In my last post we reviewed how the mobile bike shop trend, while interesting, has only one real advantage over the traditional brick-and-mortar retailer. Here is how the score played out:
- Price Reduction: Tie
- Customer Experience: Brick-and-mortar wins
- Added Value: Tie
- Convenience: Mobile wins
So the real opportunity for brick-and-mortar retailers is to level the playing field for convenience. Omni-channel retailing (like QBP’s announcement today) is one way that brick-and-mortar retailers have leveled the playing field against online retailers. I can buy from my local bike shop in my pajamas just as easily as I can buy from Chain Reaction.
So the opportunity to improve convenience within the bicycle service arena is easy: Buy a van and offer pick-up and delivery of bikes.
Here is some basic math you can use to adapt to your own situation to give you a sense of the costs and what you might decide to charge:
Leasing: $3000 down, $400/month for a Ram Van or Transit Van for a 36-month lease with 10k miles annually. Expect a bit more for a Sprinter.
Outfitting Van: You want to put a nice vinyl wrap on any commercial vehicle because it is a moving billboard. Assume $3500 up front for the wrap and weekly washing at $45/month. Racking, tools, and other outfitting of the van might cost another $2500, but will last the life of van.
Operational (Fuel, Insurance, Maintenance) Costs: Deduction per mile from the IRS is $0.55-ish, but true cost of operation is usually more like $0.40/mile. Leasing can save lots of that (first 3 years won’t see new tires, brake pads, etc). It may be more like $0.35 per mile. 30 miles per day = 900 miles per month.
Personnel: You want a great, patient driver who will recognize he/she is driving a billboard. Paid $14/hour at a total cost to the business of about $21/hour after taxes, perks, etc. Probably only driving 2-3 hours per day to pick-up 4-5 bikes = 75 hours per month, 130 bikes per month.
Workload: Note that I am assuming it does nothing but pick-up bikes (no other value to the business like errands between multiple locations). 75 hours/month, 130 bikes/month, 900 miles/month, 4.5 washes per month.
- Down-payment and set-up costs: $9000
- Lease: $400 per month
- Operation: $315 per month
- Personnel: $1575 per month
- Total monthly cost: $2555
- Total set-up plus monthly costs (times 36 months) = $91,980
- Workload is 4.5 bikes per day, 360 days/year over 3 years = 4860 bikes
Totals: $91,980 over 3 years / 4860 bikes = $18.92 per bike.
Charge $20 for the service and you’ll break even. Or charge nothing and make it part of your overhead.
Either way, your customers will love the convenience. Create an online form for scheduling and you have every advantage over the mobile bike shop.
Hi Mike, thanks for bringing this discussion up. My immediate thought is I would not want to spend $19 to make $20. Of course if you are unable to keep a healthy service Dept going with enough pick up and drop offs and need to increase your workload it might be beneficial. Also, we get a ton of additional purchases from customers coming in to pick up their repairs. These purchases are generally high margin too.
That’s great insight, Lester. I agree that just spending $19 to make $20 isn’t a great deal…but making it easier for your customers to do business with you at little or no added expense is a great deal. Thanks for the comment!