WorldWide Cycles Barry Meehan says commission charges are too much for IBDs to stomach
Words by Barry Meehan of Clonmel, Ireland's WorldWideCycles.com
"Occassionaly we are asked ‘Do you take vouchers?’ referring to different forms of cycle to work scheme vouchers. Our reply is that we do not. In our opinion, there is a good reason for that. Initially we did accept vouchers, but after waiting five months for payment and seeing how much it was costing us we decided against continuing.
The vast majority of employers in Ireland deal directly with Bike shops and many will have their own methods. The most common are as follows :
1 – The employee comes into the bike shop and selects the bike and accessories that they want. The shop hands them an invoice for the items which is passed on to the employer. The employer then sends a cheque or bank transfer to the shop and the customer comes in to collect the bike.
2 – As above the employee selects the bike etc. and passes the invoice to the employer. The employer produces a purchase order which is emailed to the shop. The employee comes in to collect the bike and then the company is invoiced by the shop and forwards on payment.Article continues below
Some employers will pay for each individually, while larger employers tend to pay monthly for whatever was purchased during the previous month.
When using the voucher system, the employee comes in, selects the bike and accessories and picks up an invoice or a form from a voucher company with the same details. This is passed on to the employer who forwards it on to the voucher company. The company then send on a voucher to the employee and the employee comes in to the shop to collect the bike. The employer is then invoiced by the voucher company and makes payment. The voucher company then forward the payment less their commission to the shop in their own good time.
In both cases the employer has to work out the tax deduction implications and salary deduction arrangements.
For very little work the voucher company charge the bike shop ten per cent commission. They also take their time passing on payment to the shop with some voucher companies taking up to five months to pass on payment. If you take a bike with say a 25 per cent profit margin this equals €250 on €1,000. So ten per cent of €1000 which is €100 is actually 40 per cent of the shops profit. The shop has to pay rent, rates, staff, lighting, heating, assemble the bike and provide warranty cover and carry the credit on the bike which has been paid for within 30 days whilst waiting for payment from the voucher company. The voucher company have about five minutes of admin and make almost as much as the bike shop .
So how does this affect the customer?
Lack of choice: Many of the shops with larger selections and better brands will not accept vouchers.
Lack of Value: Many shops accepting vouchers will now only supply goods to the value of 90 per cent of the voucher amount. Other shops have just increased their prices by ten per cent.
Warranty: A shop dealing mostly in vouchers will have great difficulty continuing trading in the current economic climate. If the shop closes down the shop down the road may not honor the warranty as many smaller items are just covered by the shop and never passed up the line to the distributor or manufacturer.
If the voucher companies charged one or two per cent they would be still making a very healthy profit for the work involved, but would be more appealing and fairer to the shops and the customers."
Discussions regarding the Cycle to work scheme and its worth to the retailer are currently in focus on the BikeBiz trade-only forum.
ROI cycle to work provider Bike to Work has now responded to this opinion piece here.