What sort of margin do I sell my product at to shops (b2b)

[roberts84]

Hi, hoping to stock my items in independent shops soon, I'm not totally clear on what margins they hope to make though (other than the more the better). Assuming the item takes up a small amount of shelf space (30cm or less), and retails at say £10, what sort of price point should I be aiming for to be reasonably enticing? I can't really guess sales figures, as I have no idea on the footfall/conversion rate of the shops.
Thanks so much for any estimates.

 

[Mr D]

Hi, hoping to stock my items in independent shops soon, I'm not totally clear on what margins they hope to make though (other than the more the better). Assuming the item takes up a small amount of shelf space (30cm or less), and retails at say £10, what sort of price point should I be aiming for to be reasonably enticing? I can't really guess sales figures, as I have no idea on the footfall/conversion rate of the shops.
Thanks so much for any estimates.

For 10 pounds retail?
2 to 4 pounds. Expect some retailers to sell for 12 to 15, they cannot go cheap on prices.
For a 10 pound item a 30cm shelf space - that is for multiple of the item on display? Otherwise it's large.
It will vary by item type and shop type - a petrol station may well have much higher stock turnover requirements than a tourist shop.

 

[roberts84]

Sorry, that 30cm is for multiple of it on display. It's quite generous too. Thanks for the info.

 

[Fooddrinkicecream]

I owned a tourist shop and regardless of how well an item may have sold, by and large I would not stock it unless it was 100% mark up. I wasnt VAT registered, so it was generally the unit cost plus vat before doubling. From the many episodes of dragons den I've watched, the items generally also retail at twice the cost of production.

 

[Mr D]

I owned a tourist shop and regardless of how well an item may have sold, by and large I would not stock it unless it was 100% mark up. I wasnt VAT registered, so it was generally the unit cost plus vat before doubling. From the many episodes of dragons den I've watched, the items generally also retail at twice the cost of production.

I'm in gifts - 2.5 times wholesale is common.
Those shops with the bigger costs (such as very high rent town centre location etc) can easily be 4 times wholesale.

More importantly and I'm sure you've come across this too - the product has to sell quickly enough or else you replace it with something else that may sell better.

 

[roberts84]

Thanks everyone.

 

[fisicx]

Spoke to a mate who is in retail and you won’t get 30cm. You will get the width of of one item and sale or return until the product becomes established.

 

[MBE2017]

Min 2x markup is the norm, but what is normal anymore? Anyone with such shops are going to be looking at every item very hard atm to see if it is worth stocking. One reason I got into importing, to increase my margins, my best selling line a few years back had a mark up of 15-20x my buying price as an importer, and I could hardly keep up with demand.

Simple answer is the more the better.

 

[Chris Ashdown]

You are limited by the market price, in our case the main manufacture's would offer for most things like say overalls, a trade price to retail outlets of 40% discount off the normal retail price, so all retailers who don't make their own overalls, are all selling within a few percentage of the manufacturer's retail price

The same happens to cash and carry where 30-40% is normal on many items

The manufacturers or wholesalers are naturally making far more profit on retail sales and still a good profit on trade sales

Shops used to have more control on their prices as they were often the only local outlet, but now they have to compete with the e-commerce market as well, which can erode their markups quite a lot, unless local competition is weak. Niche products wanted today

 

[ExoPaul]

Am I missing something? There is no mention of what the product is.

The reason I say that is if it is a unique product that you have and you have very few competitors in the market then you can pretty much charge whatever you like and suggest whatever RRP you want.

If the product has lots of others on the market that are similar and all the same price then research into what other manufacturers charge and how to undercut them while still making a profit is required.

It will also determine whether you are selling it the retailer in which case they will want a really good discount, but if you are selling it sale or return (which is often something retailers are happy to do if they have the shelf space to accommodate your product) then you can charge whatever you like and it won't affect them as it will give them a bigger commission slice. If you did Sale or Return then I think 15-20% to the retailer is usually acceptable unless its a high value, unlikely to sell many item and then they might want a slightly bigger commission rate. However, if it is an item that flies off the shelves in the hundreds a week you can offer a smaller commission of 10-15%.

But really, it all comes down to the product, the market for it, the competitors, etc. Because no retailer is going to buy a £10 product for £5, if they can go to their usual supplier and buy the exact same thing as a different brand name for £2 and can still be sold for £10.

 

[roberts84]

Am I missing something? There is no mention of what the product is.

The reason I say that is if it is a unique product that you have and you have very few competitors in the market then you can pretty much charge whatever you like and suggest whatever RRP you want.

If the product has lots of others on the market that are similar and all the same price then research into what other manufacturers charge and how to undercut them while still making a profit is required.

It will also determine whether you are selling it the retailer in which case they will want a really good discount, but if you are selling it sale or return (which is often something retailers are happy to do if they have the shelf space to accommodate your product) then you can charge whatever you like and it won't affect them as it will give them a bigger commission slice. If you did Sale or Return then I think 15-20% to the retailer is usually acceptable unless its a high value, unlikely to sell many item and then they might want a slightly bigger commission rate. However, if it is an item that flies off the shelves in the hundreds a week you can offer a smaller commission of 10-15%.

But really, it all comes down to the product, the market for it, the competitors, etc. Because no retailer is going to buy a £10 product for £5, if they can go to their usual supplier and buy the exact same thing as a different brand name for £2 and can still be sold for £10.

Of course it depends on the product, and how unique it is, but it's been useful to hear yours and all the other thoughts on this thread, it gives me a good starting point where I'm not going to be embarrassing myself or anyone else with a silly price.
You're all very helpful and I'm very grateful for the advice here. Thank you.

 

[The Byre]

Retail is always a very mixed calculation - everything depends on how much the product earns per week. If the damn things sit there for weeks, the shop will just not want it at any price. If it flies off the shelf within hours, the markup can be tiny. Bottles of whiskey at Christmas earn a hell of a lot for the space they take up - but the markup is very little.

A general rule of thumb is that your marginal costs (the cost of making the very last single item) should be between about one-tenth and one-fifth of RRP. This applies to Mars bars as much as it applies to mass-produced cars. The kicker is the cost of producing the FIRST car or Mars bar.

A Mars bar? Well, a few million. A new model of SUV - a billion or more.

Somewhere between your marginal cost of manufacture and the RRP is the cost to the retailer. Where that price-point lies depends on how quickly it sells - or perhaps I should say, how quickly you hope it sells. If your widget costs £1 to make, pack and package and sells for £10 and is totally new and untested, the lower the wholesale price, the easier it is to get through the door to the retailer.

Remember that you may want to cover your origination costs - the very high costs of building the factory, setting up the machinery and making that first widget - but the retailer does not want to be lumbered with stuff he can't sell, so at first, you may have to sink further costs into getting the thing out there, so maybe sale-or-return and/or a rock-bottom price just above your marginal costs.

 

[Deleted member 59730]

There used to be a publication about small businesses and margins put out by an organisation called COSIRA,

Cost of Overheads and admin 25%
Cost of product 25%
Cost of Sales 25%
Profit 25%

I ran my publishing business on that basis for 28 years. It works