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.
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, and attempt to use combined purchasing power to offer competitive prices and a physical space in which to display bikes etc and offer product knowledge/service. The other thing that I suspect is working against bicycle stores is the amount of information regarding bicycle servicing readily available on the Internet. Why would I take my bikes in for a service when I can do it myself?
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.
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.
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.
hmmmmmmm! Does that mean less wankers wearing lycra hyvis moving (obstructing) in pelotons on Perth roads? then I am all for it![}:)]
^^^^^^
i believe theyre ''carrying on'' more about the extra duties and taxes the retailers have to pay.
So few 'bricks and mortar' retailers capitalise on the advantages they have! You are on the ground - potential customers can come into your shop and handle the products and talk to staff and get a great 'buzz' about what they want to do with their purchase and then THEY CAN BUY IT AND TAKE IT HOME AND USE IT IMMEDIATELY.
Customers aren't stupid - we know stuff is cheaper on the internet - but it's not always no. 1 priority - particularly when it comes to hobbies like kitesurfing and cycling where people are generally spending discretionary income anyway. Be honest with you customers if they ask is it cheaper on the net, then distract them with some shiny accessory that isn't going to take 2 weeks to get to their house.
I get a lot more pissed off with poor / absent service than I do about high prices.
Not sayin taxes and internerd shopping aren't big hurdles for Aussie retailers but, over this side of the stump, the biggest detriment to shopping local is the shabby, rude and lazy service that is more often than not experienced by the customer.
It's a real problem here.
Makes it all the better when you do find a good shop, and worth supporting but if they don't have the brand/equipment you are after well then it's clickety click, thanks for coming.
