Corkage
Been thinking about how annoyed we get when someone comes in with a boxes of chainreaction/ebay/wiggle and wants us to build their dream bike for them. Particularly when it’s stuff that we specialise in (take the time and money to research and stock product). There have been times when the customer wouldn’t have even know about the internet purchased products, but for our time in analysing their particular situation and offering a solution (generally by Nick, who is a solutions man). Yeah it’s cheaper blah blah but fuck, that’s just rude!
So our labour rates are worked out based on what could be done by Adam or Dave at $80 an hour which also includes workshop equipment, tools blah blah.. Which is way less than what I was charging as an essentially unskilled trainee accountant 20 years ago. How much do you earn? We are both very smart and handsome guys and given our shop specialisation you get great value because we know what we are doing. Unfortunately that doesn’t mean that we earn $80 for every hour the shop is open because we have to order stuff, talk to lovely people who share our bike lifestyle, and do other things, like talk to people about which things they should buy on ebay/wiggle/chainreaction.
So we have to balance how to price our time and how to price our products that we stock. That mix has been the same for pretty much ten years. Our markup on parts has gone up a bit. Our standard service price has gone up from $50 or $60 in 1999 to $90 in 2010. ( I gotta stop feeling guilty when I hear people whinging about their mortgages. House prices have more than doubled in that period, and I don’t own a house yet.) The model works if we sell a bit of stuff and fix stuff. Right now, it works pretty well. We have a truly wonderful lot of customers (hate that word) who have been with us for a long time, and we feel a 2 way relationship. People pay a fair price for our advice and services, and everyone pays the same. We don’t discriminate against huffy riders or roadies. So, the thing is, the business model currently depends on service charges, profit on parts and accessories and profit on bikes. Becasue we spend so much time with new bike owners and building the bikes up properly, we don’t make money on new bikes, and I really don’t know why we stock bikes. Except for how cool it is seeing someone pick up their new bike. 2 year olds or 62 year olds, the look is generally the same.
Anyway, when someone gets their bike fixed, or a new set of wheels built, or a custom bike built, our labour rate factors in the profit from the parts/accessories that we sell with the service. So when someone brings in their ebay/chainreaction/wiggle , and we don’t get any of the profit from those parts, but we still spend the same amount of time on their project, smiling , we are ripping ourself off.
So what do we do? If we put our service prices up across the board, and all those lovely customers who haven’t been buying internet parts and bringing them in for us to fit will have to pay more. That doesn’t seem right. Or we could just say no internet buyers, like other shops say no to Huffys. I’m tempted, because then I wouldn’t need to be annoyed every time I am working on their internet products. We don’t really need any more customers. But people will keep buying more stuff off the internet unless there is a true carbon price put on all those airfreights, ha. Or maybe we should charge a corkage, 50% extra labour to work on internet provided bits. Or should we just bite it and keep saying “oh awesome! We are so excited that you have bought all this stuff on the internet, even though we sell it too!”
Spose it doesn’t happen that much. Lucky we don’t depend on high end stuff .
Can’t wait for the day when we only do BoBo bikes and repairs.
End of rant
So what do you do? Charge a differential service fee for “bring your own parts”? You wouldn’t be the first shop in Sydney to do it. And maybe then it might encourage people to think twice about where they get their parts from.
My mantra has become: if I don’t need anyone’s advice or input, I’ll find what I need myself (and it’ll probably come down to price, convenience or a mix of both); if I need some local advice, I pay local price.
I don’t begrudge you or any other retailer making a margin on what you do in order to make a living, and I understand your margins need to be higher than some high-turnover, web-based, mailer-order, don’t-expect-any-meaningful-advice-from-us,-where-not-here-for-a-chat retailer. But surely you can understand a consumer’s frustration when they’re paying double the price for a part here in Australia when it all comes out of the same factory? In the same way that same consumer should understand your frustration when they turn up with a box of parts they purchased cheaper than you can from your local wholesaler.
I see absolutely no problem with charging “corkage”. Even if you do it the other way around: up your labour rate, then offer a discount if the work includes the purchase of $x worth of parts.
Some years ago I had some wheels built in a shop in Melbourne using second hand hubs that I supplied. I can’t remember the exact figures, but I payed a higher build price than if I had purchased all the parts from them.
Sounds perfectly reasonable to me.
See I take the different approach, I have no issues paying LBS prices, I don’t have to figure out online what I want, I don’t have to wait for it to be delivered. EG, I wheel my bke in say something about the chain skipping (or whatever the issue is), pretty much knowing what will need to be replaced. The LBS who I trust check and confirm what needs fixing (and who knows it could be just a chain clean a lube), I pick it up in the arvo. Done dusted and I know all working. I much prefer this method.
As a shopper I sometimes buy cheap from the internet, and sometimes pay extra $$$ at the LBS. It depends how impatient I am, and whether I need the extra advice from the LBS.
I don’t think it’s wrong for customers to buy cheap parts elsewhere and take them to you for installation/servicing. It’s up to you to price your labour so you’re happy to do this. If you simply refuse to work on parts bought elsewhere it smacks of product bundling; you can only get product A (mechanic labour) if you buy product B (overpriced bike parts). Bundling always leaves customers with a bad taste.
As a customer I’d be happy to pay extra for labour on parts I supply myself, although 50% extra sounds a bit like “fuck you, we don’t want you as a customer”. 20% sounds more reasonable.
The option of raising your labour price across the board sounds OK to me too. You say that you worry that your loyal parts customers would have to pay more, but couldn’t you reduce your margins on parts if you increased your labour price? That might even increase your parts sales, and reduce the number of people bringing their overseas-bought parts into the shop.
I have no special experience in the bike business, so my thoughts may be totally off base. But it’s clear from the way the internet shops are so much cheaper than local shops that there’s something seriously out of whack in the Australian bike business. And it’s not the customer’s fault for buying cheap parts overseas and then wanting to buy your labour services.
I know where your frustration comes from. Down at the Nunnery I often get frustrated when people turn up with a box full of wiggle/chain reaction bits and want help putting their bike together. Its like, you just dropped a couple of hundred dollars even a grand or more on a new groupset, custom coloured wheels, and now you want free help putting it together? I don’t think people realise just how precious knowledge is, or are interested in supporting those who, in bike shops or other forums, work tirelessly to develop and share mechanical knowledge.
I think you should charge fairly for your knowledge and time. If someone wants a custom wheel built, spread the cost across parts and labour. If someone comes in wanting just spokes for the rims and hubs they have bought online (as I often do), then charge more. The knowledge you guys have is great, I think it is straight up to charge for it, either in the form of running mechanics training or in charging a corkage fee.
I am up for shops in Australia charging a lot more for bike services, if you get friendly staff and good mechanics. If selling product is not working don’t sell it. If you give advice on bike parts and they buy online charge $400 for a bike build. Often it will still be less than the amount of money they saved by buying everything online. If they want warranty on a product they bought online tell they to get lost.
Mate – you don’t need the business (you guys are flat out as it is), love what you do and the people around you then don’t go near BYO bits.
You can argue backwards and forwards what ‘value for money is’ forever. The real value is in relationships and community – the rest is just stuff.
Life is too short for the grief
This has the potential of degenerating into the usual online buying vs LBS debate. Plenty of threads out there:
http://www.bicycles.net.au/forums/viewtopic.php?t=27253&p=413928
http://www.sydneycyclist.com/forum/topics/how-i-could-support-my-lbs
But this is not. It is a LBS with a good reputation crying out that their business model is not working.
IMO the bicycle servicing market in Australia is topsy turvy, due to high labour costs and compounded by very inexpensive parallel imports (whatever the cause: distributor margins, small market etc).
I think the results are:
1. Expected high level of DIY—which is cool, I accept it. But which IMO is a problem for new bicycle riders. I freely admit being willing to pay big $ for plumbing or car repair. But will new rider Joe/Jill Bloggs accept paying $90 service for a $500 bike?
2. Small market for servicing lower end bikes—which IMO is a second whammy on new bicycle riders, especially those wanting “utility cycling”. The good old “just get a cheap bike, and beat congestion to work/uni” mantra works. Then you find that servicing a broken spoke costs as much as the bike itself.
3. Large number of ridable discarded bikes.
4. Volunteer bicycle workshops (Nunnery): I don’t think that this is just “we love bicycle culture, and will get together”. It’s no accident that these “free” workshops exist in many cities. There is an abundance of discarded bikes out there, and market failure in fixing them.
5. A contentious relationship with LBSes. I have a bicycle built by an American (the designer) and shipped to me from the States. I can do most things myself, but eventually I’d need servicing. Currently, with the ongoing discussion about LBS vs online, I’m always uncertain about the dynamics of LBS-customer relationship, and how to “support the LBS without being a schmuck”. Will the LBS look at me funny for purchasing accessories online? Dunno. Which is one reason I rarely go to new LBSes.
While I’m not in favour of the American compulsory tipping/gratuity model, I think there are parallels here. Customer x can expect to pay extra to buy from you rather than online, because it’s faster, instant, have a chat etc. But when the difference is large, out of proportion of “a convenience fee”, then they essentially are paying you a tip (ooh, Superflash is $50 at shop, $20 online). And when they don’t pay you a tip (i.e. by buying online and asking you to install), you are working without that tip, and this blog post makes you sound like an American waiter (“Yeah it’s cheaper blah blah but fuck, that’s just rude!”). And then the phrase “support your LBS” just means “tip your LBS”/“give them a donation”.
Maybe you should just formalise tips. Make clear “you survive on tips”, just like American waiters. Yes, it’s abhorrent. But there you go. Maybe the corkage idea would be less abhorrent.
Alternatively remove the stigma altogether of customers buying online—this means welcoming everyone with open arms—and provide non-online-buyers a discount on service.
Other bicycle retailers sell bicycles at premium cost, for a discounted service cost (for the first owner). Which IMO is a bit like working on a retainer. I did not realise that bicycle sales brought little profit to Cheeky Transport.
What I find perplexing is we know that petrol-car-dominated culture is *not sustainable*—i.e. we can’t keep building roads, car parks, importing foreign oil, inhaling fumes, and releasing CO2 etc. But bicycles… while a (more) sustainable form of transport can’t seem to find a sustainable business model.
I hope that you do. Because in 20 years we could still benefit from “buying online”; we’ll still be able to ride bicycles, courtesy of KMart. But we could have no Australian wheel builders, frame builders, or even LBSes.
@Paul
It’s not a zero-sum game. If you (Paul) can’t service your bike, it’s unlikely that your bringing it in to a LBS for constant service will be a constant income stream: it’s just too pricey. It’s more likely that you’d quickly realise spare parts are cheaper elsewhere (mail order), tutorials are available online and pick up bicycle servicing yourself, or stop riding. I mean, there are people that would continually bring the bicycle in if they didn’t attend that one course, but they would be a tiny minority (maybe like @Andrew above). i.e. it’s logical that the LBS (or at least the mechanics) benefit from $ upfront for a maintenance course.
reasons why i love cheeky and keep coming back:
– your staff don’t look at you like you are the scum of the earth for walking in with a 20 year old bike with 3 gears. in fact, they usually say ‘nice bike’
– unlike lots of bike shops, your staff know lots about bikes
– you do awesome things like bike maintenance workshops which might mean fewer people coming for servicing, but might also mean fewer bikes gathering dust
– you are not just a shop for selling stuff, but a place for cycling advocacy… not enough businesses in australia realise their potential for creating social change
xx
I think corkage is a perfectly reasonable, fair charge which can be signposted clearly. Everyone has to find a business model that works for them, and it may at least help you manage / avoid the pure irritation you face when the grey-market buyer strolls in asking for un-divided attention when it really hasn’t been reciprocated. Bike Maintenance courses are possibly a conflict of interest (to yourselves though), much as I know you’ve probably run them out of kindness and sharing knowledge with the community.
The same issue/debate was going on in the UK a few years ago. Parts and bikes were much more in LBS than online. Result was LBS had to lower their prices or more likely, the distributors had to reduce their margin.
Same thing has to happen here. The handful of distributors have had it good for too long. Although Australians seem to accept paying over the odds for most goods and products that are available much cheaper overseas.
Well happy to see corkage charged. Cheeky provide products and seevixe that no one else does, I utilise that and I also utilise internet sales. I buy on the net if its something I can handle / apply, more times than most I come to cheeky because you guys have all that I need and the price is comparable (cetma racks are a great example). Keep doing what you r doing, you r doing it right, and by all means charge corkage.
controversial!!!!
This page has been a good read.
@Paul$170 for a cassette! was it XTR or something? You shouldn’t ride that stuff anyway!
The problem is a lot of people can’t really afford to pay double or triple (with shipping, for a single item, from America or the UK) the price of an item because your business model isn’t working out how you’d like it. If you want your knowledge and skill in working on bikes to be adequately reflected monetarily, change your pricing on repairs and service to reflect that, but wishing that people would just cease going overseas is blowing against the wind.
As Australians, we pay way, way, too much for cycling stuff, and while I agree totally this is primarily the fault of the distributors, continuing to buy products at these hugely inflated prices only encourages them to keep ripping us off.
Offer one price for assembly when parts are bought from you. charge more for assembly only. stock impulse buy parts. don’t stock the stuff that you can get for 1/2 the price online.
I’ve bought things from LBS’s that i can get cheaper online as its right there in my hands. but big ticket items like panniers, ouch, i saved $100s buying online.
But then I’d pay someone $100s to teach me how to overhaul a bottom bracket properly.
adapt. all businesses have to to survive a changing world.
Daniel
I’ve been a supporter of Cheeky for many years and continue to get my bike serviced there when it is something I can’t do myself. It is the best bike shop for service (both customer service and bike service) that I’ve found.
I lived in the UK for 18 months over 2008/09 and the prices in bike shops there are comparable to the onlines – perhaps a bit more expensive sometimes, but I’m talking 5% or 10%, not the 50% – 100% or more which is the experience in Australia.
We shouldn’t be able to import in individual item quantities at half the price or less than buying retail in Australia (and carbon miles is a crock – the stuff you sell locally has come from the same factory as the stuff I buy online – as is shipping costs: we are actually closer to the Chinese manufacturers’ factories than anyone in Europe). If local bike shops aren’t making the margin then the original manufacturers or local distributors are. Rather than take this out on your customers by charging “corkage”, why not seek out the root cause of the problem and do something about that? And if part of the issue is that you are undercharging for service, then I don’t think anyone can justifiably complain if you increase prices. Hidden cross subsidies between servicing and sales will be rooted out in the long run anyway.
Wow, people do read the blog!
Thanks everyone for taking the time to reply. Really appreciate it. There is a lot of good thinking there. Even in the few posts I deleted because of their narky tone or doubling up on what had already been said. (ps if you want to get narky, the sydney cyclist discussion is a better place to do it. And there is some great constructive criticism there too.)
We are going to think it over. The bottom line is we need to make some changes to our business model, but not much becuase the problem discussed isn’t a huge part of our core business. In the mean-time, I think I’ll do some more yoga
How nice is it riding in the sun lately?!
What sun?! All I see is clouds
video killed the radio star, email killed the courier industry and now bicycle internet superstores are killng grass roots LBS’s!
charge them the cost price from an australian supplier on top i say!
i fully support 50% corkage schmadzie
You’ve got….
1. People buying parts from you and paying you labour to fit / fix
2. People bringing in stuff you can’t possibly stock and paying you to fit / fix (eg vintage bikes, second-hand or rare parts, or even bikes / parts you don’t sell).
3. People buying parts you stock or can stock and paying you labour to fit / fix.
Maybe in case 3 you could charge labour to come close to what you would make in case 1 (what people seem to be calling a corkage). This would probably appear very expensive to customer in case 3, but as long as you are up front about it they can’t really complain can they?
Case 2 is a bit different, and I don’t think they should pay as much for labour as a customer in case 3 but maybe more than a customer in case 1. In that case you can tell your customers in case 1 that they are getting a discount on labour due to the parts purchase (parts sales effectively subsidising labour charge).
To sum up you could have a standard labour charge (case 2), corkage (case 3) and discount labour for parts bought (case1).
I think I have very nearly exclusively paid for labour at Cheeky for more than 10 years. Occasionally, I have bought parts elsewhere that you don’t stock. In that case I wouldn’t mind paying more for your labour / expertise.
I think many bike shops tend to size you up and they may often put me in the low-value category. What they don’t seem to realise is that I will probably need to come back on a regular basis. So I keep coming back to Cheeky because of your friendliness, helpfulness, expertise and fairness and your non-judgmental approach.
Do what Bio-mechanics in Adelaide do:
“Labour is charged at $120 per hour, but if all of your parts are sourced from BMCR, the labour rate drops to $72 per hour. Lovely!”
Should cover your dilemma nicely!
B.
Very good topic for discussion! I very much prefer to purchase and support my LBS but there are times when I cant justify spending the extra cash at the LBS. I still buy my tyres and bar tape and little bits and pieces from the internet (usually Ribble or wiggle).
I am a hopeless bike mechanic and for this reason I am happy to spend extra to buy parts from a LBS and have them fit them aswell. Anything I can do myself I will source parts for myself at the cheapest possible rate.
It was mentioned in the Blog post – its just plain rude to ask a shop to fit parts to your bike when they are not purchased from there.
Ask yourself this; there is a LBS seeling a groupset $100 cheaper than the bike shop around the corner,. however this other bike shop has a labour charge $10 an hour cheaper than the shop you purchased your parts from. Do you think the shop with the cheaper labour charge is going to fit the parts for you? I would like to think NO and they would tell you where to go! OR would the shop selling you the parts be happy you went elsewhere to fit them?
Wheres the love people? For what you get from a LBS (knowledge, a good chat and in some cases a coffee!)then why buy online anyway?
Crank up the prices CHEEKY your on to a good thing!