“Electronic Dura-Ace” Pricing As Deterrent

di2equalsbike.jpg

Shimano’s electronic road group Di2 (or “Electronic Dura Ace” as some are calling it) has been lauded by many as being one of the most significant developments in bike drivetrain development since the derailleur. Even many detractors who feel that the group simply complicates a mechanical arrangement that’s been slowly perfected for the better part of the century recognize the craftsmanship that goes into creating a new and complex mechanism like the self-centering auto-trimming motors that drive the system.

Luckily, Di2 has an incredibly affordable price with the suggested retail on the complete group only around $5500. Wait, is this right? That must be a typo. I’m going to just make a call and be right back.

Shimano Di2 is a roughly $2500 premium over the DA 7900 group that makes up the core of the package. That means that the additional scratch is dedicated solely to the shifters, the battery unit and the front and rear derailleur mechanisms.

So why such a high price? Everyone I know who was looking forward to trying out the new shifting has decided to drop the idea. And that, I think is the point.

The rationale for high pricing

The Shimano Di2 group likely has a higher level of Research and Development costs associated with it than anything else the company has ever produced. While other products in the Shimano family are incremental improvements from an engineering standpoint (even if the improvements have a major impact) the electronic guts of the new groupo is a whole different game. Precision control motors, circuit boards and battery technology is a world apart from their other products.

Granted then that there are much higher R&D costs associated with the group so you’d expect a higher price, but not perhaps one that’s more than twice the cost of the top-of-the-line group it’s based on. (Since the DA 7900 complete kit includes mechanical shifters and derailleurs, the cost of the group without those parts would be lower, the cost of the Di2 is that much higher.)

Assuming a price difference of $3000, it would take just 3333 groups sold to gross $10M, a hefty R&D amount (and a number I’m pulling out of the air to represent a huge R&D cost). Price the group at a $1500 margin and it would take around 6000 bikes to hit that same gross. Spread that out over the life span of something like a high-end bike group and that’s a pretty easy number to hit.

So why is the price tag so high? I think it’s to keep people from buying it. Why would Shimano want to keep people from buying their new group? A few reasons.

First, the Di2 group is clearly and largely a shot across the bow of Campy and SRAM, the two major players that battle for the high-end bike dollars of consumers. SRAM’s group came out of virtual thin air a few years ago and took a huge chunk of market share while Campy’s new 11-speed Record group competes for the finesse market–customers who are looking for the ultimate artistic statement with their bikes.

Meanwhile, Shimano just launched DA 7900, a very well reviewed upgrade to their Dura Ace line. With considerably less R&D to swallow in the 7900 group each package likely makes a nice bit of profit and with the raves the group has garnered adds to the prestige of the company in the face of ever-growing competition.

Di2 meanwhile is a virtual unknown in the market. It’s been on bikes in secret for a few years, but it’s never been for sale. A single misstep could spell the end of the product line and a huge loss of face for Shimano. With a mass-produced product that’s never been rolled out to many customers, it’s impossible to know if any of the parts might fail under use. That’s risky.

But Shimano realizes that the only way to really vet the group is to put it on bikes. Unlike other demo groups that can be tested at races with little attention, it’s impossible to conceive of Di2 rolling out at a major race without the press going nuts over it.

So here’s Shimano’s likely dilemma–they’ve got a technology that could conceivably set the standard for cycling in the century, featuring a heavy load of new and unproven (from a long-term standpoint) engineering that’s designed for the most picky and sophisticated customers the company has.

The solution is to price the components so stratospherically high that not only does each group help quickly recoup R&D but it ensures that the Di2 parts only end up on a handful of bikes–those belonging to some sponsored race teams and to high-end custom-bike buyers. If the group fails in low-yield deployment, just replace it out, swallow the cost and make the customer happy. Spend a few years getting feedback, update the product and then roll it out at a consumer-friendly price point.

If this seems farfetched, consider Mavic’s current dilemma (ignoring their electronic shifting debacle of the past). Less than a year after releasing a wheelset based around a new cylindrical carbon spoke the company was forced to issue a voluntary recall because of potential spoke failure. As a result of the wide-scale recall dealers are reporting that the company is having problems fulfilling orders for other products as well. It’s a bit of a PR nightmare for a company that was attempting to redefine a technology.

Personally I have no doubt that a few years from now either Di2 or a Di2 derived technology will be found on huge numbers of bikes and that we’ll look back at the release of the group with the same awe that we do the original Dura Ace. In the meantime though, only those with deep enough wallets will be able to ride today on a bit of tomorrow’s technology.



11 Comments

“Shimano just launched DA 7900, a very well reviewed upgrade to their Dura Ace line”

Really?  I thought the broad takeaway was that 7900 was an great aesthetic update with very little substance?  Getting rid of the shift cables is great, and the hand postion is a little better, but I’m not sure it’s considered a quantum advance like most other DA Updates have been.

I’ve ridden Di2 - and it’s pretty much amazing.  The auto-trim is so clever, and the shifting is literally automatic.  What we don’t know is how it behaves after some chain/cassette wear.  I can’t see it being a big issue, but when you’re used to exact shifting - anything less will be very noticeable.

I’ve been riding and racing DA 7900 and it shifts almost telepathically. I agree it’s an update and a remarkable one; especially under power. I just don’t have to think about the shifting. 7800 you had to feather it up onto the big ring or really throw the front lever to get it to shift under load and then look back at the cassette to make sure it did indeed shift.

7900 is a new drivetrain benchmark, but it’s 1K more than SRAM. My thinking is that Shimano is conceding ground to SRAM and focusing on the high-end.

*More on 7900*

* [Upgrading to DA 7900](http://bikehugger.com/2009/01/upgrading-to-dura-ace-7900.html)
* [The Dura Ace DL](http://bikehugger.com/2008/03/the_da_dl.htm)
* [Di2 in action](http://bikehugger.com/2008/09/huggacast_63_dura_ace_electric.htm)

also [SRAM](http://bikehugger.com/2008/04/so-i-made-the-leap.html)

I’m not sure where you’re getting your pricing information. I just got an ad from Colorado Cyclist with the Di2 3-component pricing (brifters, front and rear derailleurs) at $3250. The 7900 calipers run around $440 and the crank is about $700. So call it $4500, still $1000 below your $5500 quote. Too rich for my blood, though.

Pricing is the MSRP Shimano provided us.

it’s remarkable that you found pricing and availability. Is that shipping? Part of what some think is a disinformation campaign from Shimano, the prices keep changing.

Should also note that SRAM is nowhere to be found these days. Availability is at zero.

Cassette is $400 and then there’s the $100 chain too!

Stuff is damn pricy.  SRAM has availability challenges every year.  They don’t ramp up for seasonal demand - they’re just cautious I think.

Call me a retrogrouch, but I think 7800 is doing just fine for a couple more years.

Red is hard to come by, but that hasn’t stopped <strike>CSC</strike> Saxo Bank from getting all the Red they need in a couple weeks’ time.  Campy didn’t have complete Record and Super Record groups to their sponsored teams, at least earlier on this season. 

I don’t think that these flagship groups exist on much else but paper.  Scarcity is a great way to milk the “fortunate” customers who will pay for the best at any price, and gouge the “smart” consumer who sees a so-called sweet spot in the step-down group, that has a higher price ceiling because of of its bigger brother.

SRAM is owned by Investment Bankers and the theory is they’re not running or stocking 1M in inventory no matter what they hype is saying.

Why not just slap a really big battery on the bike and an electric motor?

Call me a purist, but the whole point of biking to me, is getting there under your own energy - not use a bunch of batteries to help you do it.  It’s one thing to have a battery to keep track of how far and how fast you’ve gone on a computer, it’s another to be using electronic assists to improve your efficiency.

I wouldn’t ever use this, and god forbid that it entirely replaces conventional deraillers and drivetrains.  If they must have this, put a micro generator into the crank to drive it.

looks like it still requires control cables, my least favorite component… all that wireless tech and it still needs cables!!!!!

To comment

Or with us.





Advertise here

About this Entry

Mobile Social Webvisions Portland 2009 was the previous entry in this blog.

Huggacast 97: Mellow Johnny’s After Party is the next one.

Find more recent content on our home page and archives.

Latest Photos

About Bike Hugger