Why are bike shop bikes more expensive than department store bikes?
Bikes come in many sizes, types, and uses. A department store bike is made to fit people of different heights, weights, and body types; plus it must wring out every dollar of profit and have an attractive price tag. They do this by compromising on components and quality. The frames are not well sized to an individual rider which can cause handling problems and limit performance. The parts are not the best quality. The store employees may or may not know how to build the bike when it arrives in a box.
Have we owned department store bikes? Yes. They are good for casual riding. They aren't the best for use in specific cycling disciplines. Most department store bikes are 'styles' of bike. Mountain bike style, BMX style.
Bike shop bikes are more expensive because the frames come in sizes which match people's bodies, the components are higher quality, and they're designed for specific cycling disciplines. Bike shop bikes also tend to use newer technologies. It will be assembled by a bike mechanic, and you'll receive it tuned and ready. It is definitely quality over quantity. Biek shop bikes can be fixed over and over again.
Can a department store bike be fixed or improved? Yes, you can sometimes replace the components with higher quality ones. The cost to upgrade the parts will exceed the bike's value though. That doesn't mean the department store BSO (bike shaped object) is garbage; it just means it isn't worth putting a lot of money into it to upgrade. If a bike that retails for $150 at a department store needs tires, tubes, grips, seat, and brake cables we've already hit $100+. Remember, a low purchase price does not equal a low repair price. We get many requests to fix kid's bikes that get left outside in the elements and are ridden hard, and most of time we can't economically repair them. Department store bikes have become throwaway items and many once respected brand names from decades ago exist as a name and logo only.
A big part of bike longevity is how it is taken care of. A department store bike can last longer if it is parked in the garage, cleaned, and maintained. BSO's serve a purpose, and if it is all you can afford then take care of it and ride it.