MSRP vs. Invoice

[Brewman]

Where do you get this idea that a $500 markup on something is fair and reasonable?  

As Dr. Evil (Austin Powers) says:

"You just don't get it, do you Scotty?"

[Chas]

Needaclue:

Sorry, but your estimate of a 75% markup is way off. I assure you I would have retired long ago if that was even a remote possibility.

There is a little thing called competition that keeps the margins down, and then there is a little thing called overhead that eats the margins up.

And in the case of HotSpring spas, if I sell a spa, I have to service it. That tends to make me want to sell in my service area only.

[IOWASPAMAN]

"Scotty would you be an evil spa salesman"
Dr Evil

[ndabunka]

Haha, yea, right! Dealer made $3,500 on a $4,700 sale. Good one! How old are you, 3?    OK, now where's that great forum feature I like to use so much? Seems applicable for this need-for-attention guy.... Oh yea, there it is...................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................---------------------------------------->------------------>--------------------->------------>------->----->--->-->  IGNORE!!!

[Steve]

Needaclue:

Sorry, but your estimate of a 75% markup is way off. I assure you I would have retired long ago if that was even a remote possibility.

Could you imagine Chas a 75% markup? For that matter, could you imagine a 40% markup?  :-/
It would be like winning the lottery EVERYDAY!!

I don't think needsaclue understands business at all. He's proven that in many posts. It's not about gouging people, but about a profit margin that allows dealers to stay in business and support their customers AFTER the sale.

You know that needsaclue will be the first to run to his dealer and demand same-day service if something ever went wrong. But when he realizes his dealer isn't around because they didn't maintain a good enough profit margin, he'll slam the entire industry. We've all seen these sorts before and they read like an open book. I'm sure that "other dealer" will be more than happy to run right over immediately and fix it for a reasonable price!

Hopefully, needsaclue has a farm so he never has to deal with those pesky middlemen grocery stores. Word has it, they make a profit too!

Steve

[Electro]

Hi Business Folks,                  

I thought I'd add some additional comparisons.

In the "high end" stereo business, the retail margin is almost always 40%, i.e. a product that the manufacturer charges $60 is to be sold for $100.  It is typical across the country for these small dealers to give their good customers a 10% discount, selling the $60 cost item for $90.  This is now a 33% margin.  Some dealers occasionally provide their best customers a 15% discount, so that the $60 item is sold at $85.  At this level, we have their best deal and a 29% margin.

It is a fact that most of these small dealers could not continue to operate at this level, if they sold to everyone at a 15% discount (which is selling at 29% margin).  Most small businesses must operate above a 30% margin, in order to pay their G&A and other overhead expenses and eck out a small profit.

Now compare this to the world discount leaders - Walmart and Sam's Club.  According to Sam Walton's book, they actually operate continuously at a 13% margin.  This means that Walmart buys products at $87 and sells them for $100 every day.  No other business in the world has ever come close to this feat and no one can compete with them.  Think about the level of service and quality - it is mediocre across the board, but everyone knows what to expect.  Of course, the majority of Americans have come to accept mediocre service as being normal.  Most believe the Walmart level of service is actually quite good.  It isn't.

Those who are over 60 years old can remember the level of service that was common in the 1950s and earlier.  Such good service was possible and expected.  Normal margins were 50%.  Discounting was rare and not expected.

Times have changed!

Electro

[wmccall]

Hi Business Folks,                  

I This means that Walmart buys products at $87 and sells them for $100 every day.  No other business in the world has ever come close to this feat and no one can compete with them.  

Then there is the behind the scense way that Walmart increases its margins.  What the vendor didn't dot 1 "i" on the invoice? Thats a 1% fine!  What, you didn't get the email we only accept invoices from vendors with odd numbered zipcodes on the third Tuesday of months with R's in them? Thats a 10% fine.   Then when they have you hooked they ask you to sell them items below cost so they can have a loss leader sale the day after Thanksgiving.