Selling items extremely cheaply - just curious

Discussion in 'General Business Forum' started by BIGSHOT, Feb 5, 2021.

?

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  1. yes

  2. no

  3. depends

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  1. BIGSHOT

    BIGSHOT UKBF Newcomer Free Member

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    Let's say an item has a RRP of £200. Cost to manufacturer is £150. Mainly interested in an answer for the UK - but rest of the world would be good to know - but can a company sell that item for £70? I know it sounds stupid but I'm testing something as part of an analytics setup.

    Is this legal to do. Another thing from curiosity is, can someone legally sell that product for £1 and make a loss?

    Thanks!
     
    Posted: Feb 5, 2021 By: BIGSHOT Member since: Feb 5, 2021
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

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    It's legal. Occasionally even necessary.

    Clearing old stock / poorly performing stock.
    Date issues
    Needing the space.

    And sometimes it's a glitch - like several years back when one evening on Amazon thousands of items were being sold for a penny each. People buying a hundred TV sets, computers, furniture!

    Price here in UK is set by the seller. Nothing to say you must sell for a profit. Not unknown for a new product to be sold heavily discounted to get sales rank up.

    Oh and 200 pound RRP would expect to cost considerably less than 150 to make. But nothing to stop someone making a loss or a low profit on a sale.


    I know USA has different rules regarding pricing - have had USA suppliers try and impose minimum pricing on us and had to tell them to back off.
    They can insist a seller there sells at say 190 minimum.
     
    Posted: Feb 6, 2021 By: Mr D Member since: Feb 12, 2017
    #2
  3. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    5,561 1,989
    As Mr D said but as a rule it spells bankruptcy
     
    Posted: Feb 6, 2021 By: JEREMY HAWKE Member since: Mar 4, 2008
    #3
  4. ecommerce84

    ecommerce84 UKBF Regular Free Member

    920 325
    Sony announced in an investor report this week that the PlayStation 5 is being sold for less than its costs to manufacturer (which should’ve been no surprise as that is usual for a new console).

    And yet Q4 2020 profits were 20% higher than Q4 2019 profits due to software sales.

    So certainly legal and sometimes necessary.
     
    Posted: Feb 6, 2021 By: ecommerce84 Member since: Feb 24, 2007
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

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    That has been the company model for some time. Cheap system compared to a PC, load up pricing on licensing (the games).

    Or like where would you rather make money? On a new razor? Or on the razor blades.... ? :)
     
    Posted: Feb 6, 2021 By: Mr D Member since: Feb 12, 2017
    #5
  6. AllUpHere

    AllUpHere UKBF Ace Free Member

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    Razors are a good example; printers are another. How many people do you think have paid 30 or 40 quid for a printer from a well known brand, only to find it's going to cost twice the cost of the printer when they (very quickly) need new ink cartridges?
     
    Posted: Feb 6, 2021 By: AllUpHere Member since: Jun 30, 2014
    #6
  7. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    12,080 2,520
    You are not allowed to force a RRP as a manufacturer, as its against trading standards, but in most cases the manufacturer will just find they are out of stock and not supply you if you lower the suggested price

    Companies have spent millions in establishing a premium brand and want to stop companies lowering the price the goods are sold at
     
    Posted: Feb 6, 2021 By: Chris Ashdown Member since: Dec 7, 2003
    #7
  8. Mark T Jones

    Mark T Jones UKBF Big Shot Free Member

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    You have the answer above. However as a director you have duties and responsibilities and you might be in breach of those duties if your business fails as a result of irresponsible pricing policies
     
    Posted: Feb 6, 2021 By: Mark T Jones Member since: Nov 4, 2015
    #8
  9. The Byre

    The Byre UKBF Legend Full Member

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    With the exception of bespoke items that are built to order and usually cost many, many tens of thousands, this kind of calculation is as rare a hens' teeth. Most of the costs in mass-produced goods are the initial investment and only a tenth to a fifth (ballpark!) are marginal costs. That car in your driveway may have cost £30,000, but designing the thing, building a few hundred prototypes, building the factory and arranging distribution and marketing can easily cost one billion.

    The first car off the production line cost £1bn to build, the second maybe £6,000.

    In the UK and in most US states, yes. In many EU countries and in some US states, no.

    For example, in Germany, it is illegal (i.e. a corporate-criminal offense) to sell new goods at a loss in order to gain market share. The exceptions that are allowed are the ones listed by @Mr D.
     
    Posted: Feb 6, 2021 By: The Byre Member since: Aug 13, 2013
    #9
  10. BIGSHOT

    BIGSHOT UKBF Newcomer Free Member

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    Thanks for the answers everyone :) Seem to have gotten a quicker response here than something like Quora!

    Just an additional question - does having the ability to sell for a massive loss relate to brick and mortar, online, or both?
     
    Last edited: Feb 6, 2021
    Posted: Feb 6, 2021 By: BIGSHOT Member since: Feb 5, 2021
    #10
  11. 2JP

    2JP UKBF Contributor Free Member

    92 7
    No idea what you are getting at here. Most people have the ability to sell for a massive loss. It's just that most people try not to. You can even give stuff away if you want to.

    More meat on the bone please. Is your question about selling price with respect to RRP? Is this what you are asking about? If you want decent answers, please provide more detail.
     
    Posted: Feb 6, 2021 By: 2JP Member since: Dec 10, 2017
    #11
  12. BIGSHOT

    BIGSHOT UKBF Newcomer Free Member

    29 0

    I've kept the question deliberately vague since I want to explore as the answers come through more. I'm just learning.

    My question was simply someone buying a product online to resell. Ignore the profit/loss part. I know its a loss. I just wanted to know how much of a loss someone can sell at and whether it would be illegal to go past a certain point. I read, and am aware of the RRP laws between a supplier and retailer but that doesn't apply here in what I'm asking.

    Is there something specifically about this if its legal in the UK which I can read as a law for other countries. For example, selling below cost laws in the USA, Australia, Middle East, etc..
     
    Posted: Feb 6, 2021 By: BIGSHOT Member since: Feb 5, 2021
    #12
  13. japancool

    japancool UKBF Big Shot Full Member

    3,744 710
    Yes, it's legal.

    How much of a loss? 100%, if you want to.

    If you're planning to do that, you can just send me all your money instead.
     
    Posted: Feb 6, 2021 By: japancool Member since: Jul 11, 2013
    #13
  14. BIGSHOT

    BIGSHOT UKBF Newcomer Free Member

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    Do you take Paypal :p
     
    Posted: Feb 6, 2021 By: BIGSHOT Member since: Feb 5, 2021
    #14
  15. 2JP

    2JP UKBF Contributor Free Member

    92 7
    Posted: Feb 6, 2021 By: 2JP Member since: Dec 10, 2017
    #15
  16. BIGSHOT

    BIGSHOT UKBF Newcomer Free Member

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    So dumping isn't too far away from predatory pricing right?

    More about selling in mass leading to issues?
     
    Posted: Feb 6, 2021 By: BIGSHOT Member since: Feb 5, 2021
    #16
  17. Mr D

    Mr D UKBF Legend Free Member

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    You can buy a product and sell it at a loss. Ultimately that is a good chunk of what car boot and tabletop sales specialise in.
    You can buy commercially and sell for a higher price than you paid - as per your example in initial post - and make a loss. The selling price is higher, the costs could well be more than the selling price.
    That is a common mistake with new sellers, with craft sellers and with those occupying the must be cheapest section of a product sale.
    And a number of suppliers take note of it and will not sell to you again. Nothing illegal, just your custom is not welcome.

    No idea where you would find law on this in different countries.
     
    Posted: Feb 6, 2021 By: Mr D Member since: Feb 12, 2017
    #17
  18. BIGSHOT

    BIGSHOT UKBF Newcomer Free Member

    29 0

    So a company can't say anything to me if I sell just 1 of their £250 items for £1?
     
    Posted: Feb 6, 2021 By: BIGSHOT Member since: Feb 5, 2021
    #18
  19. Mr D

    Mr D UKBF Legend Free Member

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    Likely will not notice. However it can be brought to their attention by a competitor of yours - who may have purchased it from you.
    Sell below wholesale price and can have a queue of competitors buying off you!
    It's another way for them to make money.
     
    Posted: Feb 6, 2021 By: Mr D Member since: Feb 12, 2017
    #19
  20. BIGSHOT

    BIGSHOT UKBF Newcomer Free Member

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    Ok great, nice to learn! I suppose even then, nothing wrong from the legal side in the Mr D?
     
    Posted: Feb 6, 2021 By: BIGSHOT Member since: Feb 5, 2021
    #20
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