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Thankfully the E bike is the perfect vessel to bridge that power sport product leap.
Jeff's right on the financing side. This is far from the initial foray into it. You were able to get Trek Card financing for like 15 years ago, notwithstanding that it's now been phased out for Klarna or whatever.
Wide-scale rollout is another question.
Margins on ebikes are not as good on the brand side. The drive unit, battery, wiring, charge port, display, controller, charger, brackets, and higher assembly cost due to extra complication all add up to more than the difference between what the equivalent spec pedal bike and ebike are once typical margin calculations are applied. The market has priced ebikes lower than they should be, as crazy as that sounds. It's one of the reasons ebikes are not quite the panacea some people think they are for brands or dealers. Yes ebikes have higher average MSRP so more dollars are coming in but on shorter margins to counter balance that a bit..
the more ebikes get sold, the more a shop can earn through just replacing the faster wearing parts. set the service interval in the software to 1500-2000km and you have a steady flux of people coming who want the service symbol to be gone again.
even easier when financing those bikes. in germany, those contracts come with mandatory service intervals over the whole time the contract runs (usually 3 years).
I do know at one point during the post COVID bust, one of the bigger players had dealer margins at 10 to 15% with their ebikes that were on sale for about 3 straight years.. The only upside was we made up for that a bit in volume.
Now that inventory issues have settled down, I'm pretty sure the margins have improved a bit. However, to your point, the margins on ebikes, and any high end bike in general, tend to be lower..
A couple of interesting ideas here...
A service light on ebikes to get the customer to bring the bike in.. It may not turn into a major service, but it would almost always generate some kind of money, especially if the shop has a good service department. I could see push back on that from the customer who does most of their own repairs.
The 3 year terms on a lease is actually brilliant. That basically guarantees the customer has the lease coming due when the next generation of bike has dropped.
I guess I could see this potentially working if the shop is comfortable with selling used bikes... However, sometimes selling used bikes bring up other issues for the shops as far as local laws and insurance..
Dammit, now you're going to make me start thinking about this..
An idea a friend of mine had was a subscription type of service for sealant.. Every couple of months, the customer is sent a bottle of sealant as a reminder to refresh it.. At first I was on the fence with it, but with so many other companies using this model, maybe it could work..
Just to put a bow on this: I do not expect asset-backed financing to show up in the mountain bike industry anytime soon. I am also not convinced it would matter much even if it did.
A few thoughts...
The riders most likely to use consumer financing are already fairly credit constrained. A lot of that cohort has limited remaining credit capacity, and they are the ones who would theoretically be financing an e-bike or similar product, especially at today's APRs.
Speaking of APRs, I do not think true 0% APR offers are likely to show up in any meaningful way beyond short-term promos like Shop Pay. The interest rate backdrop is very different than it was in 2016. Could 0% financing drive incremental sales? Yes. But 10%+ APR financing probably does not move the needle much especially among the often well educated bike buying demographic.
Asset-backed financing would also require insurance. That seems to exist in some form for commuter e-bikes, but I have no idea what it looks like for mountain bikes that get absolutely hammered. Anything is insurable in theory, but the real question is what the premiums look like over time.
Residual value is another major problem. Trying to forecast residuals in such a fickle market is extremely difficult. It might be worth solving if there were another zero attached to the sale price, but when the high end is roughly $15K and the total addressable market is relatively small, the juice probably is not worth the squeeze.
Leasing is more interesting. Upway is worth looking at for what they are doing with e-bike “leasing” in the U.S. Interestingly, I could not easily figure out how to actually set up a lease. I did not try that hard, but the flow kept pushing me toward a normal checkout to buy the bike. When it comes to leasing an e-mtb however, I still feel this is rife with issues. Bikes would get absolutely hammered and the amount you'd force the customer to pay over 24 months would probably be close to what the bike costs (IE, $300/month). I don't see many going for that. Its car payment level of monthly burn.
Germany seems to have the most proven model, at least from what I can tell. Employers offer e-bike benefits to employees, often structured through a lease. But that is meaningfully different from mountain biking. Those bikes are often transportation substitutes, and the model benefits from local culture, employer involvement, and tax treatment.
That was a lot of words to say: I expect Klarna, Affirm, Shop Pay, and “credit cards disguised as bike financing” to remain the default in our space.
what? margins are usually the same over the whole brand? at least when you are a big retailer. i never worked for a small shop. but the big ones usually negotiate that when putting down the order volumes. the bigger your volume the bigger your margins gets
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