Average Markup

[Ftalgen]

Hey guys. I am new to this forum, but I am glad I found it.

I was wondering on average how much does a retailer markup a product once they have either purchased it from a manufacturer or other supplier. I know that the markup varies do to the costs of the retailer to do business, but just wonder5ing if anyone had a ballpark figure.

Thanks

[ndawson293]

Hey guys. I am new to this forum, but I am glad I found it.

I was wondering on average how much does a retailer markup a product once they have either purchased it from a manufacturer or other supplier. I know that the markup varies do to the costs of the retailer to do business, but just wonder5ing if anyone had a ballpark figure.

Thanks

Thats like asking how long is a piece of string. Do you have a specific product in mind?

[bizdev]

Very general ballpark: retail is double wholesale. You buy wholesale for $10 and sell at retail for $20.

[Ftalgen]

I reread my question and I think I can rephrase it to better explain what I am looking for. On average when a manufacturer sells its product to a reseller, retailer, etc. how much does the wholesale or bulk price differ from the final retail price?

So bizdev would you say that the retailer or reseller is able to get the product at about 50% less than what it intends to sell it for?

[bizdev]

My answer is the same.
Yes, retailer gets products at roughly 50% of what they will resell at. For very inexpensive items can be 3 x cost. (This is generalizing of course.)

[joshuaeric]

Very general ballpark: retail is double wholesale. You buy wholesale for $10 and sell at retail for $20.

I would probably say it is a 100% markup at a minimum.

Unless we are talking electronics, but those don't count!

[Encrypted]

It really depends on what type of product you are selling.

[ethansmith]

As the others have said already - it definitely varies based upon industry and product.

You would be surprised at how much some products are marked up. T-shirts can go as high as 400-500% markup - and so can tea products. Electronics on the other hand are generally sold at a markup of less than 10%, with some of them being sold at a loss (like the PS3 or Xbox360 because they companies know that they will make their money back many times over on video game sales).

[peteVA]

In general, most small shops work on a minimum of doubling their cost. This is referred to as "keystoning". It is also called 100% markup or 50% gross profit.

You must be careful when discussing this subject, because many people confuse markup and gross and if you talk to 99% of the people ringing cash registers they will look at the total sales for the day and tell you the boss/shop/store "made" that amount that day. As if the goods were all delivered by the stork, free of charge.

Doubling cost is about minimum for most retailers, most would like to "triple up" or get about 67% gross profit from their goods, but most fight for 50% at the end of the month, due to specials, some highly competitive items they feel forced to carry, etc.

In general, they will not consider something with less than 40% gross profit - pay 6 sell for 10.

There are exceptions, generally clothing is higher, because they end up closing out so much at the end of the each season. They have to make good money on their items when they are fresh and hot (like doughnuts), and then cut to the bone to clear the shelves for next season's goods.

And, as mentioned, electronics are lower profit. They depend on volume for making a profit. And there are rebates, advertising allowances, special terms, all of which don't show as a direct markup, but do contribute to the final profit.

An example is with bicycles. In January a bike dealer can order a large supply of bikes, let's say 100 or more. They can get terms on them that will look something like this - if they pay some or all of order total off in February they can take a 10% discount on the amount they pay, but they don't have to pay anything if they do not want to. If they pay some or all in March they can take 9% off the amount they pay, but they don't have to pay anything. So on until maybe October or November, each month earning a 1% less "anticipation discount." Then, in October the bill really does come due. They must pay at least 1/3 of the total in October, 1/3 in November and 1/3 in December. Then they start all over in January.

Now, they could have sold those 100 bikes by March or April, so they have had the manufacturer's money from March or April until October before they actually have to make a payment. Or they can pay it all in February and have an extra 10% discount. Or a combination of both.

As you can see, things are not all black and white and every industry is different. I've been billed over $100,000 with terms of no pay for 90 days, then 9 equal monthly payments. At the end of the year that can make a nice little difference in the overall profits, but on a day to day or even month to month basis, the gross profit of the items did not reflect that. They were costed out at the price on the invoice and sold at their normal selling price, so on paper the gross profit was no greater than if I would have bought one piece at a time and sold it.