17 July, 2007

Logos and Pricing


One of the things I've wanted Velo Orange to stand for is elegant and understated products. That means small logos, or even no logos. You might have noticed that we don't put our name on our racks, leather products, etc. So it's interesting that a couple of customers have commented that they'd prefer to see our logo on various products. Is the Velo Orange name becoming a status symbol like a Patagonia, Hermes, or Manolo Blahnik tag? I hope not, or maybe that would be a good thing? Hmmm...

We've recently ordered our 27oz stainless steel water bottles without logos. Well actually there is still a tiny logo near the base. The company that makes them insisted. We'll have the 18oz bottles sans logos in a month or two. These are still the greatest water bottles I've used. I don't know a single person who has tried them and gone back to plastic bottles. We use them as off bike bottles too--the environmental impact of disposable plastic water bottles is staggering.

Speaking of the water bottles, you may have noticed that the prices are a little higher. The manufacturer instituted a "minimum advertised price policy". That means the won't sell them to retailers, like VO, if they list the price below their set minimum on their web sites. Personally I think that policy stinks, but I love the bottles so we decided to go along with it. The prices are still well below "suggested retail".

Actually I've been catching a lot of, umm, guff recently, not from customers, but from distributors and competitors because our prices are too low. A well known competitor told me that "I'm making him look like he's ripping off his customers." Two distributors have made pointed remarks about how unhappy they are with our prices.

Now I've always thought that we should base our prices on what we think is a fair profit, not on what others charge. We have a brick and mortar store just like everyone else. We buy and warehouse stock. We are not a "virtual" business.

One solution to this silliness is to import more products directly. We need to grow to do this. But when we do we can challenge the importers and distributors on pricing. And that's good for everyone.

Annette always jokes that I'm just an old hippy socialist. I always though I made a pretty good capitalist.

29 comments:

Anonymous said...

r. crumb would call you a "hip capitalist." keep up the good work against obscene retail margins.

Goon said...

Chris,

Keep doing what you're doing.

I don't shop VO for the prices only, nor do I think ill of others who have slightly higher prices.

VO provides value and "leadership" to this marketplace (in terms of product offerings, blog content, etc.), and deserves to grow and thrive regardless of low pricing.

Anonymous said...

"Obscene retail margins" is too simplistic. The typical retail mark up is 50% of the retail price. That's not the margin. That mark up needs to cover the operating costs of the retailer - and - then have something left over called the "margin" available to reinvest or take as profit.

"Well known sellers" of stuff that VO sells may have higher operatings costs: larger staff, more space, bigger buying commitments with suppliers, advertising, insurance, etc.

Then again, they may not.

I suspect they struggle with operating costs and, due to the niche market, live precariously on the verge of needing to grow or shrink - especially in this economy of waning confidence.

I appreciate VO's prices and shipping charges. I respect VO's sense of style and entrepreneurialism. I rely on the blog for daily diversion.

Keep up the good work and remain competitive and sustainable.

Bruno

Anonymous said...

I was at a conference a while back, and one of the speakers was the CEO of Mountain Equipment Co-op, Canada's largest outdoors store, and a consumer co-op with over a million members. He said his response to competitors who complained that they were selling too cheap was to say, well, there is nothing stopping you from becoming a co-operative and offering low prices and returning the profits to your members. My point of connection is--well, there is nothing from stopping your local strip mall bike shop with triathalon bikes! and big hit freeride bikes! and the bike LANCE rides! from adopting similar practices; if you want to believe in competition, you have to allow for all types.
M Burdge

Joel said...

Perhaps if your competitors gave up their cars for bikes, they would not need to charge as much to make a living.

Anonymous said...

"Now I've always thought that we should base our prices on what we think is a fair profit, not on what others charge."

That policy lead to the death of Suntour as they lacked the cash to survive the Shimano onslaught like Campagnolo did.

Just sayin'.

Anonymous said...

The only thing Velo sells that's significantly higher than Riv is the Nitto R bottle cage. Other than that, I buy everything from Velo. Chris, don't change a damn thing! (well, except for the Nitto thingy teehee).

ANDY said...

Personally, I would prefer no VO logos on anything.

If a good distributor with a good product is going to stop selling to you over your low prices, make an adjustment. If not, then let THEM make the change.

David from DC [SIC] said...

You could also point out that you carry a -very- limited product range, and that this lowers overhead significantly (I suspect).

Karl Matthias said...

The interesting thing is that you're doing business in the US, working under the same market forces as everyone else, and underselling them most of the time. I call that being a good capitalist. And addressing hippie values: who says socialism and capitalism are exclusive ideas? Seems to work fairly well in France...

C said...

What irks me is the people who foolishly assume markup is just another word for profit. Clearly, these people have never worked retail!

The money made from a markup can be used for any number of things including employee benefits and retirement. I think it's funny that people who consider themselves social do-gooders refuse to shop at a chain that provides their employees with medical benefits and instead shop at a mom and pop shop that offers their employees no benefits. They blindly adhere to the small=good/big=bad mindset. Sadly, the world isn't quite so black and white.

It's nice when a company like VO comes along who can provide good service, good prices, and they try to source domestic when possible. Of course it helps to be a very small operation.

As for logos, I like the VO logo and feel they're a great business so I wouldn't mind if it was stamped on something.

peter b said...

Having been in the specialty sports industry for 20+ years now I can safely say that your local retailer isn't "ripping you off" with their mark up (clothing = 50% mark up, hardgoods = 30 – 40% mark up.)

This is because;
1) margin does not equal profit
2) the set cost of doing business (anywhere, even "virtually")is very high
3) the cost to the retailer in obtaining a product is only one small factor in determining that product’s price and value to the consumer
4) anticipating the consumers needs, often months before the consumer is aware of these needs, is a costly game of speculation

Q: How many of you love what Wal Mart and Home Depot are doing in your neighborhood?

Anonymous said...

Hard to argue with C's points.

Serving an economic purpose (in this case providing bikenuts with the exotic retro fare they crave so) goes hand in hand with serving a social purpose if the retail operation requires workers and expects those workers to be healthy, skilled and committed.

Of course, the person in charge could be a cold-hearted, selfish, exploiter selling high, paying low, and keeping all the booty for himself - but I don't think any of the folks who advocate shellac and are selling Brooks Saddles AND lugged steel frames AND little bells fall into that category.

Or at least I hope they don't because it would wreck my need for heroes in midlife.

Logos serve legitimate purposes. Done right, they quietly advertise the brand and (admit it or not) foster customer identification with the good/service. Done right means with class, discretely, etc.

We live in a logo mad society. After purchasing a bottle, bag or even a bike, I'm not likley to slap a big VO on the back windshield of my pickup truck in betwen the Harley Davidson badge and NASCAR number already there (if you get my drift). But it's fair for VO to create some healthy brand identity.

Is it just my imagination or have a few links to other purveyors of bicycling goods disappeared from the VO Blog page?

Check out Saturn's new ad announcing they'll keep Toyotas and Hondas on the lot for immediate test drive comparisons!

viva le velo

Anonymous said...

Yupp, the roll call of the departed links include:

* Kogswell Cycles
* Jitensha Studio
* Heron Bicycles
* Rivendell Bicycle Works
* Cycles Tournesol

I hadn't noticed before. As a VO customer it doens't matter that much to me, but it was kind of neat to see them there.

David from DC [SIC] said...

Bid'ness is bid'ness.

I hear that at Riv, if you don't make the monthly sales target they make you wear the really scratchy sweater with nothing underneath.

Anonymous said...

It's very easy to point at Walmart, Home Depot, Lowes, Dick's Sporting Goods as the culprits but the "local guys" also get into the Made in China action. Because cheap stuff sells and we are in a disposable mindset so, if it breaks/wears out, go get another one.

The real argument here is for value in terms of craftsmanship and service-life combined with style.

If you can sell products you believe in and make a living doing it, then by all means compete on price; compete for market share; compete for customer loyalty. If you need more help to make a living, make sure they get what they need to be committed and contributing partiicpants in the enterprise. Make sure they understand the value they create and compensate them fully and fairly.

But beware, before you go labelling a 12 person company as greedy because they need more margin than a 3 person company, acknowledge the economies of scale.

Building a growth oriented business can get expensive so gauge your margin accordingly but do realize it's a small market right now and internecine competition may deliver a pyrrhic victory.

Bruno

Anonymous said...

I don't think anyone is accusing the "12 person company" of being greedy. Seems to me they fired the first shot by accusing Chris of making them look bad.

Chris Kulczycki said...

The competition between those of us selling retro style bikes and bits is pretty friendly. That's why I'm a little irked when I hear comments about pricing stuff "too low", but it's not something to take too seriously.

One of my little theories when starting VO was that we should offer as many things as possible that no one else has. That solves the whole problem.

The other thing is that we don't consider Riv or Kogswell or Heron our competition. I think, or hope, that we have a rather different philosophy of cycling. I like to think that we are more like a low-budget version of Mariposa or Toei or Singer.

Anonymous said...

A low-key logo would be OK. After all, we are willing to pay extra for Specialites T/A, Simplex, etc when in all reality there are similar good quality parts available from eastern manufacturers with less brand name status. Also: Karl, Capitalism + Socialism = Fascism. Still seems like a good idea?

Anonymous said...

Eureka!!

A low key logo stitched onto armbands and pant cuff straps!

Combine this with a Porteur frame that can accomodate a Mauser .30 caliber sniper rifle and I think we're onto something.

Anonymous said...

quote:
"Bid'ness is bid'ness.

I hear that at Riv, if you don't make the monthly sales target they make you wear the really scratchy sweater with nothing underneath."
end quote

Nah, the scratchy wool undies are to test potential Riviites to see if they are fit for membership. My first Riv product I bought was a scratchy wool shirt, now I have two Rivs!!
So the strategy works ;0)

On a serious note, I applaud what Chris is doing here. I visit everyday, and see the trend towards Velo Orange bikes/Goods/Riv bike/goods/Jintensha bikes/goods,
as a healthy backlash to the racing scene, which is falling apart at the seams due to the doping issues.

More people want to just ride, not pose as racers. Because being seen as a racer associates one with the dope scene.
The above named companies support riding, above all. Oh, I would be ok with tiny logos.
my 2 cents
Mark

Mike K. said...

sort of off topic, but you did mention it in your blog post:

do the 18oz bottles fit in bottle cages? the Klean Kanteen website makes it seem like only the 27oz bottles fit in cages...

Anonymous said...

translation "Your prices are too low"= "You are a better businessman than me and I can't compete"... The bike business is riddled with "minimum price" policies which- if violated- result in the shop being cut off from its supply. It is restraint of trade pure and simple, anti capitalist, and illegal (if anybody could be bothered to enforce the law)

team said...

"and illegal"
not really true, it would be illegal if say all headset makers went ahead to say that all headsets must be sold for over 150 dollars. Now if only one or a few makers went ahead and said that their headsets must cost 150 bucks that is not price fixing. Basicaly as long as their are other options it is legal for a maker to do what ever they want to with price.

Things you learn on NPR.

Alan said...

I love my Velo Orange wool jersey which stands out wonderfully in a world of lycra and I have yet to see another while on the road. That said I shrunk it a bit in the wash and thus the jersey will eventually wind up on ebay as a medium rather than a large.

My favorite jersey of all time was worn by a fellow with a massive protruding stomach. The jersey fit rather tightly and said in big bold letters, "Old Men Who Get Fat Over the Winter."

Chris Kulczycki said...

Mike, The 18oz bottles do fit in cages. I use them all the time.

david_nj said...

Personally, I don't want logos. I absolutely detest logos. So, if the decision is to put logos on stuff, please at least do it in a manner than can be eradicated.

Manolo Blahniks are one thing; bike parts are quite another!

Anonymous said...

I don't claim to know anything about this sort of thing, but you might want to report the bottle maker to the antitrust division of the US justice dept.

http://tinyurl.com/2vbqtn

If their price-fixing policy is indeed illegal, that might put a stop to it.

Martha said...

In the knit-blogging world, one high-end yarn company was doing the same thing, refusing to sell to businesses that priced their products below the yarn-maker's set point. This got out, the knit-bloggers revolted, and this company no longer has this policy. I also am curious about the legalities associated with this.