Service is crucial to bike shop operations, and it sparks intense discussions about its actual value, the correct operating approach, and its overall importance to a bike shop's health.
The "typical" bike shop sees labor account for about 10-15% of its gross sales, a percentage that has climbed for most shops since 2019. Parts often mirror service as an overall percentage. With parts and labor accounting for 20-30% of gross sales, the service department accounts for an outsized amount of the store's reputation and employees' attention relative to its revenue contribution. Of course, service-centric or service-only stores will derive much more revenue from parts and service. Still, these types of businesses fall along a continuum from those who genuinely only do service to those who are service-oriented but add bikes and accessories to the mix.
In keeping with the theme of Bike Shop 101 for this series, I want to present a version of service operations using a straightforward formula for success. Successful businesses typically distill down seemingly complex issues into simple and repeatable workflows. I have spoken with retailers who need help to attain these average percentages, and it typically results from failing to follow a simple, standardized system of service intake that is proven to work, along with undercharging for service and underselling parts. The typical bike shop could add tens of thousands of dollars by adding even a few extra points to the parts and service categories. This growth potential should inspire you to consider improving your service operations. I'd bet your service center is probably average or better if you already use this system or an even more refined workflow.
First, you will see a higher average ticket price with a dedicated service writer, and 46% of respondents to Ray Keener's survey (see story on page 24) report using a dedicated service writer. Service requires selling, and selling requires confidence and time. Interrupting a busy mechanic often leads to underbilled and undersold service, missed parts add-ons, and rushed data entry while simultaneously interrupting the service workflow. Without a dedicated service writer, you must have a minimum level of expectations to be met for every single bike that comes in.
While this is not earth-shattering information, underperforming stores are most likely struggling with the following:
- Each bike must go in a stand and have a thorough and standardized walk-through. The customer should be a part of this process. This exam is where new tires, cables, chains, grips, sealant refreshes, and the like are sold, along with identifying the appropriate tune-up level or services needed.
- I am a fan of tune-up packages vs. a la carte repairs. Packages typically lead to higher revenues and simplify service writing.
- If you aren't including an environmental fee or supplies charge on each tune-up, consider doing so.
- All customer and bike identifying information must be entered accurately into the POS.
Adherence to the standards above will raise revenue and create a more professional experience. It is crucial to understand that in rushing, mistakes are made, opportunities are overlooked, and money is lost. This often happens on busy days, and patience is vital. The line of customers waiting to check in will clear quickly, and customers and mechanics will appreciate the attention to detail later.
It is obvious, but do not have the cheapest service in town. Look at what your best local and regional competitors are charging, and if you believe you are as good or better, charge the same or more. Since 2019, Ray's survey respondents' hourly rates have risen 22%. About 82% of shops now report charging more for working on e-bikes.
I would also audit your service tickets daily to check for parts on work orders with no corresponding installation charge. Don't overlook parts that can return higher margins, and charge for those overlooked little things — people don't shop for cable ends, so charge for them! Many higher-level tune-up packages may include installation charges for certain parts, but often, installation charges are missed and should have been charged on lower-level tune-ups. Verify that charges not included in a specific tune-up package are always being added, as items like tire/tube installation charges being missed add up to significant revenue losses over time. Do not repair that which can be replaced. Customers appreciate new; it also saves time, allows for more consistent positive results, and increases revenue.
Efficiency is key to a successful service center. Pay close attention to the physical workflow, the efficiency of the mechanics, the time spent on tasks that could have been completed at check-in, and the parts to be installed on the ticket with the bike. It's frustrating for everyone when parts listed on a work order can't be found. By ensuring a smooth workflow, you can motivate your team and improve the overall customer experience.
One last thought: The most detrimental thing a bike shop can do to hamstring service center profits is to believe what you think is true about your customers' price sensitivity without actually testing raising prices. I have often heard from retailers that their customers or market will not accept higher prices but the retailers have simply not tried yet. As Henry Ford famously said, "Whether you think you can or think you can't, you're right."
So, is service the future? Service will surely be a part of the future, just as new-bike sales, accessories, and clothing will be. The obvious ways to increase the service center's labor and parts revenue are to sell more services at higher prices and influence customers' decisions regarding needed and upgraded parts and accessories. It's that simple. Diligent service writing and strong sales skills will be the key to raising revenues. You have the power to make this happen. I wish you an excellent summer selling service!
Related: Retail 101: More inventory turns put money in your pocket
David De Keyser spent 28 years taking out the cardboard while owning and operating bicycle retail stores. Since 2019, he has focused on helping bicycle retailers improve their businesses, open new stores, or consider selling them. He can be reached at bikezest@gmail.com.
