Our pricing model is so simple it's crazy, but it's so different than the way most things in the world are priced that it bears a little explanation.
Some time ago, we had a big long discussion about how we should structure our pricing, and what we came up with was that we simply needed to make "X" per wheel set in order to make the business work. If the cost of the materials going into the wheels was $0, the selling price of those wheels would be "X." Since nothing ever costs nothing, the default selling price of our wheels is the cost of the components plus "X." For clarity, "cost" is our wholesale cost, not the retail price.
I'm not going to tell you what "X" is, but I can tell you that it's more than you'd pay to have a set of wheels built by a traditional bike shop. For one, we do it better than the vast majority of traditional bike shops. The bike shop around the corner has a high school kid do a bunch of their wheel work, and they farm some of it out to a local guy. None of it is as good as our work. That's a bluntly stated perspective you're not necessarily used to reading here, but there it is. Beyond that, there are costs outside of just the build - sales and advice and support and boxing and shipping and all the other stuff that we do.
The retail price of any given component is roughly irrelevant to how we price. If two hub products carry the same retail price but our wholesale cost is different between them, the wholesale cost drives our price, and vice versa. This is why, as I explained in a recent post comment, our selling price for a wheel set built with DT 350s would be roughly equal to our selling price for a wheel set built with White Industries T11s. We pay about the same for each, despite the difference in retail costs.
This is a big part of why we don't bother with builds using very low cost components. There are many wheel products we sell where our built price is just about equal to what you could go buy the unassembled parts for. The less expensive the components going into that wheel are, the further way you get from that being the case, so at some point we just have to say "we are not an economical supplier of assembly and support etc of those components and therefore we can't/won't play that game."
Conversely, there are some components where just selling the parts for what you'd be able to buy them for has a little room beyond "X." In a lot of those cases, we are well priced relative to market, but we're not trying to be Discount Dave's House of Wheels.
As I was explaining to a friend last night, apart from the simplicity of it for us, this also removes any incentive we might have to push the higher priced and therefore higher margin wheel sets. If we make more or less the same on each build, that frees us up to not consider our back end in helping you find the best solution for your situation.
So we'll build with DT 350s, but they won't be priced in line with their relative retail price to T11s. You shouldn't think of that as us giving a "bad deal" on the DT build, we're just a good deal on Whites. Same deal with Shimano - the fact that you can buy their hubs on Wiggle or Ribble or wherever at bargain basement prices doesn't remove our need to make "X" in order to profitably deliver a set of wheels to you, so while we'll build with their hubs, they aren't a mainstay thing for us.
While it has some peculiarities and asymmetries, we think that our pricing is the best solution for both us and you. Keeping our best interests aligned with yours gives us great freedom to focus purely on helping you find the best product for your situation.
Jeff – Those are 2 very nice cents, thanks.
Matt – No special tools, a few special techniques but nothing that no one else replicates. It’s just knowledge of what’s going to work and how to get it there, ability to give good counsel on parts selection, plus a ton of care and a lot of reps. Building wheels is like being a plumber – there’s no ‘best’ there’s just ‘did it right’ or ’didn’t do it right.’ Most shops simply get no reps at building wheels because they sell pre-built factory builds or get them built by QBP, Hawley, etc. and their labor turnover is such that even the reps they get don’t add up for any one person.
Interesting article. I’m curious about a strong statement (that I don’t necessarily disagree with) that you build wheels better? What does that mean? If I’ve missed a post on your process, tools used, and so on, I apologize for the redundancy of this question.
I’ll just add my .02 cents and say that I don’t think your products are all that expensive. I also don’t think you even need to explain yourselves, but understand why you do. For anybody reading this that hasn’t bought your wheels before, let me just say that the knowledge transfer, build quality, and the fact that you answer the damn phone when I have a question is WELL worth whatever “X” might be.
Dr_LHA – Correct, we are arriving at “X” irrespective of retail price. Some builders do retail cost of parts and do the build free, which will be less than us at the low end and cross over somewhere in our sweet spot, after which we generally just get better. The most common shop convention I know of is retail cost of parts plus a build fee, with 20% or so off the parts cost if you buy them all through the shop.
Long and short of it is that within our strike zone, we’re not going to be an expensive place to get your wheels, and we think the experience will be as good as you can find out there.
I guess a point here is that although “X” might be higher than what my LBS charges for a build, my LBS also charges me retail cost for the parts, or at best a price somewhere between retail and wholesale.