What is considered a "normal" markup?

[abm37]

generally, in businesses worldwide, what are normal markups of the purchase price?5%?10%?20%?30%?

for example you buy a clock for 5 pounds from a supplier, what is the normal markup? would you sell it to customers for 5.50(markup = 10 percent of the purchase price)??

 

[Fit To Defend]

Wow that really depends on turnover and saleability of the stock..If it is large comodities like property then1-2% is reasonable but upto 20% if you can get away with it..Bottled water however can have a 60-70% markup...Syrup coke and lemonade in your pub has approx 80% markup..and it also depends if you are selling to wholesale or retail..

 

[elaine@cheapaccounting]

there is no such thing as normal

 

[amaze]

As high as you can to stay competitive in your market.

 

there is no such thing as normal

Oh yes I am thats a filthy rumour

 

[ken_uk]

Guess it depends on the product, the competition, and how much of a strangle hold you have in the market.

Its not uncommon for say, a large company to sell addons for say a printer, at huge prices, way above what they pay for the parts, they make sure a 'normal' version of the part will not work by making a slight alteration to it. HP did that with memory upgrades for its laser printers years ago, selling what were in effect bog standard memory simms at ridiculous prices, they just made a small alteration (that anyone could make with a soldering iron) to stop normal simms from working at a fraction of the cost....
IBM is doing it on certain laptops, forcing you to buy only the mini PCI wireless cards they approve, by only allowing the machine to boot if the exact model is recognised by the bios - in effect stopping third party competition.

If you cant hold the market to ransom like that, then you have a lot more competition, and market forces tend to dictate your prices - if you price to high, people may go elsewhere....

 

[Wkd Walker]

Going on experience (and sorry to all you Jack Daniels drinkers) but a single Jack Daniels and cola in a public house costs the retailer 45p to buy in. Then there is runnung costs and VAT (up north). Generally retails at around £2.40 (as opposed to the London average of £3.80).

GP on most wet led pubs is 70-74%.

 

[Gavin Harris]

At Mcdonalds, the materials for a medium meal cost McDonalds pennies. I think I remember being told the following costs:

Medium Coke (including cup and straw) - 3p
Fries (including packaging) - 5p
Big Mac Burger (including packaging) - 20p

Sold for for something like £3.49!

Obviously that doesn't take into account staffing costs and building/running costs.

 

[RayB]

In printing added value per hour of production and utilisation are much more impoetant than markup - whereas in retail the mark up varies on circumstance.

The important thing is to consider overhead recovery based on some conservative forecasts as a foremost consideration.

Also, what I call the baked bean factor - if you sell beans for 20p a can and make x% profit, but by lowering the price to 15p you can shift more and make x+25% profit (because you did not have to increase overheads to handle the extra orders) - then what would you do?

 

[ExpandOnline]

Nobody has mentioned loss-leaders: where the retail price is less than cost (eg some of supermarket value ranges). It sound strange but can be used to get people through the door and you have the chance of selling them something else

 

[Adam H]

Also, what I call the baked bean factor - if you sell beans for 20p a can and make x% profit, but by lowering the price to 15p you can shift more and make x+25% profit (because you did not have to increase overheads to handle the extra orders) - then what would you do?

If people are coming in to buy food, however, you may find that selling at a lower price just means only slightly more people will be buying them, and that for the price it's selling at it simply isn't worth dropping the price compared to the effort it takes to get it into the store.

 

[coultog]

generally, in businesses worldwide, what are normal markups of the purchase price?5%?10%?20%?30%?

for example you buy a clock for 5 pounds from a supplier, what is the normal markup? would you sell it to customers for 5.50(markup = 10 percent of the purchase price)??

We markup about 2% on most of our clocks.

 

[Adam H]

I don't believe you.

 

[RayB]

If people are coming in to buy food, however, you may find that selling at a lower price just means only slightly more people will be buying them, and that for the price it's selling at it simply isn't worth dropping the price compared to the effort it takes to get it into the store.

In my post I said if you can sell more without increasing overheads (cost of sales) you can make more profit.

It is a matter of increasing utilisation

 

[asonda]

Normal, I don't think there is such a thing. Really does depend on what you're selling and how competitive you want your prices to be?

There are two ways, Percentage based, or Added Value are good ways to work out how much you cant to charge above your cost.

 

[Adam H]

In my post I said if you can sell more without increasing overheads (cost of sales) you can make more profit.

It is a matter of increasing utilisation

On beans it's really not worth it though, I do understand what you mean but for beans, there's no point as people will pick them up regardless.

 

[RayB]

On beans it's really not worth it though, I do understand what you mean but for beans, there's no point as people will pick them up regardless.

I used beans as an analogy - much like online marketers use "widgets" as an analogy.

Sorry for any confusion - your point was valid