14

At least in Indonesia it is.

Know why?

  • 1
    It's not in the USA, at least on high-end components. I saved a couple thousand on my Dura-Ace build by doing it myself. On entry level bikes though, I have seen complete bikes for about as much as just the frame alone goes for! – Brian Knoblauch May 9 '16 at 15:24
  • 3
    @BrianKnoblauch for sufficiently high-end components the bike-builder will be buying in low volumes too, and the assembly will be more expensive (mechanics will do more of the build, assembly operators less). – Chris H May 9 '16 at 15:48
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    This may be a duplicate of bicycles.stackexchange.com/q/32003/19106 – ebrohman May 9 '16 at 17:06
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    @BrianKnoblauch I have only rarely seen that to be true, and usually only when some sort of magic sale on last year's stock is going on. I've also seen an example where a manufacturer was closing out aluminum frames with a full Dura-Ace group for less than you could purchase just a Dura-Ace group for. However, these instances tend to be the exceptions, not the rule. – Deleted User May 9 '16 at 17:27
  • 2
    This question is actually not bicycle related. It's a universal phenomenon. – Peter A. Schneider May 10 '16 at 8:09
34

Economics of scale.

For instance, when a bike manufacturer buys thousands of groupsets directly from a component manufacturer, they get a significantly better per unit price than a retailer can.

The retailer not only must necessarily buy in lower volume, but also typically buys through one or more layers of middlemen, each layer adding their cut to the wholesale price.

Thus, the typical replacement price for a single part is often double or more than the original cost to install it at the manufacturer of the bike.

  • 3
    Reasons for some of the economies of scale: handling a package takes about the same amount of time whether it has 1 part or 50 identical parts in it (affecting internal and delviery costs); retail packaging is more expensive; it costs money (in the form of staff time) to sell you an item, whether that's a bike or a sprocket. – Chris H May 9 '16 at 15:03
  • 3
    Further add the fact that each individual part is not likely to sell quickly. Many of the parts will sit on the shelf for quite some time. This is a huge cost in business. Add to the mix that markup is different, the bike might only have a 15-25% margin but any part under forty dollars is likely to be closer to 100%, with intermediate items at similarly intermediate margins. That's the cost of doing business. – wedstrom May 9 '16 at 15:56
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    Lets not forget BSOs are much cheaper than Bikes. But you can't buy Groupset Shaped Objects. – Aron May 10 '16 at 6:51
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    This doesn't work for everything though, computer hardware is almost always cheaper when buying separate components than full builds. I think for some products, resellers know they can allow themselves to overprice the shit out of full builds because most people can't do it themselves anyway. – Kevin May 10 '16 at 8:55
18

In addition to economies of scale, you also have to consider the difference in price sensitivity and leverage between a manufacturer and a consumer.

If Shimano told Trek that they'd start paying retail prices for their cranks, for example, your next Trek would have SRAM cranks. You can be sure they've negotiated the lowest plausible price, because it's very worth it for them to make sure they buy a component for $34 instead of $35 when they're selling thousands of bikes.

Consumer-level parts purchases, however, generally fall into upgrades (you want an Ultegra shifter) and replacements (your shifter broke so you need a new shifter). The first group is generally price-insensitive practically by definition, since no one really needs an upgraded derailer, and you can get away with charging them more for the privilege. The second group is also going to be less price-sensitive by virtue of the fact that their cost to get their bike working again with a single component is always going to be lower than the price of buying a new bike.

Component incompatibility makes both of these more important. If you want to replace a Shimano derailer, it's generally very difficult to determine which non-Shimano components will work, so you're "locked in" to a given manufacturer. From this we should predict that known-interchangeable parts (handlebars, cranks, etc) should have lower markup than their counterparts, but I'm not sure how to measure that.

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    There's also the middleman. If you build out of parts you must buy from a parts supplier who has his own expenses. The manufacturers deal with each other directly, cutting out a lot of expense. – Daniel R Hicks May 9 '16 at 17:56
  • These points define economics of scale. – zenbike May 9 '16 at 21:03
4

Prices of goods are pretty much unrelated to the cost to make them, they are set at the maximum value company can get away with.

Parts are generally sold for repairs, not new bike construction.

If you already have a perfectly fine 95% of the bike, your two options are spend a lot to get a whole new bike, or a little to get a new component. Even if the component costs twice what it should, you're still saving 90% compared to buying a whole new bike.

1

It is an economic law that the value (=cost) increases if you split something in smaller parts. Examples:

  • tomatoes sold separately are more expensive than when sold together in a box, crate, or truck load
  • you make more money when selling apartments than when selling the entire building at once

This might be related to the physics principle of entropy. The separate parts (tomatoes, apartments) may be sold to different customers that have different needs, where the entire system (box, building) can only be sold to one customer that has the specific need for the entire system, which limits the number of potential customers.

As for the bicycle, as a whole it can be used for only one purpose / customer. When sold as parts, each part may be used independently for a repair, for building a custom designed bike, etc. More use options means more value.

The mere fact that selling parts separately involves more handling costs is not a sufficient explanation. If separate parts do not have a higher value for the customer(s), it will be difficult to recover the higher handling costs.

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