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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 con

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_emerging_portland_ou.html https://www.oregonlive.com/silicon-forest/2016/01/the_clymb_...

lumost 6y ago
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?
- trentnix 6y ago
  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.
- opportune 6y ago
  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.
LeifCarrotson 6y ago
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.
- bigiain 6y ago
  > 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.
- irscott 6y ago

lumost 6y ago

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?

trentnix 6y ago
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.
opportune 6y ago
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.

LeifCarrotson 6y ago

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.

bigiain 6y ago
> 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.
irscott 6y ago