[Buck Fever]

This is only going to affect industry folks...

I just heard from our rep that dealer employees will not be able to EP S-works models unless the dealer has purchased at least one S-works floor model.

I was told that last year, the selling history for S-Works models told them that about 95% of all S-Works bikes sold were through the EP program.

My assumption is that Specialized believes dealers were purchasing S-Works models for floor stock and then selling them either at a much higher profit margin or maintained the standard margin in an effort to undercut competition...I was told that "Specialized believes that these numbers don't represent actual purchases."

Either way, bastards are involved. My most obvious suspicion is that S has planned for what is going to amount to an enormous decrease in S-Works units sold by keeping production severily limited.

Factor in the 25% retail price increase with my general agitation on this subject and I hope S gets it up the bum.

 

[zedro]

good. All i know is, EP pricing makes evrything more expensive for me. A 95% EP sales segment is f'ing rediculous...probably lots of shop employee girlfriends and little bothers riding S-Works around...

 

[Roxy]

Sour grapes?
Have your shop owner buy an S-works and place it on the floor.

Simple.

....oh, everyones costs went up this year. China is building their Olympic city and has driven the price of steel and aluminum through the roof. Therefore prices go up.

Sheesh, even the dog can figure this one out. Ruff!

 

[Buck Fever]

Zedro: EP pricing doesn't make bikes more expensive for you, it gives employees an incentive to buy a bike, ride it, get more familiar with it and be better able to speak enthusiastically about it's handling traits/benefits. So you're aware, manufacturers set limits on how many bikes a person can EP. Usually it's one. So the notion of relatives, sig/others riding around on high end frames is fairly moot. Maybe riding around on last years high end frames.

Roxy: I know everyones cost went up this year, not only due to the cost of raw materials, but mostly due to the declining value of the US$ relative to other currency. The strong EU has also given European manufacturers more incentive to source parts from Shimano rather than domestic parts suppliers, thus grossly affecting Shimano's ability to deliver parts to the rest of the world and creating quite a global shortfall of available parts.

Also, Shimano won't tell you this, but they're trying to get out of the mail order controversy by scaling back production which has also driven availability down and demand up; setting higher prices.

Still, browse around on some forums and see how many people who have expressed disgust at how expensive the top end S bikes are. You could get a custom Seven or IF for the cash you'd put out for an S-Works.

I have a firm grasp on what's going on in the bike industry. The fact is that S may be pricing their high end bikes out of the market given the new pricing and a sluggish economy AND by alienating some of their best and most loyal customers...shop employees.

 

[CyberJay]

It's not nearly as ominous as you make it sound. It's pretty simple actually. Specialized is trying to support the shops that support their high end bikes. I'll give you an example. Last year we sold 15-20 S-works bikes. But we also LOST sales of another 15-20 because people would come to our shop, look at the models we have on the floor, then go to Mom & Pop's down the street who basically sell Expeditions all day long and had them order it in for a serious discount. Mom & Pop don't care, the way they look at it, they just made an easy $500. But are they helping specialized? They don't know anything about it. They can't help Specialized's image.

So here's the solution. S-Works is now a seperate dealership from Specialized. As I heard it, a shop must buy 4 S-Works frames and 4 S-Works bikes, as well as being a Specialized dealer in order to become an S-Works dealer. Obviously if you're not an S-Works dealer, you can't EP S-Works bikes.

Specialized is one of the best companies in the industry. They're trying to fix the problems we all share. Sorry that means you can't get a bike your shop wasn't planning on selling anyway(You're mad cause you can't buy a bike because your shop isn't stocking one right?).

-Jay

 

[SuspectDevice]

I can say from experience that the shop chain that carries Specilaized in W. Mass abuses the hell out of EP. I've seen similar abuses in other areas. EP abuse is a real problem, and needs to be dealt with. However I'm not quite sure thats what the Specialized memo is Really about....

 

[Buck Fever]

Specialized is one of the best companies in the industry. They're trying to fix the problems we all share. Sorry that means you can't get a bike your shop wasn't planning on selling anyway(You're mad cause you can't buy a bike because your shop isn't stocking one right?).

-Jay

Here's the way I look at it. I've worked at a Spec dealer for over 7 years. Of all the brands that are currently and formerly major players, Specialized has always been my favorite and the one I've pushed over all others. I'm going through the process of tallying up my sales figures over the years so I can give it accurate representation, but it's a pretty conservative guess that around 80% of bikes and accessories I've sold carry the Specialized brand. What this amounts to is multiple hundreds of thousands of dollars.

The other side of this equation is about personal finances. People give up a lot when they choose to work in shops...decent wage, health benefits and retirement are some of the important ones. One of the few benefits we have is to buy gear at low prices. Those of us who try to be responsible with our money, don't do it on credit and save the cash. My last bike was purchased in 1997 and I've literally been saving for a year to buy an S-Works.

They way I see it, I've been working my arse off to support a company that I believe in, have certainly contributed as much as I can to their bottom line, only to be rewarded like this? It's a huge F'ing disappointment and I think it's counterintuitive.

The primary reason most companies (outdoor and bike) offer EP is to get employees using product so they gain experience with it and are better able to sell it based on it's actual merits, not some ad copy they read out of the catalogue. By excluding regular dealers, Specialized is potentially missing out on expanding on their current high end market. If you don't have hundreds of shop employee's riding around on S-Works bikes giving FREE ADVERTISING to people they meet on the trails, they're going to have to pay for it somewhere else to maintain the revenue generated by the product.

 

[narlus]

Zedro: EP pricing doesn't make bikes more expensive for you, it gives employees an incentive to buy a bike, ride it, get more familiar with it and be better able to speak enthusiastically about it's handling traits/benefits.

just like stock options don't affect a company's bottom line and shouldn't be deducted from gross revenues. i still can't figure out the logic behind that one either.

 

[Roxy]

LOL, brilliant reply Narlus.
Ahhh, stock options....the food guy told me about those.

Yes, EP's do make costs higer for the retail customer. The margin has to be made up somewhere dosen't it? The retail customer that supports the industry as a whole takes it in the shorts, while the shop guy gets a break while getting a break on tires, and parts, and free labor.......how does that help?

It seems that SBC is looking to elevate the S-Works brand to compete with the more esoteric brands like Seven, DeRosa, IF and Serrotta. The product certianly holds up against them, why should they not command a similar price?

As for your personal situation (I've worked at a Spec dealer for over 7 years.....I, I, me, me.) (that is what this is about isn't it?) I suggest you convince your shop owner to purchase, place and sell S-Works. Then you can have your EP. Or if you are so valued an employee, maybe your boss will sell you an S-Works at cost and eat his margin. That is what you are asking SBC to do isn't it?
Failing that, I'd find a shop that does stock S-Works and go to work there. Or, like your customers, (GASP!) pay retail.

Ruff!

 

[Buck Fever]

Narlus: Am I wrong in my understanding that stock options are essentially valueless until they mature and can be cashed out/sold, at which time they're worth whatever the market will bear?

Roxy: In the chain from manufacturer to high end bike purchase, who do you think is getting screwed? It's not the wealthy fat guys buying the bikes. Anyone who had put in time at a shop that deals high end bikes, please speak realistically of your high end clientel. This obviously doens't include "team" riders who actually race but get cost +10 on bikes and parts.

I've been in the industry a long time. I've designed frames and parts and have priced and contracted labor out to domestic shops as well as those overseas. I quit doing it recently because it's getting harder and harder to convince manufacturers to do "small" quantities. I understand their delimma from a cost perspective, but what most people on the "outside" don't realize, is that it costs me $40-$60 to have a frame made in China that would retail for $600-$800 here. That sounds rediculous doesn't it? I'll leave it to the board geniuses to speculate where the actual costs lie as this will conclude my contribution to this topic.

I've obviously failed in my message to get shop people worked up enough to complain back to Specialized. You board regulars can get back to your typical enlightened banter happy with the false importance that you've managed to frustrate a new RM contributer.

ta ta

 

[Jm_]

EP abuse is a real problem, and needs to be dealt with.

Correct.

 

[binary visions]

You board regulars can get back to your typical enlightened banter happy with the false importance that you've managed to frustrate a new RM contributer.

I hate to say it, but if a negative response to a controversial topic frustrates you and causes you to simply bow out of the topic, then prepare for a lot of frustration ahead.

People didn't share your view on this. That doesn't make it less of a valuable contribution to the board. You brought something up, backed it up with well written arguments, good grammar and spelling, and people just didn't jump with you. It happens - don't let it frustrate you.

The anonymity of the internet makes it really easy to be blunt with criticisms. Just put on a slightly thicker skin, and keep plugging away. This is a good community - one of the best, IMO. At least here you got criticized with some good arguments instead of the classic "SHUT UP DOOD YOUR STUPID!".

Welcome to the board, anyway!

 

[Echo]

Seriously... well written, heartfelt post. Lots of facts and stories and words. But really the bottom line is, you're mad because your shop didn't buy enough bikes for you to be able to EP one.

 

[narlus]

Narlus: Am I wrong in my understanding that stock options are essentially valueless until they mature and can be cashed out/sold, at which time they're worth whatever the market will bear?

that is essentially true, but what isn't really represented is the dilution cost to the shareholders which already own stock.

to me, s-works can and should be held up to the big $ lines of seven, IF, etc. can you imagine how much it would cost if one of the smaller builders offered an s-works epic or enduro?

btw, the $40-60 cost for a frame made in china doesn't begin to cover all the real costs...pollution in that country is a growing nightmare, and the peasants of the area are picking up that cost.

 

[Repack]

A policy like that is nothing new. Trek has had a similar policy for years. Specialized has always seemed to be one of the better companies at whoring products to employees. They'll EP frames even when they are still trying to fulfill stock orders.
I went through the process when I started out trying to EP a Fuel frame for my gf, but then bought an Epic b/c of Trek's policies (policies that had nothing to do with the fact that I was breaking a major aspect of every company's EP rules).

 

[math2014]

EP or not EP, the 2005 prices for specialized are bad imho, unfortunately Specialized was the only brand for DH/FR bikes with reasonable pricing in Europe. now there is none... oh wait, we got Nicolai and Keewee .

If specialized or any other brand decides to manufacture a proper bike, with ONLY 1yr warranty, a good and clean crash replacement program , BUT MX level quality and engineering, then i would be happy to pay a high premium for a frame (ie 2500$)

 

[Repack]

I didn't see what Zedro wrote about sig others..
One thing that you need to keep in mind is the amount of money it takes to stock a bike like an S-Works. Most retailers have credit terms with suppliers. But even for those that do, taking advantage of a company's (like SBC) "Just in time" capabilities makes it cheaper to NOT stock the bikes. If a store has an S-Works on the floor, they can only afford to sell it for retail. Finance charges aside, that floor bike is still taking a bite out of the shop's credit line. The shop still needs to earn a return. As another poster said, its a lot easier to quote a price at a 10% margin, pay cash for the bike from SBC, and deliver the bike to the customer quickly. The shop has made an easy profit, without having to make any initial investment. Special ordering an Epic with cash pre-paid by the customer and selling it at a 10% margin will earn the shop more money than say selling 4 srocked hybrids off the floor, and with less time and effort.
It is a scenario that I saw played out many times. When selling a frame-up build, for instance, the customer is expecting to wait for parts. If said customer is paying up-front for the buid kit, the shop can drasticly reduce the margins. When selling a high-end floor bike, the shop doesn't have those options.
The old way was sort of an "Everybody wins but Specialized" scenario. The customer waits a day or two and saves a bunch, the shop has made an easy profit, but Specialized has taken in less money.
I don't blame SBC one bit.

 

[Buck Fever]

I hate to say it, but if a negative response to a controversial topic frustrates you and causes you to simply bow out of the topic, then prepare for a lot of frustration ahead.

People didn't share your view on this. That doesn't make it less of a valuable contribution to the board. You brought something up, backed it up with well written arguments, good grammar and spelling, and people just didn't jump with you. It happens - don't let it frustrate you.

The anonymity of the internet makes it really easy to be blunt with criticisms. Just put on a slightly thicker skin, and keep plugging away. This is a good community - one of the best, IMO. At least here you got criticized with some good arguments instead of the classic "SHUT UP DOOD YOUR STUPID!".

Welcome to the board, anyway!

Thanks. Really, thanks. I did get some fairly well written response, but to be honest, I was looking for more of a reaction from people in the industry and it seems like I'm getting arguments from mostly consumers who don't have a full understanding of what it's like to be a shop monkey. I think all shop monkeys deserve a very inexpensive crack at everything in the bike industry.

Why? Because the people working in shops because they love riding, wrenching and talking to people about bikes, are the real people who help drive the industry and make it what it is. There are so many people who work in shops because they truly love biking and sharing the entire experience with other people. That's where I'm coming from.

I know there are a lot of people in the industry who make huge financial sacrifice to stay involved. There are very few rewards. The EP program is one of them. For example, I turned down a fairly well paying job in Newport, RI and a top secret clearance to work full time in a shop in Providence. Obviously it's my choice and I don't regret it (not all the time anyway).

I'd like to think (as I've been told) that while I'm aware of alot of the driving factors in the industry, I don't sell bikes based on dollar figures and returns, I've sold them because of my commitment, enthusiasm and depth of knowledge about bikes.

While I can see your point about equating stock options and EP, I don't think it's deep enough. True that they're both forms of salary compensation. In both cases, the companies aren't making a direct dollar value from either the stock or the bike (although Spec still makes a very small margin on the bike, about 30% vs 50%). The biggest benefit to manufacturers, as I have stated before, is that the employee can gain direct experience with the product and is more capable and likely more enthusiastic about communicating their experience to future customers. It's free advertising that definitely pays off.

By the way, I don't think the S-Works line is among the company of Seven and IF. I've been able to walk into Seven and have them change the bend on my custom bars. You'll also never be able to get SBC to make you a custom trials bike with super short stays employing creative use of cut-outs to creat tire clearance. DeRosa maybe, I've alwyas felt that most European bikes really aren't what they're made out to be. Typically their frame prep is terrible and paint especially is drastically over-rated. Colnago? Lame fades painted over decals mostly.

 

[bmxr]

that is essentially true, but what isn't really represented is the dilution cost to the shareholders which already own stock.

And what does that have to do with the income statement? If you read your 10-k you can find out all you want to know about the company's options, can't you?

 

[Kornphlake]

I've never gotten EP pricing on anything and I've never worked in a bike shop, so maybe I don't fully appreciate the importance of the topic but it seems like something that is abused, really how can a shop employee on a shop employee's wage afford to buy a new top of the line bike every 3-6 months? I can't do it and I have a good job. It seems to me like shop employees are getting EP pricing on bikes, riding them for a few months and then selling them on ebay or wherever for exactly what they paid, this doesn't help the manufacturer at all.

Don't get me wrong I think that people who work in bike shops are great folks and I understand it's tough to be passionate about something that won't put food on your table but at the same time you've got to support the industry that supports you. If you really want that S-works bike and don't want to pay full retail then you've got some incentive to work harder at finding a customer who will pay full retail for one.

 

[math2014]

By the way, I don't think the S-Works line is among the company of Seven and IF. I've been able to walk into Seven and have them change the bend on my custom bars. You'll also never be able to get SBC to make you a custom trials bike with super short stays employing creative use of cut-outs to creat tire clearance. DeRosa maybe, I've alwyas felt that most European bikes really aren't what they're made out to be. Typically their frame prep is terrible and paint especially is drastically over-rated. Colnago? Lame fades painted over decals mostly.

Hey bro, i agree with your posts but... most European bikes are on a different level. Colnago is another story...they mainly rely on their name now.

Check out Pinarello, Orbea, Principia, Kuota, Isaac, Gios, Coppi, Cinelli, and you will notice a true flair of high end frame prep.

 

[rjw]

I've never gotten EP pricing on anything and I've never worked in a bike shop, so maybe I don't fully appreciate the importance of the topic but it seems like something that is abused, really how can a shop employee on a shop employee's wage afford to buy a new top of the line bike every 3-6 months? I can't do it and I have a good job. It seems to me like shop employees are getting EP pricing on bikes, riding them for a few months and then selling them on ebay or wherever for exactly what they paid, this doesn't help the manufacturer at all.

Some people do exactly that. My usual riding partner got a road bike frame on EP, and now a year later is selling it back through the shop as ex-demo for more than he paid for it.

 

[zedro]

Zedro: EP pricing doesn't make bikes more expensive for you, it gives employees an incentive to buy a bike, ride it, get more familiar with it and be better able to speak enthusiastically about it's handling traits/benefits. So you're aware, manufacturers set limits on how many bikes a person can EP. Usually it's one. So the notion of relatives, sig/others riding around on high end frames is fairly moot. Maybe riding around on last years high end frames.

if EP pricing is below the dealer cost, then yes that money has to come from somewhere, the usual place being the retail market.

Also i know theres a limit on EP purchases, but keep in mind LBSs usually carry more than one brand, so the shop employee will EP a trek for himself, then EP a Giant for his mom, then EP a Specialized for his girlfirend, etc, so crony-ism starts to occur, not to mention ex-employees (as i've heard) start getting in on the action. Then as mentioned, the bike can easily be sold off to break even, further compounding the problem.

I'm not against EPs, really its none of my buisness, but no doubt there are abuses, and it does raise prices for the other low-wage earners that dont get massive discounts.

 

[dan-o]

if EP pricing is below the dealer cost, then yes that money has to come from somewhere, the usual place being the retail market.

EP programs such as Specializeds don't effect the profitability of the dealer since the products are purchased directly through the manufacturer, who take a reduced (but still profitable) margin on the sale. Dealer cost is irrelevent since the products don't come from their stock and payment is made to the manufacturer. The only real effect these programs have on the average consumer is that limited production items may become more scarcely available due to bro-deal sales.

 

[Buck Fever]

EP programs such as Specializeds don't effect the profitability of the dealer since the products are purchased directly through the manufacturer, who take a reduced (but still profitable) margin on the sale. Dealer cost is irrelevent since the products don't come from their stock and payment is made to the manufacturer. The only real effect these programs have on the average consumer is that limited production items may become more scarcely available due to bro-deal sales.

Correct, they don't affect dealer profitability because they're coming right from the manufacturer. But, typically, if a product is a severely limited run, employees won't have access to it until about halfway through the season.

 

[Repack]

A couple of additional thoughts. "Bro-Deals" can have a cumulative negative effect. With Specialized, those loses are much more diluted than for a company like Sinister. Sinister recently had its funding pulled. One of the main reasons I heard (basically a rumor, but one that was easy to see at events/races) was that way too many of their frames were being sold at "friend" prices. Now I know that SBC and Sinister are extremely different, I am only trying to find an example.
I previously mentioned Trek's anti "abuse" plan. I think that it is something along the lines that they will not sell anything EP until at least 75% of pending regular orders have been filled.
And as far as romantic notions of shops go, please do not hold on to them. I know every shop is different, but the old adage, "The closer you work to the industry, the less you ride" seems to hold mostly true. Given the unforgiving nature of the cycling industry, it is best not to become too emotionally attached. I hope that didn't come across as too cynical. I love to ride, but shop jobs create way too much stress for what they pay/offer.