Retail / Wholesale Price - Please help!

[Wolf]

This is a dummy question and it might sound stupid, but since I am not South African and have no experience in the retail market I REALLY need your help.

MSRP of my product: R174,56 + VAT = R199
Wholesale price: R117 + VAT = 133,38

Huge suppliers like UPD get 15-20% discount on the wholesale price depending on the quantity.

My question: Is the wholesale price of 117 + VAT acceptable? Too high? Too low?

Is R57,56 profit / 49,20% Markup / 32,98% Gross Margine acceptable for a retailer?

Please help me out. I have no clue how retailers calculate.

Thanks

[duncan drennan]

Is that your price to the distributors, or the price the retailer pays?

[Wolf]

117 + VAT is the price for the retailer.

A distributor get's another 15-20% discount.
The merchandise manager of a big distribution company told me they are working on a 15-20% discount base.

[Dave A]

Is R57,56 profit / 49,20% Markup / 32,98% Gross Margine acceptable for a retailer?

I'm not in retail, but I do know that one of the issues in retail is the cost of the shelf space. The turnover rate of a shelf of product is an important factor in determining an acceptable mark-up.

I'm not sure the percentage mark-up is the ultimate factor. It's a case of how many Rands each square metre of shelf is producing per month.

[Wolf]

Makes sense Dave.

Even better for me because one item just takes about 4cm² on the shelve.

[Dave A]

As long as it doesn't stay there for too long - don't forget that. It's time and space.

[Wolf]

I am convinced with the right eye catcher it wouldn't stay there for long. Once the people get to know that there is a product like this available they will go for it - and use it for the rest of their lives

[johnnygirl]

i am guessing you're talking about cosmetics, because i read & replied to your other thread. mark-ups are very different depending on the product category. for branded cosmetics the mark-ups are actually quite low, between 33% and 37% should be on target.

[Marq]

For pricing you must also bring into account your fixed costs - determine your breakevens and from there look at the volumes that you must do/ can do to make what you want in the bank - and from there look at the markups again and so on until you feel you can make the max while not losing out to the bigger guys.

Its not easy but as you get into your own market, the numbers will come.

[JohanvW]

As long as it doesn't stay there for too long - don't forget that. It's time and space.

Hi Dave. I couldn't agree with you more on the time issue. We try to mark down an article after a said time of standing still. Even untouched stock get dammaged, stale or old. We try to apply a FIFO and would eventually sell it at cost if we have to as long as the stock moves.

[Pap_sak]

There is no "standard" mark-up, it depends on the product as well as where is is sold. I sell quite a lot of shoes, and even there I get different mark ups with different brands. But if your product is aimed at the chains and supermarkets, I would have thought that it's a decent mark up, but to be safe you need to find the cost price of your closest competitor and see how you stack up.

[MichaelB]

Yes I concur with Papsak above. You should also be determining your retail selling price based on competitors for the same product in your area. If you do not have any competition, you call the shots! Ultimately, your profitability is not calculated by the markup you think you should be taking, things like industry norms for example, could be restrictive on what you can be asking. Your fixed & variable overheads need to be considered, relative to your expected turnover as a whole for a month. If collectively, your markups average a good enough return for you to pay your overheads & put a good bundle of cash in your pocket every month, and your customers are happy to pay your prices, then you've hit a winning recipe.

[robinsonwang]

This is a dummy question and it might sound stupid, but since I am not South African and have no experience in the retail market I REALLY need your help.

MSRP of my product: R174,56 + VAT = R199
Wholesale price: R117 + VAT = 133,38

Huge suppliers like UPD get 15-20% discount on the wholesale price depending on the quantity.

My question: Is the wholesale price of 117 + VAT acceptable? Too high? Too low?

Is R57,56 profit / 49,20% Markup / 32,98% Gross Margine acceptable for a retailer?

Please help me out. I have no clue how retailers calculate.

Thanks

The calculation of profit also depends on the turnover rate of input. We are a wholesaler, we always suggest our distributors to keep stock for the productions in good demand and less popular productions for dropship. For Internet business, 15%-20% Gross margin is acceptable, sorry, I'm talk about the consumer's electronics and gadgets.