The chance of a lifetime: You are asked to start a bike shop. How should it be done?

[laserracer]

i would like to walk into a bike shop to be greeted by happy smiley people ..a shop that has reasonable prices for there parts and service .. and a garden bar not serving alcohol but good coffee and hot roast beef sandwich's somewhere you can sit with like minded enthusiasts and chat about buying new bikes and what parts you need

[breakaway]

Would also be nice if they had a tandoor and serve up delicious tandoori chicken etc at a reasonable price.

[bogan]

Hi Bogan,

First, an apology for misreading your earlier post. Hands up to that one. But I think you see where I'm coming from on the economies of scale argument. And competing with the US operators.

no worries, is a lot to read in here it certainly would make the whole system more attractive, but for the initial startup thing its not really an option.

To be competitive all you'd need to do is undercut the retail price less maybe 15% for store discount. So somewhere around the $100 mark ought to do it. But only if you can buy the parts, ship them in, store them, advertise them, and sell 100% of them at a profit. Unsold stock will really kill your overall profit.

But you'd also need to be able to source the parts from a supplier who'd be happy for you to undercut NZ prices for your proposed inventory. This could be harder than you think, as the UK wholesaler may already have some very good customers here they'd wish to keep happy.

hmmm, yes it would hinge on that, though If one was serious about this plan such a fact would be found out in the early stages I am guessing? I have no idea on how one gets a wholeseller.

... the more I think about your 'parts-only' plan, the more I think you could be on to something. If you could identify and stock a small inventory of a few dozen of the most in-demand parts across the widest possible number of motorcycles, then advertise them right here on KB, and run distribution from a small home-based unit, you could probably build a strong small business.

Yeh, I was initially thinking just cheap parts with big lead times, but your take on it sounds equally valid.

[Katman]

Exactly, if things look possible at 10 items, surely it will look a lot better at 100!

Are you married to a bank manager?

Let's develop your idea a little further.

Are you going to bring in 1 each of 100 different items? Or are you going to bring in 100 units of the same item?

If it's 100 units of the same item, which item are you going to choose? Do you think there is the market in NZ to sell every one of your units? What are you going to do with the ones that don't sell because a new model comes out next year? If you decide to sell any unsold items at cost, how is that going to affect your profit? (Considering you set your retail price based on the plan of selling 100 units at that retail price).

If you're going to bring in 1 each of 100 different items, what happens if you sell 1 item this week and next week another person wants one of the very same item? Are you going to get in just that one item or are you going to order another 99 different stock items along with it to keep your freight per item cost down? Or are you going to wait until you receive 99 other orders for items and risk incurring the wrath of the customer that wanted that first item within 3-4 days? If you order in just that single item are you going to be able to offer it at the same price?

[bogan]

Are you married to a bank manager?

Let's develop your idea a little further.

Are you going to bring in 1 each of 100 different items? Or are you going to bring in 100 units of the same item?

If it's 100 units of the same item, which item are you going to choose? Do you think there is the market in NZ to sell every one of your units? What are you going to do with the ones that don't sell because a new model comes out next year? If you decide to sell any unsold items at cost, how is that going to affect your profit? (Considering you set your retail price based on the plan of selling 100 units at that retail price).

If you're going to bring in 1 each of 100 different items, what happens if you sell 1 item this week and next week another person wants one of the very same item? Are you going to get in just that one item or are you going to order another 99 different stock items along with it to keep your freight per item cost down? Or are you going to wait until you have 99 other items that need ordering and risk incurring the wrath of the customer that wanted that first item within 3-4 days? If you order in just that single item are you going to be able to offer it at the same price?

Cheap parts with big lead times would be the plan (so basically carry nothing in stock), not everyone would be happy with that of course, but it'd be the minimum risk and minimum startup cost.

The long lead times would probably put a lot of people off, but they probably arent the ones getting the stuff online anyway, personally I dont mind that as I have quite a few bits that can wait, sometime even forget what I've ordered (and paid for) so its like christmas when it comes in the mail

[Katman]

Cheap parts with big lead times would be the plan (so basically carry nothing in stock), not everyone would be happy with that of course, but it'd be the minimum risk and minimum startup cost.

The long lead times would probably put a lot of people off, but they probably arent the ones getting the stuff online anyway, personally I dont mind that as I have quite a few bits that can wait, sometime even forget what I've ordered (and paid for) so its like christmas when it comes in the mail

Welcome to the yawning chasm that seperates theory from reality.

[bogan]

Welcome to the yawning chasm that seperates theory from reality.

Perhaps you're being a bit of a woodsman there? (old codgers bumping into trees and whatnot )

You have always done things with parts in stock etc, so can't see how it can be done otherwise, the theory I described is kind of like JIT (just in time) manufacturing (holy crap I did learn something from that paper ), where the idea is to have minimum levels of stock to bring down operating overheads, of course they must also have enough to keep the machinery/workers going, and manufacturing it is easier to plan as you don't get last minute jobs etc, however the theory is the same.

[Katman]

Perhaps you're being a bit of a woodsman there? (old codgers bumping into trees and whatnot )

You have always done things with parts in stock etc, so can't see how it can be done otherwise, the theory I described is kind of like JIT (just in time) manufacturing (holy crap I did learn something from that paper ), where the idea is to have minimum levels of stock to bring down operating overheads, of course they must also have enough to keep the machinery/workers going, and manufacturing it is easier to plan as you don't get last minute jobs etc, however the theory is the same.

*I palm my face*

[Swoop]

Look,You're Kiwis,you live in a third world country with first world desire for toys,but are only willing to pay the lowest price.

Quote of the thread!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

[Scorp]

Cheap parts with big lead times would be the plan (so basically carry nothing in stock), not everyone would be happy with that of course, but it'd be the minimum risk and minimum startup cost.

Got a sneaky suspicion that Fishpond do something like that with their books. Their pricing is close to Amazon's, and they're lead times are way slower. I don't even bother looking on Fishpond, just go straight to Amazon.

I think you'll find, if you do the sums, that unless you carry stock and buy in substantial quantities, that you'll never create enough margin for yourself to make a living.

Let's take your example of the part you reckon you can bring in for $84 and which sells in your local bike shop for $124. Check out the NZ Post's parcel rates, and you're going to find that P&P is probably going to add another $10 if you're sending it somewhere in the North Island. So your all in cost to your customer is now $94.

In order to make it worth your customers while waiting for your long lead times, you'll need to undercut your local bike shop by at least $20 or people are just going to pay the extra. And if, and it's a fairly big if, people are prepared to wait the extra time just to save $20, that leaves you a $10 profit per sale before operating and marketing costs and tax. That's pretty slim pickings.

Hence my suggestion that you find a product that enjoys a steady/regular demand, buy in bulk, then sell at a competitive rate. You'd also need to produce aggressive ads and place them on sites like KB, e.g. offering special price deals to the first 1,000 buyers, or within the next 10 days, in order to maximise your chances of clearing the stock as quickly as possible.

If you could lower the unit cost for your part to $50 if you buy 1,000 and clear the lot over a 10 day aggressive sale with a very competitive price of say $70 plus postage and packing. You could beat the high street price by $45 and still clear $20 per unit.

[bogan]

Got a sneaky suspicion that Fishpond do something like that with their books. Their pricing is close to Amazon's, and they're lead times are way slower. I don't even bother looking on Fishpond, just go straight to Amazon.

well aparently they aint doing too badly though

Having started as a one man band, Fishpond is now 25 employees strong, after just 3 years in the market.

I think you'll find, if you do the sums, that unless you carry stock and buy in substantial quantities, that you'll never create enough margin for yourself to make a living.

Let's take your example of the part you reckon you can bring in for $84 and which sells in your local bike shop for $124. Check out the NZ Post's parcel rates, and you're going to find that P&P is probably going to add another $10 if you're sending it somewhere in the North Island. So your all in cost to your customer is now $94.

In order to make it worth your customers while waiting for your long lead times, you'll need to undercut your local bike shop by at least $20 or people are just going to pay the extra. And if, and it's a fairly big if, people are prepared to wait the extra time just to save $20, that leaves you a $10 profit per sale before operating and marketing costs and tax. That's pretty slim pickings.

Hence my suggestion that you find a product that enjoys a steady/regular demand, buy in bulk, then sell at a competitive rate. You'd also need to produce aggressive ads and place them on sites like KB, e.g. offering special price deals to the first 1,000 buyers, or within the next 10 days, in order to maximise your chances of clearing the stock as quickly as possible.

If you could lower the unit cost for your part to $50 if you buy 1,000 and clear the lot over a 10 day aggressive sale with a very competitive price of say $70 plus postage and packing. You could beat the high street price by $45 and still clear $20 per unit.

I had factored in a $5GBP NZ post cost, so bout 10NZD was already in there And in theory the extra delays caused by reposting in NZ should only be a couple of days, so not overly inconvenient on top of a shipping time of 2 weeks or more.

Yeh I hear what you are saying, If I had the money and was serious I'd definetly look into stocking items etc and buying as direct as possible, but that takes more research than I'm gonna do. My point is that it is possible to get parts here and sell them from an NZ company who's prices are competitive with international stores. I'm not quite sure what my original reason for proving this point was probly just an attempt to shut the nay-sayers up

[Katman]

Hence my suggestion that you find a product that enjoys a steady/regular demand, buy in bulk, then sell at a competitive rate.

Surely you're not suggesting that someone selling one product is going to satisfy New Zealands motorcyclists.

All that's going to do is make that one person a profit while not gaining anything for motorcyclists - except one product that they can get cheaper than in a bike shop.

[Conquiztador]

Yeh I hear what you are saying, If I had the money and was serious I'd definetly look into stocking items etc and buying as direct as possible, but that takes more research than I'm gonna do. My point is that it is possible to get parts here and sell them from an NZ company who's prices are competitive with international stores. I'm not quite sure what my original reason for proving this point was probly just an attempt to shut the nay-sayers up

Back for more...

Here a scenario: We have a faulty bike. We go to the local shop and want the bit. They tell us it is $500. We say: "SHIT! Thats expensive. But I need one, so yeah, I'll take it". We then have to pay the $500 up front so they order it. They contact their NZ distributor/importer who contacts their overseas distributor who gets it from the factory. This takes ages and we get peed off. We were peed off at the high price, but decided to pay as we really need that bit. But the real anger comes in when the bit does not arrive before 2 months later.

Yep, we can do some websurfing and find a supplier of that bit, probably 1/2 price (or less). Then we need to have a credit card, do the ordering and all that goes with it. And it turns up in our letterbox a week later. But we also need to have some knowledge (that takes some time to learn, and we most probably will never need again...)

How bout a company that sorted all that hassle for us? We contact "Find-A-Bit" and tell them what we want. They ring/email us back inside an hour and say: We can have it here in a week. Cost you $400. Pay by internet banking, post a cheque (you will have to wait for clearance) or deposit cash in to our account. A week later we have the bit.

We would pay them for doing the web searching, for having a credit card with cash on it and for the service, while we could go on with our life earning our hourly rate, washing the dog or watching footy on TV.

Find-A-Bit would slowly start to get a reputation of doing a good job (A little like the Doctor), they would start to build a relationship with some of the overseas suppliers and perhaps start to get a little better prices. They could get an agreement with a courier company so their costs would go down. And here is a business model that needs very little money up front...

Right all nay sayers, shoot a hole in that one.

[Katman]

Right all nay sayers, shoot a hole in that one.

Does 'Find-a-Bit' handle the warranty claims?

Whose headache is it if the wrong part is sent?

Which part will 'Find-a-Bit' source? The cheapest part, or a good quality part? (Or just whichever part gives them the best margin?)

[bogan]

Right all nay sayers, shoot a hole in that one.

Nay, can't see any holes in that one . With the amount of info and parts diagrams freely available online it probably wouldn't take too long to find the bits either.