How much do shops want?

Polymer

Hi all

I am just trying to divide up margins on a product which is going to retail, I'm unsure how much retailers look for % wise. I know with food they look for a 35% mark up - does anyone know what % to factor in for retail goods and also distribution.

Thanks guys.

Bandara

give an example of the product type and I'll hopefully be able to give you an idea of the margin I would expect on it

Polymer

Hi Hammertime

Example of product would be a dog bowl! Just wondering what the mark is on such products % wise so at €5.00 sale price, obviously manufacturing is around 10-20%. How much to distributer, shop and then how much left for profit?

Bandara

Polymer wrote: »

Hi Hammertime

Example of product would be a dog bowl! Just wondering what the mark is on such products % wise so at €5.00 sale price, obviously manufacturing is around 10-20%. How much to distributer, shop and then how much left for profit?

If i personally was retailing it I'd want 45% margin on the product, a distributor would be maybe a little less but not much, I'd be guessing at 40%

The product concerned is a lot to do with it, if its another type of dog bowl in a market where there are hundreds of dog bowls available it really has to be something special and also the distributor needs to be making a large margin to bother stocking it.

Also if you only have one of two products they are not really going to be too pushed to deal with you as its not worth the hassle to list you if you have a tiny range of goods.

DubTony

Hi Polymer,

A dog bowl type product typically belongs in a hardware section of a store (although would obviously be displayed prominently with pet foods). Typical margin on retail for that type of product is 40% to 50%. That's RETAIL margin, as opposed to markup. If you suggested to me that I retail it at a fiver (€4.11 + vat) I'd find it difficult to give you much more than €2 for it.
The reason for the large retail margin is that products of this type are the ones most likely to gather dust as they're not fast moving.
The typical scenario with goods like these is that retailers buy large amounts and hammer the supplier down. Companies like Woodie's would be unlikely to pay any more than €1.50 for it and may even ignore your suggested retail price and sell at a higher price. This may have changed a bit in the current economy, so you could expect a real hammering on the price they'll pay.

In my opinion, you're looking at this the wrong way. Determine your costs, and compare similar products in the market place. You should then be able to work out how much you would expect your product to retail for. Allow for wholesale margins, retail margins, rebates and possibly hello money for the bigger players and then you'll know if your product can even get to market at the price you envision. If it won't you have some things to think about.

BTW, there are very few food items with a 35% markup. Meat and fruit & veg may have it but most of the ambient stuff on the floor is unlikely to have a markup that high.

Polymer

Thanks for that, I know the margin that the shop takes is high, but for a shop to take 45% and a distributor to take 40% doesn't leave much left?
Is there any other way of getting it to consumer other than through a distributor?
Not into online, want retail? If you were selling to a chain store like dunnes, can you organise your own delivery nationwide?
By the way it's not a dog bowl, but it's a similar product.
Also is a distributor the same as wholesale? Like if Dunnes were to agree to buy the product surely it still wouldn't have to go through a distributor??

DubTony

Yeah, you're right. If you're selling to the multiples (Dunnes, Tesco etc.) you'll have to deal direct. The same goes with Musgrave Retail Partners (SuperValu / Centra), BWG (Spar / Mace) ADM Londis etc. You'll deal direct with all these companies, but with the symbol groups you're more likely to have to do the deal with Head Office and then follow up directly with each shop.

If you're a one trick pony (one product) you'll need a product that moves so fast you won't be able to keep up. Servicing symbol groups with a hardware type item will require you to call into every shop you want to put the product in. That's when you need a wholesaler. The problem with wholesalers is that your product becomes just another line in a catalogue of hundreds, and so you need to offer the wholesaler a strong incentive to move it. That incentive is usually a bigger margin.

Assuming you're not manufacturing this item yourself and you're simply distributing it, have you worked out how much you actually need? I'll repeat my earlier point, manufacturers and wholesalers DON'T control retail prices (although they like to think they do). So the only reason you should be considering retail price in your position is to see how it stands up against the competition.

Start with YOUR cost base and see how cheaply YOU can put the product to market.

TheCostumeShop.ie: Ronan

Polymer - if its a pet product pm me details. I have a pet business, might be able to pass it on to the buying department in my company.

% mark up depends on the individual product, it its high volume the margins can be low but if its very niche and slow to shift margins reflect that and are substantially higher, for example a frozen dog desert etc.

I'd recommend setting your retail price where you can most profitable shift the most units and work backwards from there.

DubTony

Fancy Dresser wrote: »

Polymer - if its a pet product pm me details. I have a pet business, might be able to pass it on to the buying department in my company.

% mark up depends on the individual product, it its high volume the margins can be low but if its very niche and slow to shift margins reflect that and are substantially higher, for example a frozen dog desert etc.

I'd recommend setting your retail price where you can most profitable shift the most units and work backwards from there.

I think that's his issue. From what I can gather his figures don't add up when all things are taken into consideration. But I'll say it again. Manufacturers and distributors can try to set retail prices but where stockholding is involved, the retailer has the final say. If the product hits the market at too high a price (when compared to the competition), the retailer probably won't stock it. If it's too cheap the required margin isn't in it. IMO the way to price it is take all costs and add desired profit. Of course if we had a better idea of what it is, the advice could be more appropriate.