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What Goes Into The Cost of a Bicycle?

by Dragon Bicycles

Bicycle Pricing

Bikes are sold at a variety of prices from $200 to $10,000.  A bike's price is determined by the frame material and components included with the bike.  Or is it?  When we buy a bike do we really know how much of our money goes toward making the bike better?

Let's explore the various factors that affect the price of a new bike.  

Frame Materials 

15% of a bicycle's cost goes to the frame material

Carbon fiber frames demand the highest prices

Steel frames are used for inexpensive and high-end bikes

Aluminum frames are used on mid-level and inexpensive bikes

 

Components 

20% of a bicycle's cost.  A bike will typically have between 22 and 25 components  

The graphic on the right shows the Shimano and SRAM mountain bike component by model level.  XTR Di2 from Shimano is the most expensive, while the Shimano Tourney is the least expensive.   

Bicycle component makers like Shimano and SRAM make components that range in price from inexpensive to very expensive.  Typically as the cost of the component increases in price, so does the quality, durability, and weight savings.

In an effort to gain more sales, the bike industry will sell an expensive frame with inexpensive components to bring down the price.  

Crafting

20% of a bicycle's cost.  The majority of bicycles are still built by hand

Building a bike is labor intensive and requires extreme attention to detail.  Check out this really interesting article about building carbon fiber bikes from the masters at CyclingTips.

Steel & Aluminum Are Welded By Hand

Steel and aluminum are welded by hand.  Carbon fiber is molded and shaped by hand before curing.

Shipping

5% of a bike's cost goes to transporting the bike from the factory to the dealer.

A bike will change hands 4 to 5 times before reaching the customer. 

A typical bike's travel schedule includes: Frame Builder>Bicycle Assembler>Brand HQ>Distributor>Retailer.  The price of the bike increases with each step  

Overhead

20% of a bike's cost.  Industry leaders employ hundreds of people in various locations around the world.

Retail Store

The cost to operate a retail storefront varies between 6-10% of a bike's cost. 
Rent, utilities, and maintenance are just a few of the many costs associated with operating a retail store.   

Marketing/Sponsorship

Roughly 8-10% of a bike's cost goes to brand advertising and marketing campaigns. 

Larger brands sponsor bike teams, races, and events. 

Takeaway

A bike's retail price is driven by seven factors:  
*Frame material
*Components
*Crafting
*Shipping
*Marketing/Sponsorship
*Overhead
*Retail Store

    Retail prices that we see at our local bike shop and online are driven by seven definitive factors.  In trying to understand bike pricing, we can clearly see the type of frame material and components used on the bike.

    Less obvious are the bike brand's operating costs that include crafting, shipping, marketing, overhead, and retail.  But actually, discovering the five less obvious cost factors is easy enough. 

    The biggest brands are publicly traded companies, and they regularly share their financial info with the public.  All bike brands have a presence on Facebook, Instagram, Twitter, etc. and regularly post about events, sponsored riders, and races.   

    Do a little detective work on Google and websites like CyclingTips and BikeRadar to help fill in the rest of the story.

    You can always check back on Dragon's blog for bike tips, inside info, and product updates.  

    Safe riding.

    p.s. email us a pic of your winter biking adventures, signup for our newsletter and we'll send you two free Dragon water bottles. Email pics to cs@dragonbicycles.com