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Choosing the Right Pricing Model: A Guide for Bike Shops

Nigel Groce-Wright

When we go to choose a merchant services company, the amount of information out there to absorb is overwhelming. The Bike Collective is here to digest this information and give our honest recommendations for bike shop owners to take their shop to the next level.

My name is Nigel Groce-Wright. I have worked with retail stores for close to a decade helping them streamline operations and grow their revenue. My goal in writing this article is to help you navigate a seemingly simple decision that can have a major effect on your bike shop’s bottom line.

In this article, we are going to discuss the various types of pricing models that payment processors charge. I am also going to discuss the pros and cons through the lens of a bike shop. Finally, I am going to explain common misconceptions of each.

The Basics: Wholesale Rate Plus Processor Mark-Up

As small business owners, our customers will have purchase totals spanning a wide range. Important to keep in mind, the processing fees will be on a per-transaction basis. Regardless of the processing company, whether Visa, American Express or Discover, the pricing will consist of a flat rate and an additional mark-up included for each transaction. The banks themselves will determine the flat rate per transaction with the additional mark-up typically being about $0.20. 

With the right processor, the fees should end there. Depending on the status of your shop and additional services you are needing, this key cost will be the majority of the cost to increase your bottom line. Imagine, a 2.0%+ $0.15 fixed per transaction fee which is connected to your website, manages your contacts, and reaches out to customers with invoicing available. Sounds pretty sick to me, and trust us it is. Let’s get into some more of the details of each pricing model to better understand where exactly we are going to save money.

Tiered Pricing Model

Another aspect that you’ll encounter when comparing pricing models with various processors and that is the tiered pricing model. This is a variable pricing model that involves setting a different fixed rate for different products that fall under the same category or price range. This means if you sell a bike versus a t-shirt the fees will be different. Many of the accessible processors (i.e. Square, Toast, Clover) fix your fees on sales over $1,000 to a 7-8% fixed rate where sales under $10 will be in the 2-3% range in terms of processing fees.

The enticing things about the tiered pricing model is it is accessible for retailers doing business for purchases in the $10-$50 range and is streamlined for that purpose. The clients of these processors have boosted the marketability of their platforms, just because it’s the first option, doesn’t mean it’s the best.

Final Thoughts

We at the Bike Collective believe there should be a user friendly, cost effective solution for the unique retail business we do. We are here to help you navigate the weeds in all of these payment solutions and to provide you the best option for your situation. Let’s elevate the bottom line together and get more people on bikes.

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Any bike shop owner in the United States is invited to join the collective. We offer service discounts on common line items like payment processing, insurance, and other business services.

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