URGENT - Markups & Margins - Help Needed

[usbman]

Dear All,

I'm urgenty looking for some help. Does anybody know of the markups and/or margins expected by the major retailers when we supply in usb flash drives? A number of retailers have noted interest in our products, but before we quote prices I was hoping for some initial guidance. I've heard 15-35% quoted. And in some cases as much as 50%. :|

Thank you in anticipation of your replies.

 

[arcon5]

I imagine they would be looking for about 50% profit margin on the product.

At 15-35% it wouldn't really be worth their while, particularly with the product being of low value.

 

[usbman]

Thanks for the reply arcon5

So are we saying that if we sell into retaill at £10 they would sell out at £15?

 

[arcon5]

The 50% I refer to is their profit margin... they sell for £20, take away VAT=£18 and buy in for £9.

Or a 100% markup depending on how you look at it.. buy for £10, sell for £20 + VAT

I believe I read somewhere the multiplier of 2.2 (or 2.5 in an increasing number of cases) is quite common for work out retail price. This includes VAT considerations.
So you need to decide how much the item will sell for at retail, take VAT away and calculate a wholesale price.

If you think the company will negotiate price then start high and work downwards..

 

[andygambles]

It also depends on if it is a high volume line or not.

A product which they will sell thousands of each day will be acceptable at a lower margin level. However a product that may have sales of a couple a week will require greater margin to be worthwhile.

 

[Mike W]

Double plus VAT is pretty standard.

 

[Toby1968]

Simply rule of thumb is below £30 retail a margin of 50% (100% markup) will be required i.e cost price x 2.4 to include VAT.

At this price turnover is irrelevant as no shop will stock an item at £30 or less that takes a long time to shift.

And remember, you are not "gifting" your product to the shops, the shops are taking a gamble on YOUR product and selling it for YOU. A lot of people come on this forum and don't seem to understand this basic principle of commerce

 

[DJL King]

Lots of people confuse these terms. Gross profit (also known as margin) is the profit on the item divided by the selling price excluding VAT.
So buy for £1.50, sell for £2.50 plus VAT, profit is 1.00/2.50 = 40% GP

Mark up can mean a number of things:
1. The actual profit on an item - mark up is £1.00
2. The multiplier on the cost price that gives the selling price. Thus 1.667 x 1.50 = 2.50, or 166.7%
3. The multiplier as the uplift percentage, 66.7% in this case.

Retail buyers are generally targetted and monitored on margin achievement. So talk about "What margin do you need to make on this stuff?" and then know how to quickly work out your selling price.

When someone says " I want 60% on this", divide the cost price by 1 minus 60%, i.e. 0.4. So if the product is offered at £1 and the buyer wants 60% margin, it has to be sold for £2.50 plus VAT.

I explain some of the terms on my website wix.com/boundarytraining/website.

Good luck!

 

[Kwackers]

I'm not saying 50% is wrong, but would be interested where people get the figures from.

Surely it depends on the industry?

I know a major supplier for electronics/pc stuff and they give about 15% margin on RRP for the likes of Apple. It's cheaper to buy it on Amazon .

 

[Toby1968]

I'm not saying 50% is wrong, but would be interested where people get the figures from.

Surely it depends on the industry?

I know a major supplier for electronics/pc stuff and they give about 15% margin on RRP for the likes of Apple. It's cheaper to buy it on Amazon .

It's all to do with price point, 15% is acceptable on items costing say £500, on an item less than £30 it obviously isn't an option. I used to be in the photographic trade - margins on cameras were indeed about 15% or even less, batteries, film, paper, filters etc were often cost x 3 plus vat.

The OP has a low value product and as such x2.4 will be the minimum retailers will be looking for, approach the supermarkets and they will want more - and it won't be by increasing the price they sell at!

 

[Kwackers]

Hi Toby,

Thanks for the reply, that helps a lot as it is information that I will need very soon

 

[kulture]

Sometimes the markup has nothing to do with cost (!) but rather what the retailer thinks the item is worth/what they can get for it. No amount of mathematics will do if TESCO etc. is selling a USB stick for £9.99 and yours is £14.99 and looks the same. Sometimes retailers "know" that this particular item will sell well at £12.99 (perhaps because of looks/quality, or value, or whatever) so that is what they will sell it at regardless of margin. If your cost is £1.05 then they will happily stock it but if your cost is £9.99 they will not.

 

[amygowan]

Sorry to jump on this but I'm wondering if you can state a different markup for an online store to a high street store? The high street retail mark up on kids wear is typically wholesale price x 2.25, but can online stores ask for the same deal given that they don't have a shop premises? I'm talking small independents online stores not big chains...just wondering if there is a general rule...many thanks.

 

[Esk247]

Dont think there is a general rule. It depends on product, the markup they are looking for on the item, if they can sell in high volume they may be prepared to have a lower markup or buy at a higher price initially. There are trial prices, they buy 1000 units for 2 stores in different locations to trial the product etc etc.

From my experience, you offer three different types of wholesale price dependent on the volume they are purchasing e.g. 50 units will mean they pay more per unit, 500 units is in the middle, 1000 is bang on for them getting a good price in return for you making a big deal there and then. *numbers dependent on product and pricing, not to be taken literally*

reserve the 100% markup for big deals.