Its all about PROFIT!

[rps199]

Sorry but i'm going to have a real moan!

For the complete idiots out in la la land take note!

Business basics! Buy product for a £1, sell it for £2 including postage = £1 profit right? NOOO!!!!!

What about your postage cost?
What about your packaging cost?
What about your labour cost?
What about your merchant fees? (or eBay or Paypal fees)

You may as well sent your customer a fiver in the post!!!

Unfortunately I think that before someone is able to start a business they really should understand about profit margins and costs so they don't inadvertently destroy other businesses and harm the economy even more.

Sorry for the moan but had terrible May thanks to the idiots who are not in control of their costs and are now selling bread and butter items at a loss which i refuse to do! (And i know they are making a loss as they purchase from the same source) Problem is because of a hike in turnover they probably don't even realise.

 

[Chrisbridgett]

Not sure why you're complaining. They might be costing you business now, but if the result is them eventually going bust, what's not to like?

Furthermore, sometimes companies sell items at a loss purposefully to get bring in customers that will purchase other items that have good margins.

 

Anyone selling Chinese goods will harm the economy.

 

[90DC]

Different products are sold at different margins. There will be people who are able to buy at less than you, therefore can sell for less than you. However, I do agree that there are people out there selling products at a clear loss, but that's up to them and don't worry, they shouldn't be around long by employing this tactic as losing money on a product makes little business sense.

I understand loss leaders, but competition is different online and consumers appear to show less loyalty to small businesses online in comparison to 'bricks and mortar' businesses. I wouldn't have a loss leader, as there are certain people online who prey on this kind of tactic.

 

[Wasworkinallweek]

i have let a shop to a guy and he is doing a bit of what i had done(motor spares) plus a new line of stock (diy)
i have tried to explain to him that by discounting the stock (overly) he will badly effect his profit ,ie selling 20% below the average price for the product in the area.

but he knows best i think it could be an interesting 5 years ....:redface:

 

[Fred_the_frog]

Not sure why you're complaining. They might be costing you business now, but if the result is them eventually going bust, what's not to like?

Furthermore, sometimes companies sell items at a loss purposefully to get bring in customers that will purchase other items that have good margins.

It's because these companies don't pop up every now and then, they are always there. One business fails, another load have started up. It's a continuous circuit, so products are always being sold cheap. Hence the reason the OP is annoyed- they can't run their business to be profitable in the long term with all these people doing it in the short term.


Without getting too political, I don't think the government should be pushing for people to start their own businesses, for the reasons given in the OP's post!

 

[rps199]

Loss leader are one thing, we have a couple of lines which are loss leaders.
Problem is the wider effect of these actions. We are a small business, times are hard and prices have to be increased to sustain margin, especially with the Royal Mail increase. They may well go out of business but we have seen a 50% decrease this month alone!

 

[rps199]

It's because these companies don't pop up every now and then, they are always there. One business fails, another load have started up. It's a continuous circuit, so products are always being sold cheap. Hence the reason the OP is annoyed- they can't run their business to be profitable in the long term with all these people doing it in the short term.


Without getting too political, I don't think the government should be pushing for people to start their own businesses, for the reasons given in the OP's post!

Thank you. Exactly my issue.

 

[rps199]

i have let a shop to a guy and he is doing a bit of what i had done(motor spares) plus a new line of stock (diy)
i have tried to explain to him that by discounting the stock (overly) he will badly effect his profit ,ie selling 20% below the average price for the product in the area.

but he knows best i think it could be an interesting 5 years ....:redface:

Is this chap based in MK18 postcode by chance?

 

[Wasworkinallweek]

Is this chap based in MK18 postcode by chance?

no

essex boy ...... you got the same?

 

[rps199]

no

essex boy ...... you got the same?

Sounds just like the idiot i would like to shout at! Exactly the same products. I'm based in Essex (not from essex thou! Hampshire lad!) i'll be on the lookout!

 

[Wasworkinallweek]

where you based and what are you selling yep im a nosy git ....

 

[Lucan Unlordly]

Why the assumption that because some business people choose to sell for small margins on some items that they are doomed to failure?

One things for sure, no sales = no profit....

I compete with a major independent retailer who's strength lies in his purchasing power which is many times more than mine.

However in one product sector that's a little more hands on and requiring customer liaison his best weapon was to undercut all my prices by 50p across the board. In what some would see as foolhardy I further reduced my prices to undercut his by £1, at which point margins were extremely tight. In the meantime I added more profitable products within the same sector and negotiated between 10 and 15% off of best prices from every supplier on the basis that my year on year sales would increase.
It was an 'exercise' that was well overdue.:redface:

My competitor refused to sell at such low prices claiming that I was killing the market and would be gone in 6 months. Subsequently he increased his prices on the basis that he needed to make a certain margin and because of my increased volume I now get the first refusal on any supplier offers that come through...........................which I put out at cost price for a couple of weeks just to irritate him

 

[Wasworkinallweek]

i agree that if you need to you can or should cut to the bone but if you are selling a product which the cheapest around is £7.50 from a major big player why oh why would you sell it for £3.50 ??????

surely £6.99 would be better increasing your margin by £3.49 and still being the cheapest around ..

knowledge of what the market pays and will stand is surely a factor in everyones pricing structure

or did i get that wrong :|

 

[Chrisbridgett]

Why the assumption that because some business people choose to sell for small margins on some items that they are doomed to failure?

One things for sure, no sales = no profit....

I compete with a major independent retailer who's strength lies in his purchasing power which is many times more than mine.

However in one product sector that's a little more hands on and requiring customer liaison his best weapon was to undercut all my prices by 50p across the board. In what some would see as foolhardy I further reduced my prices to undercut his by £1, at which point margins were extremely tight. In the meantime I added more profitable products within the same sector and negotiated between 10 and 15% off of best prices from every supplier on the basis that my year on year sales would increase.
It was an 'exercise' that was well overdue.:redface:

My competitor refused to sell at such low prices claiming that I was killing the market and would be gone in 6 months. Subsequently he increased his prices on the basis that he needed to make a certain margin and because of my increased volume I now get the first refusal on any supplier offers that come through...........................which I put out at cost price for a couple of weeks just to irritate him

Exactly the kind of tactics I had in mind when I posted earlier. Of course this kind of thing is all situation-dependant. OP probably doesn't have these options.

 

[primone]

Anyone selling Chinese goods will harm the economy.

Will you buy thing from China?

 

[quikshop]

For the complete idiots out in la la land take note!
...Business basics! Buy product for a £1, sell it for £2 including postage = £1 profit right? NOOO!!!!!...Sorry for the moan but had terrible May thanks to the idiots who are not in control of their costs and are now selling bread and butter items at a loss which i refuse to do!

A few years ago a friend of mine with a brand new online shop spent all of his marketing budget on subsidising selling products at below wholesale, and most of his time doing SEO.

The result; his shop became a market leader and several notable competitors went out of business.

I suspect his competitors were posting similar comments to you, probably on this very same forum

 

[Dymo King]

A few years ago a friend of mine with a brand new online shop spent all of his marketing budget on subsidising selling products at below wholesale, and most of his time doing SEO.

The result; his shop became a market leader and several notable competitors went out of business.

I suspect his competitors were posting similar comments to you, probably on this very same forum

A legitimate strategy (at least if you can raise the money in the first place), but one I guess quite a few have tried and failed at.

But as he grows into the market leader presumably his costs increase as he takes on more staff, maybe needs a bigger premises etc - and then isn't there a danger that some new upstart comes along, spends all their marketing budget on SEO and subsidising selling below cost and they become market leader and your friend joins his previous competition...?

 

[JElder]

A legitimate strategy (at least if you can raise the money in the first place), but one I guess quite a few have tried and failed at.

But as he grows into the market leader presumably his costs increase as he takes on more staff, maybe needs a bigger premises etc - and then isn't there a danger that some new upstart comes along, spends all their marketing budget on SEO and subsidising selling below cost and they become market leader and your friend joins his previous competition...?

Everybody sing along:

"It's the circle, the circle of liiiiiiife"

(With apologies to The Lion King)

 

[VSpy1]

Im probably missing this, but if he's selling at below wholesale price, how did he make a profit?

 

[quikshop]

Im probably missing this, but if he's selling at below wholesale price, how did he make a profit?

He didn't. What he did get was excellent SERPS and market share from a standing start, and very quickly. It was only when his cost per customer had dropped through his SEO work that he started building margin into prices.

Like the OP said, the vast majority of traders who sell at little or no margin do so because they don't understand basic finance, but for those with funds from the outset its a legitimate way to undermine competition and take market share.