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Comment by S_A_P | Hacker News Reader

Guitar Center definitely shifted to "mainstream" and de-contented stores after bain got involved. Maybe that is the only real path forward, but I dont ever stop into Guitar Center anymore since they usually only have the prosumer-ish gear that Im not interested in. They also seem to have much less used gear in each store, despite the influx of 'sell yer gear here for cash' emails I get from them.

Edit: Another thing- part of the problem for US based retailers in general is MAP. Its price fixing, and in many cases I can go to, say Thomanmusic.com and order something from Germany for ~85% of the best price I can get at major retailers here, including shipping, tarriffs and foreign transaction fees. Personally I think MAP is ridiculous and leads to TREMENDOUS waste of resources. Im buying something that was shipped from China to Europe, then shipping it back to Texas all for less money than US retailers will allow. WHY IS THAT?

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MAP loopholes (like the thomanmusic.com example you mentioned) have killed brick and mortar retail. Some of those prices you're paying from those European outlets are less than the local retailer can buy it wholesale. So you're asking your local retailer to lose money to make the sale.

I owned a bike shop and sporting goods store in a past life (I've written about it here: http://www.sciencerocketry.com/blog/great-work-and-new-begin...) and the effects of Shimano's inability (or really, refusal) to control pricing from its European distribution was catastrophic to my business and my peers. And not only that, I found that many of those sellers would defraud customs on expensive items by declaring the value just under thresholds that would result in them paying import taxes and tariffs. It was a profit destroyer for us but Shimano moved units, and that's all that mattered to them.

When some of those parts customers purchased from Chain Reaction or Wiggle or whatever didn't work, the customers who bought those parts overseas would come into our shop asking us to handle the warranty process. We were a Shimano dealer, after all! If we politely refused or tried to collect a handling charge, we were the ones that would face the customer's outrage.

The end result is that there is less sales tax in your community because of the absence of that brick and mortar retailer. There are fewer jobs. There are fewer local communities built around hobbies, crafts, trades, or whatever. But you can get products cheaper and your dollars have greater purchasing power. Maybe that's a worthwhile trade-off - YMMV.

But what is causing the prices in US and EU to vary so much? Im a cyclist, and even with a race team discount, the EU prices are often 10% lower than through my LBS.

Are Shimano and others just gouging in the US market because they can (and damn the impact on local retailers)?

Maybe the fact that EU has VAT? The final consumer price might be the same in US and EU but manufacturer can charge US retailers more because the sales tax is small compared to VAT.

I'm curious about relative tariffs.

If I buy an expensive custom modular synthesizer from the US, I'm going to get hit with import duties as well as VAT. As a business owner I can claim back the VAT, but the import duties are a non-trivial and non-recoverable extra.

If buy a synthesizer from Thomann in the EU, I can also claim back the VAT. And there are no import duties - at least until January 2021 in the UK.

So the final cost for a UK business buyer is 20% less than the nominal price.

Does the US charge import tariffs on these items? I have no idea. But if it does, that would explain some of the differences.

And it usually works the other way. The standard price in pounds for US tech sold in the UK is 1:1 with the US dollar price.

The base iPhone 12 Pro Max is $1099 in the US. In the UK it's £1099, which is more than $1400. Even without VAT it's more than $1200.

In Spain it's €1259, which is closer to $1500.

Don't forget state+city sales tax. In San Francisco that adds 8.5%.

That US$1099 in the US is usually increased by 5-8% for sales tax. https://en.wikipedia.org/wiki/Sales_taxes_in_the_United_Stat...

Duties are another funny thing. At least in Canada, bike stuff from China has variable duties:

> Importing a complete, assembled bicycle will cost you 13 per cent in duty. If you're just bringing the frame in, that's a five per cent tariff, and if you're importing complete wheels, there's a 6.5 per cent tariff.

So, if you import tires and rims separately (even in the same package), there's no tariff! Frame + other parts, and you only pay on the frame.

https://www.cbc.ca/news/canada/british-columbia/what-you-nee...

It's a number of different things that contribute:

- It's common for global manufacturers to sell products at different prices depending on regional market conditions. So EU distributers may get better pricing than US distributers.

- Some retailers may be able to purchase products cheaper because of volume or preferential relationship.

- Most commonly, the products beings old are actually OEM products originally sold at a significant discount to a bike brand (who have massive minimums, arbitrary product mix requirements - think a mountain bike brand buying road parts because that's the "package" Shimano sells to get favorable pricing, and big incentives to prevent them from purchasing from SRAM or some other parts manufacturer). The bike brand takes its excess parts and sells them "under the table" to a retail outlet (that they may have actually discretely partnered with at the outset).

My opinion is that yes, Shimano, specifically, doesn't care about brick and mortar retailers. Shimano considers it a relic of the past and are partially unaware (or apathetic) of the reality that their actions and distribution model is accelerating the death of the brick and mortar shops. That said, Shimano USA might care about US brick-and-mortar retailers, but they don't have enough influence to prevent Shimano Global (Japan) to affect any real change.

Shimano has seen steady growth, so they have no incentive to change. But that growth has been at the expense of the very partners that played a significant role in helping them gain market dominance.

I'm generally of the opinion that, at least in the bike industry, the shops and online outlets selling massive volume at discount aren't really in any better financial shape than their mom and pop competitors. When I first got into the industry I was regaled with stories of success of competitors like The Clymb and how they were 'killing it'. Turns out, the only thing they were killing was themselves. The Clymb, despite assurances of their brilliance, sold back in 2015 for $100,000 despite millions and millions in sales (the buyer assumed 18.5MM in debt) - https://www.oregonlive.com/silicon-forest/2016/01/the_clymb_...

Reading this, I do wonder how long any middlemen will last in the age of the internet.

Manufacturers don’t sell direct for a variety of reasons that steadily become less compelling as the costs and complexity of shipping, advertising, and retail management fall.

How long before non tech firms follow the path of tech firms and sell direct?

In the bike business (and many others), there are middlemen in between the middlemen! Between me and a bike brand would often be a distributor and in between me and the distributor was a sales rep! I found my sales reps (who took 1-4 points off the margin) to be generally likeable and altogether useless. But there they were, a relic of bike retail of old, still hanging on.

And that's the view of more than a few consumers in terms of how they view their bike shop. Anything that can be sold direct, will be.

I think the variety of SAAS platforms (spotify, stripe, shippo, no doubt countless others) becoming available that make it easy for a manufacturer to essentially buy all the business logic they need to sell D2C is the nail in the coffin.

Why does Shimano have arbitrary product mix requirements for OEMs? Why should they set different prices for different markets in excess of the costs to ship between those markets?

It sounds like they're being overly aggressive with their price segmentation. When setting up your first lemonade stand, you learn that you should set prices at the sum of costs for goods, labor, and overhead, plus a profit margin, hoping that the output of your manufacture delivers more value to your customers than that sum. Shimano doesn't want to be paid a flat rate for the value they add, they would prefer that everyone to pay exactly as much as they could possibly be willing to pay.

This is the same in the guitar industry re: arbitrary product mix.

If I'm a shop and I want to deal Fender guitars, I have to sign a dealer agreement which says that I agree to buy $x worth of apparel, parts, guitars I don't want because I don't think I can sell them etc on top of the sometimes unreasonable numbers of guitars/amps they also make you buy.

The companies have all the control and they know it. A lot of brands are also making you pay a separate fee to be able to sell online and most absolutely prohibit you as a US dealer from shipping overseas.

All of these things + operating costs make the margins at your average local music shop very very slim. I ran one of the best shops in the world and we still struggled with this kinda stuff.

On the face of it, it seems like a market ripe for disruption. Is it that hard to make a decent guitar, or is branding so import to customers that a new brand with a decent product at a cheaper price has basically no chance?

There are a lot of brands and manufacturers. One brand might use multiple manufacturers. Or one manufacturer might make for multiple brands and might even sell some directly with their own brand. Some forms are trademarked (Charvel uses the Fender headstock shape in some of their models). Pickups make a big portion of the sound, again connect different ones together. Some makers insist on putting really crappy pickups in their otherwise excellent guitars. Some might have ok woodwork but all the hardware is bad.

The traditional evolution for a guitar maker is like this: A guitar technician tours with famous guitarists and starts customizing instruments for them. They start their own brand for making new guitars. They have a small team in a small shop and they hand make good but expensive guitars. Then they move manufacturing to Japan. Still pretty good stuff, moderate price, available for the people who really want to get it. Third phase is to move manufacturing somewhere else and sell barely adequate quality guitars with just your brand. Make flashy paint jobs, sell to the masses as "first guitar" etc. Original owners might be out at this point.

Some decades later introduce some old models revived at high quality again.

But then how come some of them have so much power over retailers?

On the bicycle side, the disruption is happening. It's just leaving local retailers out of the mix. Instead, we have 100% online brands appearing (Canyon, etc).

Locally, the bike shops that are doing well all have a side-business - several have brewpubs or cafes, other have training facilities.

> When setting up your first lemonade stand, you learn that you should set prices at the sum of costs for goods, labor, and overhead, plus a profit margin, hoping that the output of your manufacture delivers more value to your customers than that sum.

That's kinda opposite of a lot of (good) HN advice about pricing.

Here, we (mostly) agree that you set your prices to capture as much of the value you're providing to the customer as you can, not some simple markup on your costs. If the customer gets 10k/month value from your startup, of course you don't price it at $1k - even if it only costs you $500 to provide it.

If I had been running a lemonade stand on the island where Fyre Festival was failing to eventual, you can be sure my pricing would have been regarded as predatory and obscene to all the "cost plus a profit margin" folks.

I reckon the big error here - is tradition wholesale and retail chain ignoring the fact that geographic market segmentation is rapidly disappearing for many things. Shimano think they can gatekeep their markets, and sort-of can at retailer level using distributor contracts. But they totally can't stop consumers buying online from wherever it's cheapest, and that includes dark shift and/or knockoffs from AliExpress et al. Shimano will slowly kill their distributor network, who'll go broke or give up stocking Shimano as more and more consumers use them as a showroom and then go buy parts/bikes online. That'll happen more or less slowly depending on Shimano's brand strength, but the smaller and less discounted distributors will go (or skirt the wholesalers) first, and sooner or later the only place to see a Shimano bike will be a few major specialist bicycle retailers or on late night TV watching the Tour De France.

> But what is causing the prices in US and EU to vary so much?

In the UK (and perhaps other parts of Europe) manufacturers aren't allowed to force retailers to sell at a particular price. The manufacturer can 'recommend' a price (or indeed print a price on the package) but the retailer can sell for whatever price they want [1]

Any binding 'minimum advertised price' or 'resale price maintenance' agreement would be price fixing, violating competition law.

[1] https://www.gov.uk/government/publications/resale-price-main...

As far as I know, it’s the same in the US. But a manufacturer can make a deal with a seller to not advertise lower than a certain price. Hence if you go to a retailer’s website, they might say you have to add the item to the cart to see the price.

An agreement not to advertise an item lower than a certain price would be illegal in the UK, as indirect price fixing.

ChainReaction owns the bike brands Vitus and Nukeproof, so they're able to purchase whole groupsets from shimano at OEM pricing which is a massive discount over retail price. It's not the US market that is getting shafted by shimano, it's the entire retail components market. I've even seen groupsets in boxes on the shelf at bike shops, priced higher than bikes on the showroom floor with that same groupset installed.

And somehow the bike retailers get furious at their own customers for seeking out the lower-priced options, instead of being furious with shimano for ripping them off.

I assure you, there is plenty of outrage directed at Shimano, over many years. And little has changed. Any retailer that is furious at their customers is misdirecting their anger, for sure. The customer would be a fool not to seek the lower-priced option.

>> able to purchase whole groupsets from shimano at OEM pricing which is a massive discount over retail price.

This is false (unfortunately); while CR/Wiggle does sell their own bikes with Shimano builds this is no different than any other bike manufacturer, yet the trek or specialized at your LBS is still significantly more. You cannot purchase any Shimano parts at Chain Reaction.

>You cannot purchase any Shimano parts at Chain Reaction.

this is a relatively recent development, you could last year. i'm not sure if they've clamped down globally or just stopped shipping to north america.

>this is no different than any other bike manufacturer

it's different in that CR is a retailer as well as a manufacturer. I assure you that even if the situation has changed recently, they definitely were selling off their OEM parts. it wasn't some sneaky thing, they were literally advertising what they were doing.

I think you are highlighting the main issue- either these companies like Shimano are subsidizing artificially low prices abroad with US MAP/wholesale prices or they are behaving in a dealer hostile manner. The net result is US brick and mortar retailers are screwed.

Thanks for this comment. Very interesting.

I think Wiggle and Chain Reaction have now merged, but both are struggling.

I was wondering if you could explain why bike components are so expensive in the first place? For example, why can a bicycle, which is mechanically quite simple, cost as much as a motorbike or small car? Is this a patent situation?

Volumn, bikes just don't sell enough to pay off the engineering that goes into them without high prices.

I don't purchase as much due to global events - I need the cash in my pocket. My cycling purchases used to be top end, really top end, but now I can go for a ride in a pair of regular shorts just as well as €80 ones. And I feel such a dick for blowing so much, so unnecessarily. Equally, thanks to various YouTubers (Hambini, Durianrider etc) - it's all a scam, anyway. I'm glad I woke up. Sorry lbs, and online stores, but it's back to basics for this non-pro.

I'm familiar with Hambini - and his bravado is well ahead of his actual knowledge. I'm not familiar with Durianrider.

I can say this with confidence - the bike industry isn't built on a scam. There are scammers within it (like any other industry) but the established brands are not scamming you with their higher priced offerings. They may be wrong about some of the benefits they believe they are offering, but it's not a scam.

It sounds mostly like your cost-value threshold has changed. And that's fine. But that €80 pair of shorts - if it comes from a reputable brand - actually does offer some benefits and advancements that a few consumers find valuable. When I read a comment like yours it sounds like someone lamenting that people purchase high-end GPUs. Sure, nobody needs 4k graphics at 120 fps, but there's a market for it anyway.

I'm probably being a bike industry apologist when I say this, but I think maybe you don't appreciate how complex some of the parts and materials used in bikes are. The quality of the manufacturing and materials is outstanding. Also, the bike company doing research and development to design a frame, prescribe a carbon layup for that frame, service and warranty that frame, and distribute that frame is only going to sell 4-figure and sometimes 5-figure numbers of those frames on complete bikes.

My general understanding of the economics on the product side of the bike business (which isn't as deep as my understanding of the retail side) is that the manufacturers aren't making much money either. They've got lots of hands in their pockets, a lot of pricing pressure thinning margins, and a low barrier of entry for new competition in the marketplace.

In regards to Chain Wiggle, I'm not surprised they are struggling. The graveyard is full of businesses that won on price and their is no business strategy easier to emulate than being the price leader.

Seems to be the business is design, go to china and find a manufacturer. I found these videos about china bike show interesting. "Specialized" gave the keynote apparently.

Some crazy bikes there (I like the offcenter wheels for hop riding.). Also very high end road bikes. (though italian carbon fiber seats).

Carbon Bike design process: https://www.youtube.com/watch?v=1WinYdscJi0

Bike show part1 https://www.youtube.com/watch?v=a9BAc0kL55o

part2 https://www.youtube.com/watch?v=ZQVoKKwydwQ

part3 https://www.youtube.com/watch?v=SKa3iQ3akHk

A 2000kg car can produce 200hp, or 10 kg/hp. A 100 kg man + bike combo will produce 1/3 hp, so 300 kg/hp. The bikes are underpowered and every bit of extra performance is very welcome.

A bike manufacturer cannot produce a better man, but they can keep optimizing the bike itself and they will keep doing it until even the wealthiest customers balk at the cost. Which is why the best gear is out of reach for most people.

You can easily purchase a bike that is not that heavily optimized - they are $100 a pop in Walmart.

The details of these optimizations are numerous and elaborate, but they are only a consequence of the weight/power balance.

I feel for you- I have a family member running a medical supply retail store, and the people who use it to showroom their online purchases and act like they've caught a shyster because of a 10-15% price difference is maddening. Amazon, etc doesn't walk people through models, usage, fitting, etc. Then folks pontificating about how they need to "innovate" in the face of huge corps selling less than they can buy wholesale..

Oh yeah, bike retailers have seen their fair share of exhortations to "innovate". And that's why some of them tried opening coffee shops or brewing beer or hiring consultants to help them create better merchandising to "reach female buyers that like to shop" and ways to spend your money with no return. Why manage one struggling business (your bike shop) when you can manage two struggling businesses (your bike shop and your coffee shop)!

Really, retail has largely been gamed past the point of no return. "Win the Holidays", as Best Buy put it a few years ago. Consumers evangelize their hookup, not their service experience.

Maybe bike consumers don't need the support and service the bike business traditionally offered. Camera stores are gone, but camera sales have never been better. Cameras are better and more accessible than ever before, too. Maybe the bike business will follow the same path. Time will tell.

EDIT: Funny enough, cameras are still subject to MAP and it is generally enforced fiercely.

All camera sales are in steep decline year on year, assuming you’re ignoring smartphones. The compact camera market is essentially dead, no one is making DSLRs in the future, and the mirrorless market is shrinking.

My anecdote must be then, at best, a few years old. But I am continually amazed at the quality of the cameras available both in my phone and in standalone cameras. Innovation continues even though the market has radically changed.

This is absolutely untrue for video cameras - both DSLM's and larger 'cinema cameras' like the FX9 and C300 iii, let alone Arri and Red models. They're selling faster that they can be manufactured in many cases.

It is 100% true for all CIPA members. Mirrorless sales are down. Unit price is up, but the market is contracting: https://www.dpreview.com/news/7282900211/cipa-s-latest-numbe...

What I just said may not be true for Red or Arri, but you don’t walk into Joe’s Camera to buy an Arri, and for their high-end models they’re literally only available to rent for production anyway.

Long lead times on new cameras is not indicative of high sales in a vacuum, just high sales relative to projected demand, which again is absurdly low.

You're conflating video camera and digital camera sales.

It'd be great to see sales numbers for all the major manufacturers, but Canon have in the last year launched five new cinema focused cameras (R5, R6, C70, C300 iii and C500 ii), Sony have launched three (A7sii, FX9, FX6). All of these (the ones that are currently available at least) appear - both from availability, and the frequency I see them on location - to be selling extremely well.

As to your 'high end models' comment. That isn't remotely true. Arri make one camera, the Alexa 65, that isn't available for retail. Red make one line of cameras, the Red Ranger, that wasn't available but now is. They also make custom cameras for specific DOPs occasionally. But broadly speaking both manufacturers only make 'high end models' (only exception being the new Red Komodo pro-sumer crash cam), and they're all for sale (and doing extremely well).

I've never met an LBS that could service a bicycle on the time estimate they quote. And most people don't realize that quality bikes are worth their price, vs. the Huffy at Walmart, but that's all they can afford.

So yeah, why manage one business destined to fail on its own when you can try to be a social hub? Look at Capital One with their "bank coffee shops". Look at how breweries have differentiated themselves. Bike shops are niche, like book shops are now, and will have to really offer a top-notch service and pricing experience to compete.

The bike business is funny, right? It's one of those businesses where you really need to find your niche in order to succeed. If you think you're gonna survive off a franchise store or something in a strip mall, you will die. Some models that I've seen weather online retail are either going after a captive audience, such as commuters in a city, MTB shops here in Santa Cruz or they cater to super, super high end customers that are paying for an experience (La Biciletta/Blacksmith in Toronto). Lotta shops make up for retail on service as well, but yet again, that requires the captive audience.

In regards to dirt cheap OEM parts from Europe, that's largely stopped. Most of those online retailers won't ship Shimano groupsets to NA anymore and while you can find good deals online, I tend to see them being sold from US-based companies. In any case, with the way manufacturers have shifted away from standards, being your own home mechanic has gotten prohibitively expensive, with the need for various presses and extraction tools, etc... I tend to see many more high-end factory bikes on the road than bespokes and forget doing your own suspension work on modern MTBs...

In regards to dirt cheap OEM parts from Europe, that's largely stopped.

That is excellent news for bike shops. I just hope it's not too little, too late. It kinda defeats the narrative from Shimano and others it was legally impossible to do so, though.

The ironic thing about the dirt cheap OEM parts from europe ruining local business is, its happening in europe as well.

If a local shop orders parts from lets say shimano it must be bought from the official shimano importer. All while the online shops import it themselves and undercut the prices by a lot.

I once wanted to buy a new bearing for the crankset and my bike was already disassembled. So i went to the local shop to avoid waiting for shipment (was before next/same day delivery was a thing in germany). The price there was about 50 or 60€ while the online price was something in the 20th. I talked to the owner what the reason for that big of a difference and he showed me his official B2B catalogue. It was basically the price he asked for. So he wouldn't even make money out of it if I would have bought it there. He recommended to just buy it online which I then did.

A secondary problem is that even if you offer the best, most trustworthy customer experience possible, people will naturally discount it because they will have the feeling you're just trying to steer them to more expensive/higher margin/higher kickback purchases. Shops sometimes say "Non-commissioned salesperson" to try to diffuse that belief, but I'm skeptical.

I wonder if for major purchases, there'd be a market equivalent to the "independent fee-based investment advisor." Basically unbundle the service experience brick-and-mortar traditionally provided and let people buy it seperately. You'd pay a modest service charge up front and discuss with them what your needs are, and then they find you the right product and the cheapest/most reliable place to buy it. It comes with a service guarantee-- if you buy through their recommendation, they are responsible for negotiating warranty/service hassles.

I could see spending a $20 fee to know I completely slam-dunked a $500 purchase, especially if they can regularly yield outcomes like "Our huge network of merchant data found you the bike/appliance/etc. you wanted at some tiny brick-and-mortar in Baltimore and it comes out $50 cheaper delivered than any retailer you'd consider locally." Brick-and-mortar retailers don't have to try to maintain an expensive sales and customer-service experience and convert to rack-em-high-sell-em-cheap warehouses, and no-service-required customers can skip the consultancy and go directly to them and still get a decent price.

They "advisor" service would have to be explicitly independent and no-kickbacks for this to work... so I suspect what would happen is that it would build trust for a few years, then start undermining it by taking incentives to steer business.

> Our huge network of merchant data found.. at some tiny brick-and-mortar in Baltimore and it comes out $50 cheaper

Here is the crux: the 'supply chain' for gathering the data from all the tiny stores in small towns, who may not even have a retail system or may not be even connected, would be intractable.

Use a call centre to contact 100 stores at once?

Huh, that's a rocking idea.

The ad tech industry is basically this idea taken to its conclusion and it totally sucks.

The bicycle industry has a problem in that prices on consummable parts have far outstripped the rate of inflation. There is no reason for decent chains, tires, and cassettes to cost $60+ when they were $30 20 years ago. Motorcycle parts are comparatively cheaper for just as much engineering rigor, far more material input, and lower available consumer base for North Am. It's all about the price gouging for the OEMs.

This is nothing new. In the 1980s I was into photography. The local camera shop sales guys were always complaining about the people who would come in, spend hours talking about and looking at gear, and then they would leave and order it from 47th Street Photo, or Adorama, or one of the other NYC mail order sellers.

True. Although in retrospect, I see a lot of those local stores as having a limited inventory of gear and all the incentive in the world to push that inventory. While I have a special place in my heart for things like indie bookstores, homebrew suppliers, etc. a lot of small local specialty shops really weren't all that great.

I'd like to see some of the stores become actual showrooms.

You go in, get to handle the actual product. Then, if you decide to buy, do it there via the stores affiliate link. If not, you pay the store $N on your way out.

That way the customer gets the price they want, and the store makes some money for letting them handle things.

Also, I'd happily pay the store to deal with any warranty issues. I just talk to the person of the store (whom I paid for that service), and they communicate with whoever they need to get the issue solved. In the meantime, they give me a replacement item. This service should be offered, at a higher price tag, even if I bought my product elsewhere, no questions asked.

This sounds a lot like the Apple physical stores - they'll sell and service any gear made by Apple.

Also helps that Apple is vertically integrated and has tight control over it's supply chain and applies MAP very uniformly.

> If not, you pay the store $N on your way out.

I was thinking the same as I scanned down this thread, but I can't get past two things: 1) It's tough to for me (the customer) to have enough confidence that the showroom has all the options I should consider, and that the showroom employees are knowledgeable about them all. Without that, it's tough to commit to a flat price for browsing before I enter. 2) I can't see how this happens one store at a time. As long as there are traditional retail locations nearby, ones that let customers browse for free, customers will gravitate there. Can this business model succeed only once traditional brick and mortar retail has disappeared?

The new version of this is the customer-centric return policy. Because there's no place to go and see several different products, shoppers just order them all online, and return the ones they don't want.

It's interesting. The online marketplace (Amazon) controls the return policy, but the sellers control the pricing. That's not necessarily a bad thing. Unfortunately, it's distorted (particularly in the case of Amazon) by the proliferation of fake brands. And by fake brands, I do not mean fakes of well-known brands...I mean meaningless brands that do not exist, that attempt to create product differentiation that does not exist.

It's turned Amazon into the crap-pile of last resort, for me.

My observation in the years leading up to the online giants dominating some markets (electronics for example), was that retail stores that could adequately guide customers was rapidly declining.

Medical supply is probably a different category, where expertise is more important than others. But in more common examples, when I would go to a store and already knew more about their product lines than the salespeople, the local price difference was a turnoff. I'm happy to pay a reasonable uplift if a vendor can educate, guide or support me as a customer. But when few of them can, I literally have no reason to patronize them.

As fast shipping became an option, there was less and less reason to go to a showroom other than to independently look at a product person. In 2020, I don't even care about that, because return policies are liberal.

My favorite case example is CircuitCity [1]: "In 2003, Circuit City converted to a single hourly pay structure in all stores, eliminating commissioned sales. Many previously commissioned sales associates were offered new positions as hourly "product specialists", while 3,900 salespeople were laid off, saving the company about $130 million per year. Many company insiders later revealed that they thought this was the most influential company decision that would ultimately lead to its demise."

Lowering costs by eliminating qualified and experiences salespeople, attempting to become an expertise-less local storefront competing on price with businesses that have lower costs was a suicide move, and endemic of executives attempting to run companies based _purely_ on a bottom line, without actually understanding the market they are in. "Excel Excutives" in my words.

On the other hand, I have begun doing more business with BestBuy this year. Not because they have changed their level of in store expertise, but because when I need something, they can compete with Amazon in some cases on a combination of price and convenience. I can find if their store has something, the quantity, and have it in hand with no more than drive time. In the work-from-mode many of us are in, this can be a big deal. Plus, I can get appliances from them with installation, and office furniture from their delivery services that is a bit of a gamble from Amazon, who so far is not as convenient for "big box" shipping.

I hope BB continues what they are doing, because they seem to have figured out some of the variables to _adapt._ IMO innovation is not the problem, adaptation is. No business can survive if they don't adapt to fickle consumers where a significant portion of them will always use the resources available to them while simultaneously seeking to save money.

[1] https://en.wikipedia.org/wiki/Circuit_City#2000s

This is a similar observation I've made on BB. When CC went under, I was fairly certain that BB was on the chopping block next, and I though Fry's would be the last one standing. Forward 15 years and the fortunes of BB and Fry's seem vastly different. Although I'm not sure how they accomplished this, buying last second supplies over the last few years when I ran a business shifted back to BB, because they managed their inventory better than Fry's and had more items in stock when we needed it in a pinch. So convenience and sufficient selection, with good enough prices are somewhere in that playbook

In a similar vein, it seems like at least in the Midwest, Micro Center has completely cornered the computer and parts market in any town where it operates, and the stores are packed to the gills with parts, decent prices, and customers (especially this year it seems).

Total opposite of Frys, or the late CompUSA or Circuit City.

Best Buy isn't packed, but they always have some activity in the locations I frequent, and they also have decent prices and good selection when you need things local.

The experience you've had with BestBuy sounds very similar to Argos here in the UK. They have local stores, some based out of supermarkets, you can see if things are in stock and reserve + pick it up within the hour. They're usually competitively priced with Amazon, they're open late, and they don't have fake items.

The lack of counterfeits is an advantage I did not consider, but is becoming more and more important.

Goes in hand with not receiving goods that are obviously used and resold with zero apparent QC.

> ...have killed brick and mortar retail.

There's still a lot of brick and mortar retail, and it does not seem to be disappearing, but it is not really about re-distributing the goods anymore, but mostly about paid support. For instance, a lot of bike shops in my area are turning into repair and assembly workshops, where you are welcome to bring the bike that you bought cheaply from an online retailer and they help you assemble and adjust it. I guess the earnings for that usage are much larger than for re-distribution, since 100% of what the client pays is directly for the shop.

EDIT: also, I have issue on the fact that you call buying cheapest goods a "loophole". There's nothing wrong about it in an efficient market.

I've seen similar conversions to service-only, and I'll just say that service was a loss leader for us. We never found our service department to be profitable on service alone. Some of it was the complexity of the type of bikes we services (high-end, aero-focused bikes) and some of it was because service pricing has largely been subsidized by healthy margins on parts sales.

The service-only shops will never be anything more than cozy lifestyle businesses. And a few of those that own service-only shops actually live in the business to make ends meet.

Maybe the high-end segment is too niche. But if there are hundreds of thousands of bike commuters in your urban area, you need quite a lot of service shops. Right now they seem to be over-saturated and give you a rdv mid-january if you ask. It would seem that things are going quite well for them!

I recently bought a new bike in one of those shops and it essentially amounted to the seller buying the bike online from his laptop in front of me.

Not sure what you mean about "cozy lifestile business", but is seems great, especially if it allows to make ends meet.

In U.S. cities it's more like thousands or tens of thousands of bike commuters (during good weather), but commuter bikes are either rented from bikeshares or are junkers that get replaced for a couple hundred dollars from time to time. If any market has customers, it's high end.

On the other hand, people who buy high-end bikes are very likely able to repair and adjust the bikes by themselves, so they will never set foot on an actual store. It's precisely the daily commuters not interested in bike mechanics who would need and appreciate the most a physical workshop. Not the sporty types! For example here in France there is the Cyclable line of stores [1] that are very explicitly not targeted towards the sport of cycling (you won't find any lycra shorts nor carbon frames), but to cycling as a means of transportation. They seem to be doing quite well. The bikes that they sell are also quite high-end. I tried to go there this summer but the first time I was turned down as I did not have an appointment!

[1] www.cyclable.com

My LBS (actually a local chain of 5 shops) has a month wait for servicing, which they do at one central location. I was quite happy to pay a few hundred bucks to get my brakes bled and everything retuned but not prepared to lose my bike for a month. As it is I got the parts/tools I needed from Amazon and did the job myself. I'm not sure if this is testament to a fantastic Covid-19 driven uptick in business or their lackluster business acumen.

Then the solution is not for Shimano to enforce MAP overseas, but to instead stop enforcing it in the States. "MAP loopholes" haven't killed your business, MAP has.

The playing field is still unlevel - those overseas retailers don't pay sales tax and are still getting the products cheaper than they are made available to US retailers. The US government even subsidizes some overseas shipping, making it more affordable for overseas retailers to reach a US audience!

> cheaper than they are made available to US retailers

Seems like addressing this problem is important. Why is wholesale cheaper in Europe than the US?

MAP agreements are illegal in EU. They were specifically banned, and for good reason. Which is why calling Shimano's stance a "refusal" to deal with some problem gets you a negative response.

Still, feel you on the retail apocalypse, and how every other new internet darling can somehow skirt taxes or... and the problem is unfixable until right after it doesn't matter anymore. It took something like twenty years for Amazon to start paying US sales taxes most of the time, in many cities Uber's business model was price dumping etc.

Apple and Garmin manage to successfully enforce MAP. Nintendo, Sega, and Sony before them. Parallel Import Law is the means they use to do so.

Shimano could, were they willing, use Parallel Import laws to prevent European retailers from selling those products in the American market. They've chosen not to. So whether one likes hearing it called a "refusal" or not, I think that's what it is.

Amazon will just sell everything just above the cost of the good and all the small stores will go bankrupt. We seen this with CPG and groceries with Walmart moving into a city.

I think of bike shops as mechanics that happen to sell other stuff.

They should simply sell parts at competitive costs, but price labor for repairs, adjustments, etc. at a fair rate.

Alternatively, charge a transparent markup in exchange for “free” service on the item should something go wrong.

For huge retailers as amazon it should be illegal to sell things for less than the average price of the cheapest -lets say- 20 stores where that product is sold in the country (with huge penalties for trying to artificially reduce the average price like creating fake stores or bribing store managers)

Thats what MAP was suppose to do. The brands don't want all their sales from one distribution partner because that distribution partner will have enormous leverage.

Where MAP fails is if brands want to different prices globally. This is because items will just get re-imported if they are priced lower in other countries. They want the benefits of globalization which is cheaper labor and materials but don't want to negative aspects which is the same price globally for the product.

I don't get why bikes are so crazy expensive. Maybe you can elucidate. How can a bicycle cost $3-5K? What's in it that costs so much? This is not a US-only phenomenon either, I just checked e.g. UK Bikester store and the prices are pretty nutty there as well. It's just a few pieces of metal welded together by robots in China, how can it be $5K?

Bikes that are a few pieces of metal welded together by robots in China go for $100 at Walmart. Carbon fiber bikes that you can lift with your pinky and use to hurtle down a mountain road in the French Alps can be well north of $10,000.

>the effects of Shimano's inability (or really, refusal) to control pricing from its European distribution was catastrophic to my business and my peers.

MAP is outright illegal in the EU.

This sounds like one of the oft-overlooked knock-on effects of globalization and long supply chains. Lots of tariff quackery and a whole lot of risk and uncertainty for sourcing. It all ends up funneling money away from local businesses and governments. Even if it helps consumers by making goods a smidgen cheaper, what good is it if money ultimately leaves the local economy?

Multiply your experience by a million and stretch it out over decades, and this is middle America getting sucked dry.

Well stated.

There are two conflicting things at play there. Middle America is getting sucked dry on the manufacturing side because of uncompetitive costs. The knee jerk reaction of the government is then to address this with tariffs, which then results in the local retail industry getting sucked dry as well because they can’t compete with tariff bypass loopholes.

There are steel mills down the road from my manufacturing business that were shuttered for decades and reopened when the tariffs came into effect. They were not competitive with Chinese government sponsored steel, that much is true. It’s extremely nice for me that they came back online; they order out of production precision parts from me for their heavy equipment. I’m located just across the river from St. Louis. This is middle America.

Most of my consumer products are sold directly, online, but I also sell titanium weed pipes to a local chain. COVID definitely slowed retail sales. I looked into getting my motorcycle parts onto big corporate retail shelves, but the margins are tight. I’m working on that. Business has been good, so I can afford to try new things. Cutting blanks with plasma rather than waterjet and milling steel with air blast rather than coolant, together, might make big box retail rational, for me.

The economics of manufacturing: extremely multi-faceted. There is a tendency for successful manufacturers to allow costs to escalate until flexibility is gone. Their employees unionize. Management borrows against the future. Then, the market changes.

It’s a rough game. I chuckle when people talk about the right to a job. Sure; that can work if I have a right to sales.

> There are steel mills down the road from my manufacturing business that were shuttered for decades and reopened when the tariffs came into effect.

This is a beautiful, heart-warming story that is not really supported by the data.

Actually, steel employment in the US declined after the tarrifs were introduced [1].

Net steel production in the US went sideways over the past decade. It rose around the time of the tariffs, but it also fell and rose at other times [2].

The tariffs did, however, cause the cost of US steel to skyrocket [3]. Which is not fantastic for the ~330,910,000 Americans who aren't steel workers (who didn't actually win anything, since employment declined), or owners of steel plants (who I assume did win something, since they reaped the lion's share of the benefit of higher margins).

[1] https://www.ibisworld.com/industry-statistics/employment/iro...

[2] https://tradingeconomics.com/united-states/steel-production

[3] https://tradingeconomics.com/commodity/steel

This is so interesting. What I think we're seeing here in these two comments is the divide between micro- and macroeconomics. I absolutely believe that supply-chain disruptions in steel due to tariffs pushed U.S. plants to re-open in some locations, but I also can see how across the nation the production dropped.

Frankly, we won't know the true effects on the tariffs until at least 2026 in my opinion -- these trends happen on the order of decades rather than years.

There's another possible explanation. Plants may have re-opened, but they aren't employing anyone, because of automation, which undermines the 'protect the local economy' aspect of tariffs. Robots don't spend their paycheque at local businesses, and it takes fewer people to build them, then they replace. [1]

[1] If that weren't the case, they'd be more expensive than just employing people.

MAP -- Manufacturer's Authorized Price? Minimum Advertised Price? ...?

Looks to be Minimum Advertised Price:

https://www.thebalancesmb.com/what-is-minimum-advertised-pri...

Thank you! The term is ungoogleable for obvious reasons and "MAP loophole" finds this thread.

Searching for "map price" gives me the definition right away. :)

"the" definition -> "a" definition

it's still unclear which of the 2 acronyms I cited was the intended one.

Shouldn't you blame producers for practicing price discrimination by nationality before anyone else though?

> effects of Shimano's inability (or really, refusal) to control pricing from its European distribution

Why should they control pricing, or why any producer should control pricing in stores?

It looks to me like trentnix already provided their answer to this question, by stating what happens when the producer doesn't control pricing:

"The end result is that there is less sales tax in your community because of the absence of that brick and mortar retailer. There are fewer jobs. There are fewer local communities built around hobbies, crafts, trades, or whatever. But you can get products cheaper and your dollars have greater purchasing power. Maybe that's a worthwhile trade-off - YMMV."

I'm not here to claim that the answer is convincing (or not), but I think it does qualify as an answer to your question.

The first major reason is that price controls influence and protect perception of value. The primary means a consumer uses to assess value when comparing product options is price. Lots of brands (particularly of the premium but still mainstream variety) such as Apple, Garmin, and Nintendo use price controls to influence the buyer's perception of value. Do you think that an iPad is never on sale because no retailer is willing to put it on sale? Do you think a Nintendo Switch is never on sale because no retailer is willing to mark down the price?

There is always a retailer willing to undercut the rest in pursuit of a sale. Some retailers are even willing to do so in a predatory way, willing to absorb losses until the competition is eliminated or in pursuit of add-on sales that might help recoup lost margin. But those brands strictly enforce the prices their products can be advertised and sold at because it helps maintain the customer's perception that their products are valuable and in demand.

Products in bike shops are almost always considered "premium". They don't sell the big box $100 bikes and cheap parts. They typically sell higher quality products targeted at aspiring enthusiasts or enthusiasts. So a price control is exactly how you can differentiate your product from the cheap schlock on the shelves at Wal-Mart or even Academy and Dick's Sporting Goods.

The second major reason is because (although this benefit has diminished over time) having products on store shelves provides enormous marketing benefit. Most customers that walked into my store didn't come in knowing explicitly what they wanted. Many of them had done some research to be generally aware of their options, but our recommendations were often a massive influence in their purchasing decision.

Bike, component, and apparel brands were often pretty myopic when it came to their marketing efforts (and that's why they are always exactly the same from brand-to-brand). They genuinely thought the average consumer in the market for an entry-level carbon bike (say 1500-2000 USD) was influenced by having a Tour de France team or having some great rider win races on their bike. While that sometimes made a different at the prosumer level, the meat-and-potatoes bike shop customer isn't influenced one bit by that type of marketing. But seeing an attractive bike at a compelling price on the floor of a reputable bike shop is how most sales begin. So brands making sure retailers can be profitable selling those options is essential or retailers won't bother stocking their stuff.

If the bike shops can't be profitable, there will be fewer bike shops. And that means there will be fewer opportunities for customers to see you brand and your products. And it also means there will eventually be fewer riders - at least among bike enthusiasts. Because in my experience, bike shops are the hub of bike culture in most communities.

I understand your argument (but I don't agree with it).

Price fixing is banned by (I think) any reasonable country in the world and there is a reason for it.

There will always be brick-and-mortar stores because some people want to touch and look at the product before buying. Others prefer to buy online for lower price.

Well for what it's worth: Thomann started out as and still is a Brick and Mortar Store. In fact it used to be quite the Mom&Pop Shop makin sales in the founder's living room that doubled as a show floor.

They however were excellent at expanding into online sales (in roughly the same timeline as Amazon) and became Europe's largest online retailer. So one could argue that Guitar Center not improving their online offerings and maybe cutting back on physical locations had also something to do with it.

Sorry your business didn't flourish like you had hoped but I enjoyed your blog post. I always wondered how my experiences in software development and marketing would work in a more traditional business and if it would make things way easier/better/worse. Sounds like it would help but there are lots more variables to try and contend with. All the best with your future endeavours!

What is the european MAP loophole though? I shop for music gear regularly and don't recall seeing prices listed for lower from european retailers or on platforms like reverb. Even if it was cheaper, shipping was usually inhibitive. Is this really a practical loophole?

Can you please define "MAP"?

Minimum Advertised Price. The FTC has a good primer on it and why it is sometimes acceptable. https://www.ftc.gov/tips-advice/competition-guidance/guide-a...

Minimum Advertised Price. While it is possible in some cases to negotiate with a store, most of the time they ask you to get a price in writing that is lower so that they can match it. A few problems with that- 1) MAP is the minimum Advertise-able price so you wont find that anywhere online searching, and stores aren't exactly excited to quote you lower just so that you can take it down the road to get a discount...

Edit: Also Ive tried getting a lower price on gear in the US by showing the all in Thomann price, and the response I get:We do not honor non US pricing.

Thank you for asking this, I was lost.

Online it’s easy to open the chat window and just ask for the best price they can give you and get a really competitive number. I just don’t think people realize you can do that.

Yes, I've done that on Sweetwater so many times, and they always give me a better price than GC.

That requires human interaction, and if I'm going to a website, I explicitly don't want that as part of the buying experience. I want a machine that will give me exactly what I want with no delays and minimal salesmanship.

If you want to pay more they are happy to accept more.

You literally just ask and they give you a better price. There’s no up-sell, they want the transaction completed as quickly as you do.

Wow, I had no idea this was a thing.

Yup, keeps me coming back. Also open-box specials are a great way to save money.

Near as I can tell, Bain loaded up Guitar Center with a pile of debt, and that debt was one of the primary reasons it went into bankruptcy.

I don't really understand how leveraged buyouts are legal, and I suppose I should learn a bit.

What is MAP. That's a really hard term to search for so I'm not finding anything obviously relevant.

Minimum advertised price

MAP is really important for manufacturers. It is valuable to have multiple distribution channels for your product, and in the age of online retail, this is especially true. Because cultivating a distribution channel is not zero cost, if those channels are destroyed by one distributor taking a loss and undercutting everyone else, it can be highly detrimental to the manufacturer. That's because if you only have a single distribution channel they can pressure you to cut manufacturing costs through outsourcing or decreasing quality.

Source: I helped build a product to track MAP violations, and there's also a bunch of articles and books written on this stuff.

The cynic in me thinks the 'price in writing' price match is so that the price matching retailer can report retailers who dont abide by MAP.

I dont disagree, but it leads to scenarios like the above where arbitrage exists. I can buy something from Europe and then sell it on Reverb under MAP and still make a tidy profit. This sort of thing doesnt scale and introduces risk to me if I do that(how do you handle warranty claims, most gear is shipped with EU power cords so you have to buy US power cords to ship to customers, etc)

For retailers, most do not have the resources to differentiate so 1 store selling for MAP is interchangeable with another. There are boutique stores that have passionate/knowledgeable staff that can guide less informed or newer customers. Sweetwater does this at scale, and I do buy from them for this reason when its something Im not completely up to speed on when I purchase.

This is not an easy problem, but I do think an unofficial price floor is not good for the consumer. I also acknowledge that there are stores that will discount privately via chat or in person, but ironically Guitar Center was very inflexible on several items I wanted to purchase there in the last 5 or so years. I ended up going to smaller retailers.

It is also easier for the manufacturer to check. it isn't unheard of for someone to walk into a store, get a discount, and then leave. If you next day the manufacturer says they caught you and so you get no more product.

> They also seem to have much less used gear in each store

Reverb.com completely kneecapped this side of their business, and probably lots of their new product sales also. Between competition from Reverb (who have minimal warehousing overhead and no physical retail overhead), online-only sellers (who have no retail overhead), an expanded boutique market (pedals / eurorack), and much of the overall market turning to software and direct sales (much easier to download Ableton and start making music on day 1 rather than spend years learning guitar), the writing has been on the wall for large-scale brick and mortar operations in the music creation trade.

Regarding the Thomann competition, I am from Spain and constantly checking popular synthesizers and digital piano prices and the local shops advertise prices that are mostly on par with the german juggernaut. Thomann is great, but a decade ago they sent me a Korg synth with the printed manual in German, I guess this has changed.

On the other hand, I prefer getting the package myself in the car, so as to avoid surprises when the thing arrives --I didn't have any issues with Thomann's courier, though.

That is my preference as well, but in some cases Ive saved significant amounts by purchasing from Thomann or MusicStore.de. Im in the US, so the Minimum Advertised Price is the default unless you find a store that will work with you and offer a discount privately. Those exist, but not for every piece of gear(popular stuff usually wont get a discount, because why?) I feel like this is the kind of problem that is solve-able, but Im not quite sure how just yet. If I can figure it out, maybe there is a startup idea :)

Thank you for introducing me to this concept. I hadn't heard of MAP and ended up reading about it.

I had always assumed that a salesperson immediately offering me a discount, or that weird "price shown when you add to cart" pattern were just people being shady to increase conversion... while that may be true some of the time, I had no idea there was a legitimate reason why they might not tell you the "real" price upfront.

MAP isn't any less shady than the other behaviors.

Sorry I guess I misstated my point, MAP seems super shady, I just didn't realize that the other things I found shady were basically forced by MAP.

Maybe missing some background but I’m curious what mainstream and de-contented mean in this context? I’ve heard the term prosumer referring to appliances like espresso machines, but with guitars would a $2000 Gibson be prosumer?

For most international retail products, local pricing is based in-part on the cost of service centers/staff that are required to maintain local operations.

How does it work with musical instruments?

Wait what? I try to get some Suhr model from Europe since some of the models aren't here in the US, but the price there is more expensive, also need the shipping cost here to US.

Depends on the gear and the manufacturer. Typically Japanese or Euro brands are cheaper when purchased in the EU, while the American brands are not much different. Also depends on where the Euro is compared to the dollar on the particular day.

Some examples of brands I can find cheaper in Europe vs US: - Jomox - MFB - Roland - Behringer(In some cases by 50%(!) For instance the Behringer X32 mixer is a pretty popular 32 channel mixer used throughout the world at Thomannmusic.com its currently $1,495/€1,262.93 vs $2498.99 at GuitarCenter.com)

https://www.thomannmusic.com/behringer_x_32.htm

https://www.guitarcenter.com/Behringer/Digital-Mixer-X32-133...

YMMV but I can assure you there is arbitrage/huge discounts to be had out there.

unrelated, but kraft music is a good spot for domestic orders in my experience

What is MAP?

Ah, found it, Minimum Advertised Price.

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