Quote:
Originally Posted by tractionaction
I believe they where a big Sponsor at the SF SX. In some cases they gave away free riding gear with certain models.
Their deals are so good other shops in the bay area are forced to lower their prices also. In most cases loosing money on every dirt bike sold.
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I know other dealers don't want to compete, as they don't want to cut their profit margins down. But, I don't think they are losing money on every bike sold.
Keep this general business principle in mind: The factories don't have an incentive to limit the number of dealers who distribute their bikes. I.e, they want a mechanism (dealerships) to be able to get as many of their bikes to the public (in various locations) as possible. That means that OTD Cycles pays the same or nearly the same price on each bike as other dealers. However, OTD can earn rebates based on number of bikes sold, just like any other dealer can.
OTD apparently chooses the business model of selling lots of bikes by reducing their margins, and if they are successful, they earn part of those lost revenues back in the form of dealer rebates. They also earn money back in the form of ancillary sales, such as parts and accessories, to their large number of bike buying customers. Other shops don't seem to want to take the gamble of lowering prices in the hopes of gaining more customers, so they just try to sell less bikes at full markup.
I of course don't know the specifics of OTD Cycle's arrangments with any of the factories, or their target monthly margins, etc. However, the above formula is generally known in the marketplace. No dealer will sell a bike at a NET loss. I.e., at a price below cost without any offset, like a rebate from the factory or augmented ancillary sales. If they did, they'd go out of business in a hurry.
Anyway, I'm glad OTD has stepped up the competition. For us mere mortals that don't get deals because we are not pro riders, nor successful racers anymore (thus, doing
PR for a particular shop), it is nice to get a new bike without breaking the bank. I appluad OTC's efforts to provide bikes at a low cost. Seems that since the 90's, lots of businesses, especially in the bay area, think that because they can get away with gouging the customer, that makes it OK.