What is retailers general markup % on laptops in NZ?

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RickD

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# 19499 19-Feb-2008 18:00

Hi,

I want to know if anyone can tell me what NZ retailers general markup % on laptops is? Or give me some idea of the range?
Mainly the big retailers I am interested in DSE, Harvey Norman etc

thanks

scottjpalmer

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# 111648 19-Feb-2008 18:36

The sub 1200 ones they'd be lucky to make $50, up to $150 or $200ish on the $2kish ones.

Hence the bag, mouse, flash drive and extended warranty they try and sell you :-)

tonyhughes

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# 111658 19-Feb-2008 19:12

Not much at all. The market is so competitive that the margins are tiny.

Even full RRP on some brand name stuff is only 11% (Which sounds a lot to anyone who doesn't understand business too well, but is very slim margin to have if you have to run sales staff, helpdesks, service etc.)

marmel

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# 111674 19-Feb-2008 20:12

When I worked at Bond & Bond the average on computers/laptops may have been about 12-15%. Taking in to account interest free terms etc there wasn't a lot of money in it. As mentioned above extended warranties and accessories bump up the margin. Extended warranties were about 70% profit from memory.

You also need to take into account that most of the big retail chains have centralised purchasing. The "real" cost of goods is not known by staff in local stores, even the store managers.

The buyers purchase in bulk and then enter the prices into the system. The buyers could enter any price they wanted to really. The buyers would also get rebates from the big suppliers for selling so much product etc but this figure is not known to the stores.

heavenlywild

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# 111675 19-Feb-2008 20:22

This is such an interesting thread. I didn't know the margin was so tight! I bet retailers make a killing on Apple products though - Macs!

sbiddle

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# 111677 19-Feb-2008 20:26

heavenly_wild: This is such an interesting thread. I didn't know the margin was so tight! I bet retailers make a killing on Apple products though - Macs!

It's the exact opposite. Margins on Apple products are very low - hence everybody typically selling at the RRP. You'll also notice that Apple products are always excluded from interest free promotions at all retailers who carry them due to the low margins.

RickD

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# 111695 19-Feb-2008 21:47

Thanks for all the replies... exactly what I wanted to know.

heavenlywild

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# 111713 19-Feb-2008 22:27

So when the likes of DSE, Noel Leeming and Harvey Norman have 10-20% off notebooks, they are not making any money! Wow... instead, they are trying to get rid of excess stock? It is a competitive market out there.

weblordpepe

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# 111984 21-Feb-2008 02:13

Krikey. Remind me not to start selling notebooks!!!

The price difference between stores for the Asus EEE has been almost non-existant. What -a $~50 price difference? With almost all being $599 or so?

sbiddle

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# 111993 21-Feb-2008 06:48

heavenly_wild: So when the likes of DSE, Noel Leeming and Harvey Norman have 10-20% off notebooks, they are not making any money! Wow... instead, they are trying to get rid of excess stock? It is a competitive market out there.

It's not very often that you find big box retailers losing money. As pointed out above retail stores (and staff) typically have no idea what the company is actually paying for stock. When you have somebody like Noel Leeming offering 20% off certain brands it's typically manufacturers offering rebates back to the retailers to move stock so they're still making margins on the products.

There are plenty of sales incentives involved in the industry where the more stock retailers can sell the less they pay for goods.

You can be rest assured however that with the exception of clearance stock (or ex display/demo goods) that no matter how good your deal was it's unlikely the store was losing money!

zaptor

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# 112074 21-Feb-2008 13:12

All the big retailers buy in bulk, so automatically you have a margin in there. The trick is to convice enough people to buy them.

From memory Noel Leeming, and Bond & Bond had a business model where a lot of their profit was generated thorugh their finance company arm (whatever they're called).
Although it's now popular amongst other retailers (unfortunately), the big "0" % interest, no money down blah blah credit line was effectively one of their biggest earners. It's just another way of loaning money to people who think they earn enough to pay it back. Woe betide anyone who doesn't pay it all back in the interest free period!
It looks like Harvey Norman is doing the same kind of thing as well.

It's a risky business, but, it does mean they can buy in bulk, with the caveat that enough of the general public will still buy them due to the "interest free" deals, which are quite attractive and seen as the most affordable option by joe public.

However, DSE is a slightly different kettle of fish. They basically dump stuff (when it's near it's end of shelf life) - just to keep things ticking (i.e. if you're not selling, you're not earning), old stock is effectively a negative asset so selling cheap - "at a loss" - isn't as bad as it sounds. DSE's strength is in the low end of the market IMO - sure they sell "cheap" laptops, but turnover is better there (and probably more sustainable).

mushion22

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# 112085 21-Feb-2008 14:06

For DSE, accessories are where the profit is at, and they make more money on entertainment and imaging products than laptops. They only really sell laptops to get customers into their store rather than Noels or Harveys etc. You'll notice that they tend to do package deals rather than discounts. Its easy to give away a DSE USB Stick or a DSE bag - they cost very little, much less than the equivalent reduction in profit they would have to allow to give the customer the same value through a discount.

Eg say they made $100 profit from a $1k laptop. They sell a DSE bag for say $50 which costs them $20, and a DSE USB Stick for $30 which costs them maybe $20, and a Cable that they sell for $20 that costs them maybe $0.80 (I kid you not!). To give a $100 discount on the laptop it means they lose the $100 profit and make no money on the deal (and its even worse for the company because staff are payed commission based on sales rather than profit!). To give the customer a perceived $100 increase in value by bundling the accesssories or offering them to fence-sitting customers, it only costs them $40.80 thus they still make $59.20 on the deal. Customer is happy because they feel proud that they showed who was boss and got the $100 value, and if the customer was looking slightly unhappy the salesperson could give maybe another cable and a pack of CDs which will only result in a few dollars less profit, but at the end of the day the company wins, especially if the salesperson did a good enough job such that the customer chooses DSE in the future instead of a competitor to buy their ink, their CDs, their iPod accessories, their paper, their adaptors etc etc etc.