I’ve wondered about the economics of online cheap bike sales. At bicycle trade shows I often run into very enthusiastic young people who borrowed $20,000 from the parents to become an Internet sales entrepreneur. They go to Alibaba.com and buy a container load of these bikes for about $50 each from a company like Hangzhou Furui Bicycle Co., Ltd.
This bike looks suspiciously like the Hollandia Oma Citi Bicycle which sells for $199 at your better online bike retailers such as Walmart and Amazon.
I used a Dutch bike in this example, but most online bike sales seem to be fixed-gear style bikes or beach cruisers. Like this Omafiets, the Chinese bike factory charges about $50 per bike when you buy by the container load. Add design fees, tooling costs, a shipping agent and a conservative $3000 in shipping expenses to get those 200 bikes to Los Angeles for a total cost of maybe $20 thousand. You then sell your bike online at $199 for a reasonable 99% margin.
This is all quick and dirty back of the envelope calculation. I hope somebody who’s truly thinking of sinking twenty grand into a venture like this counts the cost.
One significant risk I can think of is seizure by U.S. Customs and Border Patrol. I don’t think most of these operators are trying to smuggle anything into the country illegally, but I’ve seen bikes from some of these online retailers that likely don’t pass the CPSC safety standards required for bicycles. Perhaps the risk is small, but it’s either all or nothing — if Customs seizes your bikes, you forfeit everything.
Various U.S. government agencies publish their asset forfeiture lists to forfeiture.gov. SOme items of interest from this morning’s list include this bike-related merchandise (with my commentary in italic text).
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Seized on 11/19/2014; At the port of HOUSTON, TX; BICYCLE HELMETS; 131; EA; Valued at $0.00; For violation of 19USC1595A(C). 131 bike helmets seized. Section C of 19 US Code § 1595A says merchandise can be seized if it’s “a plastic explosive which does not contain a detection agent,” among other things. Be sure you know this arcane law before selling online!
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Seized on 12/10/2014; At the port of DALLAS/FT. WORTH, TX; CYCLING HELMETS; 14; EA; Valued at $2,100.00; For violation of 18USC2323(A)(1),18USC2320. 18 US Code § 2320 covers trafficking in counterfeit goods, so these were apparently helmets with a counterfeited brand. A value of $2100 for 14 helmets works out to $150 per helmet.
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Seized on 10/23/2014; At the port of LOS ANGELES, CA; YELLOW UNICYCLE; 588; PC; Valued at $0.00; For violation of 19USC1595A(C)2(A), 15USC2068, 16CFR1303, RCD. 588 unicycles! 16 CFR 1303 bans lead paint. I’m sure it’s pure coincidence that this no-name yellow unicycle is listed as “currently unavailable”
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Seized on 07/16/2014; At the port of LOS ANGELES, CA; CHILDREN’S BICYCLES; 270; PC; Valued at $0.00; For violation of 19USC1595A(C)(2)(A),15USC1263,15USC2057,16CFR1303.4(B),LAJ. 270 children’s bicycles, again for violating lead paint standards. One wonders how many lead-infused bikes for children end up for sale at flea market and online sales in America?
Have you or anyone you know lost an entire shipment of bikes or accessories due to a misunderstanding of U.S. law? What’s your story?
I have looked into buying a container load of plastic containers for Geocaching via Alibaba. The Customs paperwork and getting it from the Port to my garage or storage unit were obstacles. I think Alibaba helps in case of non-delivery, but don’t know about quality or seizure of the goods.
Isn’t that how Flying Pidgeon in LA got started?
I think several popular online bike retailers got started this way, though probably with a larger initial investment. Barrier to entry seems a lot lower now than when Mike Sinyard began importing Italian bike parts in the 70s.