up a reputation and it goes a long way. A lot of stores though offer crap service, crap range of bikes and crap advice...the result is predicable.

The whole collect Gst thing on <1K has been done to death. The government has said time and time again that it costs more to collect that revenue...than the actual revenue, so they are at a net loss doing it, why would they? Sure it would be great if everything was a level playing field but the real world unfortunately seldom works like that.

For the record i've probably spent > 20k on bikes and my local shop in the last 5 years and probably >5k on components from CRC. If I bought the components at my LBS it would be more like 10-12k, no one is stupid enough to burn 6k just to support their local shop. They know it, I joke with them about it all the time, they are realists and focus on their strengths, because of that they are thriving.

Hamsta said...
www.smh.com.au/business/small-business/hard-to-brake-even-as-another-bike-store-struggles-20130104-2c8bd.html

In my relatively short life I have seen many many bicycle retailers come and go in Perth, prior to e-commerce, with a relatively small core group having survived for whatever reasons. Perhaps bicycle retailers will have to form a co-operative and open only 1 or 2 superstores, kind of like a bicycle Bunnings,

Consolidation like Bunnings will occur sooner or later, but when Bunnings took over the industry they did not have the tax office subsidising them.

Regardless of where a business owner decides his target market is, he should have the same tax rules as his competitor. Look at say clothes nothing to technical about them (although i'm not a chick) but Aussie retailers are handicapped to the tune of 20% tax wise, and every sports shop needs to sell branded clothes.

kiteboy dave said...
Like it or not the stores must also take a portion of the blame.

My wife got a trike recently. The 2 local bike shops both said "nope, not possible, we can't provide you a child seat that will go on your trike, sorry, can't be done."

20 mins on the interwebs and I had one on the way, 4 days delivery from UK.

Neither of those shops took the opportunity to say "give me your number, I'll find you a seat that fits and get back to you."

Why not?

They could have purchased one like I did, whacked $40 bucks on top and still be at the same price as their other kid seats, and I would have been totally happy.

Yep they carry on about the internet but dont think they can use it for them selves, to survive you must think outside the box.

^^^^^^
i believe theyre ''carrying on'' more about the extra duties and taxes the retailers have to pay.

ThePhil said...
Regardless of where a business owner decides his target market is, he should have the same tax rules as his competitor.

In a perfect world maybe Phil, is fairness and equity even considered in this world of global consumerism?

ThePhil said...
Look at say clothes nothing to technical about them (although i'm not a chick) but Aussie retailers are handicapped to the tune of 20% tax wise, and every sports shop needs to sell branded clothes.

A tad hypocritical of retailers to complain about the uneven playing field while they fill their shelves with products made in third world countries because of the low cost of an uneven playing field.

Interesting times!

kiteboy dave said...
Like it or not the stores must also take a portion of the blame.

My wife got a trike recently. The 2 local bike shops both said "nope, not possible, we can't provide you a child seat that will go on your trike, sorry, can't be done."

20 mins on the interwebs and I had one on the way, 4 days delivery from UK.

Neither of those shops took the opportunity to say "give me your number, I'll find you a seat that fits and get back to you."

Why not?

They could have purchased one like I did, whacked $40 bucks on top and still be at the same price as their other kid seats, and I would have been totally happy.

Because he's then not really doing you any favours is he, just marking up what you could have done yourself and costing you more money. You may have appreciated the service or you may well have thought, what a wanker why didn't he just tell me where to get it online.

See if he did it by the book, say it was one of his regular suppliers, he would then be up for probably 5% duty then the importing charges of $55, then gst to you, he already knows he is priced out of the game, so he politely tells you 'don't know' as being forced to look like a rip off merchant. If it was a level playing field, i.e. he had the $1,000 duty/gst/IPDC threshold, then he would be able to service you, maybe for even the same cost.

Ted the Kiwi said...

CJW said...

The problem is a lot of stores that I see focus on the wrong thing

I dropped into a medium sized speciality mountain bike joint to look at a new mountain bike in early Dec....it was 5:45pm and he was closing at 6.....I knew what I was after but just needed to clarify a few things. At 5:55pm the customer he had been dealing with left and he came up to me to ask what I was after - I told him I was after a new bike and just had a couple of things to clarify first - he told me he did not have time as it was almost 6 and that he could not possibly help me in that time frame. I could not believe the blokes attitude or the way he spoke to me. I walked out of that shop wanting to bash him and I am not a violent man!! Not too mention that he had just spent 8 of his last 10 mins with the other customer talking crap about the cricket. I was an after thought. I had driven 25 mins to get to his shop. Anyway a few days later I was down in Sydney and went into another store and was treated very pleasantly and 10 mins later I had a new 29ner and was walking out the store. A week later I was back in there buying another for the GF as once she had seen mine there was no way she was sticking with old one. I took great pride in going back to the initial shop and buying 2 drink bottles for $8 each off the bloke for our 2 new bikes as I pointed out to him. I watched his mouth drop on the floor as he saw 2 easy sales fall right through his hands. I really enjoyed it and spending $16 was priceless. If shops want to compete for my hard earned dollar they need to offer great service otherwise I am happy to buy online and save myself lots of cashola - which is what I normally do anyway. The reason I wasn't for the bike was that I wanted it there and then. And he was too lazy to sell it too me.

What if he had to leave right on 6 to pick up the kids, or go to an urgent medical appointment?
There will always be instances of good and bad service in this whole wide world, I have people come into my shop everyday and they bag out the opposition sometimes saying some really nasty things, and I think to myself, crap I have windsurfed with that guy for 20 years he's a good mate of mine and always looks after his customers very well. People are funny, but it's no excuse to have an uneven tax system.

Think of these guys who just went bust at Crank, maybe they made some bad decisions, maybe not, maybe he just had a vicious divorce and lost the plot for a bit. But there is still no way that he should be forced to pay duties and taxes that his competition is not.

tmurray said...EDIT
THEY CAN BUY IT AND TAKE IT HOME AND USE IT IMMEDIATELY.

Customers aren't stupid - we know stuff is cheaper on the internet - EDIT
I get a lot more pissed off with poor / absent service than I do about high prices.

THEY CAN TRY IT AND GO HOME AND BUY IT ON THE INTERNET.

Your right, customers aren't stupid.

As for the customer service argument, this argument is starting to grind my gears.

The customer is not always king......in fact the majority of customers should be deemed to be complete dimwitted assholes until they prove otherwise. Of course this assumption is largely dependant upon the nature of the good/service being offered.