A Question About Margins

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Hi All

Looking for some advise on how to deal with other retailers

I'm importing backgammon sets and make 100% margin online. I'd like to offer wholesale pricing to offline retailors?

Having never dealt in this space before, what margin would you typically go for?

Cheers
#margins #question
  • Profile picture of the author ShoppingSignals
    If the retailer can make 25% to 40% margins, they will typically be happy. Less than that can be a tough sell. More than that can be negotiated with proven retailers and higher volume.
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  • Profile picture of the author kjamesnv
    In my experience retailers usually expect 50% profit margin.(Buy for $5 - Sell for $10)
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    • Profile picture of the author AK86
      Originally Posted by kjamesnv View Post

      In my experience retailers usually expect 50% profit margin.(Buy for $5 - Sell for $10)
      Buying for $5 and selling for $10 is not 50% profit, it's 100%.
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      • Profile picture of the author dave_hermansen
        No, that would be a 50% margin and a 100% markup. See this for clarification: http://www.accountingtools.com/quest...nd-markup.html

        Here's an excerpt directly from that page:
        • To arrive at a 10% margin, the markup percentage is 11.1%
        • To arrive at a 20% margin, the markup percentage is 25.0%
        • To arrive at a 30% margin, the markup percentage is 42.9%
        • To arrive at a 40% margin, the markup percentage is 80.0%
        • To arrive at a 50% margin, the markup percentage is 100.0%
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        • Profile picture of the author Ryan David
          25-50% gross margins are probably the average, but I think they'd be looking for more like 40-50% on something like a backgammon game. I'd say a typical retailer wants to average out around 35%-40% gross margins for a small business and 25%-ish for a large store with big volume.
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          • Profile picture of the author dave_hermansen
            Originally Posted by Ryan David View Post

            25-50% gross margins are probably the average, but I think they'd be looking for more like 40-50% on something like a backgammon game. I'd say a typical retailer wants to average out around 35%-40% gross margins for a small business and 25%-ish for a large store with big volume.
            Yeah, I was talking more specifically about start ups using the dropship model. I agree that larger retailers are going to expect up in the 30-50% range.
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        • Profile picture of the author moneyglue
          Originally Posted by dave_hermansen View Post

          No, that would be a 50% margin and a 100% markup. See this for clarification: What is the difference between margin and*markup? - Questions & Answers - AccountingTools

          Here's an excerpt directly from that page:
          • To arrive at a 10% margin, the markup percentage is 11.1%
          • To arrive at a 20% margin, the markup percentage is 25.0%
          • To arrive at a 30% margin, the markup percentage is 42.9%
          • To arrive at a 40% margin, the markup percentage is 80.0%
          • To arrive at a 50% margin, the markup percentage is 100.0%
          Thanks for the clarification Dave. Love what you do with you StoreCoach site. Have registered.
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  • Profile picture of the author dave_hermansen
    There's no such thing as a 100% margin, so I think you mean a 100% markup... Which would be equivalent to a 50% MARGIN. (i.e. buy for $20 and "markup" $20 to sell for $40 equals a 100% "markup" and a 50% "margin".)

    I agree with ShoppingSignals here, the retails will expect to make at least 20-25% margins when all is said & done. Anything below that and it might be challenging to recruit retailers.

    BTW, if you plan to dropship for retailers you should submit your business to our dropship directory at http://dropshipblueprint.com/add-company. We have thousands of students that use that directory to source wholesale products that can be dropshipped for them.
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  • Profile picture of the author Oziboomer
    Originally Posted by moneyglue View Post

    Hi All

    Looking for some advise on how to deal with other retailers

    I'm importing backgammon sets and make 100% margin online. I'd like to offer wholesale pricing to offline retailors?

    Having never dealt in this space before, what margin would you typically go for?

    Cheers
    You shouldn't compare Online and Offline margins as the costs of doing business in a physical sense particularly in Australia where the wages are high as are the lease costs for retail operations.

    Going back several years I used to breakfast with an owner of a super successful giftware chain who had multiple outlets in major shopping centres. Her standard markup was 500%

    That might sound extreme but most wholesalers will publish recommended retail pricing for their products showing 100% mark up so 50% margin.

    It depends on the industry and their costs so don't think you need to cut your margin too much as you ultimately will have no control over what a retailer sells the item for.

    Don't talk to the retailer about online pricing, just show them the product and let them decide.

    What sort of retailer are you trying to sell to?

    Also unless you have a broader range of products how are you going to attract a retailer to open an account with you for such a narrow band?
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  • Profile picture of the author moneyglue
    @Oziboomer , referring to offline giftware shops and to a certain extent toy shops. There's a few other products as well like chess sets, fair trade games
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