Harvey Norman - Furniture - Too good to be true

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#1399298 3-Oct-2015 13:00

mattwnz:
TonyR1973:
mattwnz: I would add those sales where they say 'cost plus GST' or similar, which can be higher priced than their normal sales rotation. It is impossible to know what their true Cost price is taking into account all their costs.

I was going to say this next. Their "cost" in their "below cost" sales isn't merely the purchase price of the goods.

Yes that is my point, the cost would include a percentage of staffing cost, rent for the store, freight of the goods etc, so impossible for the consumer to really know the true cost. It is not just the raw wholesale cost they may buy it in from their supplier at. So this sort of promotion is not transparent to the consumer. Unfortunately I have found that the regulators don't have the resources to investigate every single compliant they receive.

Would disagree, the cost is the cost of whatever, which excludes overheads such as buildings/staff etc......

Just like when you purchase something, do you include your overheads in it, such as the vehicle you got to the store in, the fuel, the cup of coffee on the way etc

Sounds like their price is something more akin to retail rather than an actual sale

richms

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#1399328 3-Oct-2015 13:35

gregmcc: Would disagree, the cost is the cost of whatever, which excludes overheads such as buildings/staff etc......

Just like when you purchase something, do you include your overheads in it, such as the vehicle you got to the store in, the fuel, the cup of coffee on the way etc

Sounds like their price is something more akin to retail rather than an actual sale

If I am deciding between going to a shop and buying or paying $7 for delivery then I will usually factor those and more importantly my time into the decision. So for pizza from up the road it's worth going to get it. For something at a store across auckland then delivery usually wins. Unfortunately buying crap for myself means those other costs are not actually expenses as far as the ird care but for a business the vehicle and the time are for sure and should be accounted for. Not sure on the coffee tho ;)

Richard rich.ms

sir1963

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#1399353 3-Oct-2015 13:57

gregmcc:
mattwnz:
TonyR1973:
mattwnz: I would add those sales where they say 'cost plus GST' or similar, which can be higher priced than their normal sales rotation. It is impossible to know what their true Cost price is taking into account all their costs.

I was going to say this next. Their "cost" in their "below cost" sales isn't merely the purchase price of the goods.

Yes that is my point, the cost would include a percentage of staffing cost, rent for the store, freight of the goods etc, so impossible for the consumer to really know the true cost. It is not just the raw wholesale cost they may buy it in from their supplier at. So this sort of promotion is not transparent to the consumer. Unfortunately I have found that the regulators don't have the resources to investigate every single compliant they receive.

Would disagree, the cost is the cost of whatever, which excludes overheads such as buildings/staff etc......

Just like when you purchase something, do you include your overheads in it, such as the vehicle you got to the store in, the fuel, the cup of coffee on the way etc

Sounds like their price is something more akin to retail rather than an actual sale

No, "cost" is what it costs to sell that item.

Profit is sell price - cost

So yes, as a business you include ALL overheads (which includes vehicles used for the business and the tea/coffee for the staff).Failing to do so results in you going broke very quickly.

gzt

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#1399388 3-Oct-2015 15:05

It is 100% clear what meaning advertisers intend for cost plus sales.

That is cost from supplier plus x%.

Ordinarily the x% includes retailer costs and includes a profit margin. What you guys are describing is something different like 'all costs plus x%'. No large retailer calculates retail prices from costs like that. Cost recovery is built into the item margin and profit is averaged on a win some lose some basis.

tdgeek

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#1399399 3-Oct-2015 15:45

gzt: It is 100% clear what meaning advertisers intend for cost plus sales.

That is cost from supplier plus x%.

Ordinarily the x% includes retailer costs and includes a profit margin. What you guys are describing is something different like 'all costs plus x%'. No large retailer calculates retail prices from costs like that. Cost recovery is built into the item margin and profit is averaged on a win some lose some basis.

Correct.

On a monthly/annual basis this is Gross profit. Sales, less Cost Of Sales. COS being the cost of goods sold, the old words we used to call it. This will include direct costs, such as inbound freight. All the other costs such as admin, financial, etc are not part of cost plus margin.

Handle9

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#1399401 3-Oct-2015 15:56

tdgeek:
gzt: It is 100% clear what meaning advertisers intend for cost plus sales.

That is cost from supplier plus x%.

Ordinarily the x% includes retailer costs and includes a profit margin. What you guys are describing is something different like 'all costs plus x%'. No large retailer calculates retail prices from costs like that. Cost recovery is built into the item margin and profit is averaged on a win some lose some basis.

Correct.

On a monthly/annual basis this is Gross profit. Sales, less Cost Of Sales. COS being the cost of goods sold, the old words we used to call it. This will include direct costs, such as inbound freight. All the other costs such as admin, financial, etc are not part of cost plus margin.

Yes, correct. What all these cost + sales exclude is "volume related adjustments" - i.e. the rebate they get from the supplier when they acheive a set number of sales. These can be very significant and allow them to sell at or below "cost".

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mattwnz

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#1399411 3-Oct-2015 16:20

Handle9:
Yes, correct. What all these cost + sales exclude is "volume related adjustments" - i.e. the rebate they get from the supplier when they acheive a set number of sales. These can be very significant and allow them to sell at or below "cost".

And that is why the retailers often say that they are selling below their cost price. Whether that is accurate wording from them I don't know, but I guess it is below their regular cost price..

tdgeek

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#1399415 3-Oct-2015 16:41

Loss leaders, cashflow, some reasons to sell below cost and lose money on those sales.
Cashflow is more important than profit

Dunnersfella

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#1399434 3-Oct-2015 18:25

tdgeek:
Cashflow is more important than profit

Said companies who have gone out of business.

richms

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#1399440 3-Oct-2015 18:49

Dunnersfella:
Said companies who have gone out of business.

Or were in growth phase. Aquiring customers has a cost, often that cost is lossleaders.

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tdgeek

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#1399445 3-Oct-2015 19:20

Dunnersfella:
tdgeek:
Cashflow is more important than profit

Said companies who have gone out of business.

You can run a business at a loss. New businesses do it every day. Hard times. If you do not have cashflow you cannot run a business, profitable or not. You've heard the term asset rich, cash poor? Applies also to businesses whose liquidity (assets that are cash in a months notice, such as debtors) are in the negative. No cash to pay creditors, payroll, GST.

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mattwnz

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#1399510 3-Oct-2015 23:41

tdgeek:
Dunnersfella:
tdgeek:
Cashflow is more important than profit

Said companies who have gone out of business.

You can run a business at a loss. New businesses do it every day. Hard times. If you do not have cashflow you cannot run a business, profitable or not. You've heard the term asset rich, cash poor? Applies also to businesses whose liquidity (assets that are cash in a months notice, such as debtors) are in the negative. No cash to pay creditors, payroll, GST.

It isn't uncommon for companies to do this. One reason is to grow the company quickly. Often companies that operate this way do so, in the hope that a competitor or other company will buy them out. The other is the company that floats on the share market, and gets a lot of capital that way. When they need money they issue shares. Eventually though someone will want a return on their money.

MikeB4

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#1399556 4-Oct-2015 07:47

tdgeek:
Dunnersfella:
tdgeek:
Cashflow is more important than profit

Said companies who have gone out of business.

You can run a business at a loss. New businesses do it every day. Hard times. If you do not have cashflow you cannot run a business, profitable or not. You've heard the term asset rich, cash poor? Applies also to businesses whose liquidity (assets that are cash in a months notice, such as debtors) are in the negative. No cash to pay creditors, payroll, GST.

From memory Xero has yet to return a profit.

Here is a crazy notion, lets give peace a chance.

TonyR1973

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#1399679 4-Oct-2015 13:48

MikeB4: From memory Xero has yet to return a profit.

Perhaps as a company, on paper.

mattwnz

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#1399694 4-Oct-2015 14:40

MikeB4:
tdgeek:
Dunnersfella:
tdgeek:
Cashflow is more important than profit

Said companies who have gone out of business.

You can run a business at a loss. New businesses do it every day. Hard times. If you do not have cashflow you cannot run a business, profitable or not. You've heard the term asset rich, cash poor? Applies also to businesses whose liquidity (assets that are cash in a months notice, such as debtors) are in the negative. No cash to pay creditors, payroll, GST.

From memory Xero has yet to return a profit.

On paper, but they could make a profit instead of using the money to reinvest if they wanted to, and grow slower. It all depends on the companies growth and business strategy. But there model is far different to a regular retail one. They are selling a 'sticky' service, rather than one off items. With retailers it is often a race to the bottom with the undercutting that goes on. Although they make big margins on things like extended warranties and accessories, and in area where there is less competition.

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