Good question, when I go to Walmart, I can find bikes for $200, why aren’t all bikes so cheap? The explanation is very simple.
In this article, I’ve put together for you all the necessary elements to understand how the prices of our bikes are calculated and why the good bikes are so expensive.
Keep reading to learn all about it.
Why are bikes so expensive?
Quality materials costs
In the production, the raw materials are a determining element since they will strongly impact the final price of the product.
Indeed, making a carbon road bike or an aluminum mountain bike do not correspond at all to the same budget and then vary the final note.
If we go up in quality and range of bikes, the models are generally lighter and lighter, requiring very particular and expensive materials with singular properties, implying much higher prices.
Labor costs and manufacturing
In the manufacturing cost (and therefore in the final price) comes the wage cost (especially if the bikes are assembled by hand) and the machine-tools costs.
Employee costs can vary greatly from one manufacturer to another as many choose to build and assemble their bikes in areas where labor is very cheap. However, for those who choose to produce and/or assemble in the US, the cost of manufacturing climbs significantly.
Quality Control
A major difference between a low-end bike that can be found for a low price at a retailer like Walmart and a high-end mountain bike with a much higher price is the notion of quality, specifically quality control.
For the high end, the products must meet very precise and extremely rigorous specifications. Thus, all along the production line, control points are installed to ensure that the bike in production reaches the established requirements.
The QA (quality assurance) is a process involving many additional charges that will increase the price of the finished product.
R&D costs
High-end bikes are at the cutting edge of technology. Cycling is a living field that progresses every day, the competitiveness between brands is strong and causes innovations to the chain in order to succeed in placing themselves in the top of the basket.
Thus, the research and development costs are easily very high for manufacturers seeking to make a technological breakthrough. These costs will then be visible in the final price of the bike.
Marketing costs
Here, the costs will vary depending on the brand. For a brand that has been established for years and is known by everyone (we can use Trek as an example), the advertising costs will be a smaller portion of the budget than for a small brand that is less known by the general public and is trying to make a name for itself among the big players.
In this case, a small brand invests and reinvests a large part of its budget in advertising and marketing to make a brand name.
Supply vs Demand
Like many markets, the bicycle market does not escape the law of supply and demand. In the current context, we observe an exponential growth in demand with a supply that also multiplies, but at a slower rate, so prices are naturally pulled up by manufacturers and distributors who increase their margin.
Shipping costs
The delivery of products, especially internationally, represents a cost that can be important for the buyer.
Recently, the price of container transport has skyrocketed, which has caused a sharp increase in the price of bicycles and cycling-related products.
Brand image and reputation
The big names in cycling are often sufficiently established in their market that consumers only swear by them. As a result, bike buyers will be willing to pay more money to afford the bike or component of their favorite brand, being used to their standards and quality.
For the smaller bike companies, the challenge is to position themselves against the bigger ones by offering equivalent or superior technologies at an attractive price, in order to make the fans leave their old favorite brand and try something new.
Small Scale Production
The law is simple and well known: the more we make, the less it costs us to make.
Brands that produce a small volume of bikes are more likely to sell them at a high price to offset the high production costs.
Assembling bikes by hand, welding frames together one by one are all reasons that increase production costs. The big manufacturers are less concerned, relying on mass production and automation of the production line.
Lack of Competition
In some niches and categories of bicycles, only a few manufacturers are positioned and can thus raise their prices easily because the competition is too weak to wage a price war. The transfer cost for the customer is high because few brands meet his needs, so he has little negotiating power against them.
Inflation
In the current inflationary context, the decrease in the purchasing power of citizens makes it more difficult to buy a bicycle. The access to certain raw materials is also more complicated for manufacturers and causes the price to soar.
Profit margins
Finally, in the bike price is the margin of the manufacturer (and the distributor if there is one). The companies do not work at a loss, this margin can represent a large amount depending on the model.
Generally, a bike manufacturer’s margin is less than 20% of the total price. For example, the largest manufacturer in terms of volume, Giant, has a margin of 9.7%.
FAQ
Is an expensive bicycle worth it?
It depends on your needs and your budget.
If you are experienced enough to aim for performance or want to touch the best, a high end model will be perfect for you and will make you happy for a few years.
If you are a beginner, a mid-range model will be more suitable and will be a good compromise in terms of quality/price. Buying a cheaper bike will be a wiser action, even if you want to reinvest in a better model later on.
How much does a really good bike cost?
The price range is wide, but very good bikes usually start around 1500$.
Of course, this varies greatly depending on their model, road bike, mountain bike, hybrid or electric bike, all have very different prices, so it is difficult to give a firm and definitive answer.
Why are bicycle prices going up?
The difficult access to raw materials and the increasing cost of transporting goods are the two main reasons for the price increase. Unfortunately, these prices will not fall back immediately and are expected to remain high for a while.
What is next?
If the price of bikes is high and continues to rise, finding and buying a bike at an affordable price is still possible. To do this, you have to be smart and look in the right place.
The second hand market is full of quality models looking for new owners! Look around your home, in your local bike shop or on online platforms, you will find what you are looking for.
