Technology Mark-up

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sxz

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#211689 7-Apr-2017 09:13

Thought you guys might find this interesting:

Video Baby Monitor - retails for $NZ250
The Warehouse RED ALERT deal sold this for $175 (or thereabouts). I was (am) very pleased with this price for this model.
It arrived this morning and included an invoice from the manufacturer to the warehouse(!) showing the manufacturer only charged the warehouse $NZ127 (including GST). Shipping must have come direct from the manufacturer in OZ.

I don't work in retail, so generally have no idea what markup retailers make on products, but I was genuinely surprised that even on the RED ALERT deal the warehouse still made nearly $50 from me. At $250 they would be making $123 (gross) on every product sold.

This is the model in question: https://www.noelleeming.co.nz/shop/computers-tablets/smart-home/baby-monitors/vtech-bm3500-safe-sound-video-audio-baby-monitor/prod144963.html

Edit: to clarify the manufacturer's charges included GST

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#1757934 7-Apr-2017 09:14

Does the manufacurer price include GST?
If it's imported from Australia then probably not.
The price you paid of $175 includes almost $20 of GST.
So the actual revenue the warehouse got is around $150.
That seems like a reasonable margin.

Geektastic

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#1757940 7-Apr-2017 09:27

I recently discovered that the standard mark up on items sold in pharmacies, excluding prescription items, is 200%.

Still, if the government only "levelled playing field" by charging GST on imports below the current threshold all would be well in NZ retail....!

timmmay

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#1757953 7-Apr-2017 09:39

Pharmacies are always expensive. From the PHARMAC schedule it looks like a paracetamol tablet costs $0.008 (0.8c) per tablet, and ibuprofen costs $0.009 (0.9c). If you buy them in the supermarket it's probably $2 - $6 for 20, or 10c - 30c/ tablet, or a 10X - 30X markup over (1000% - 3000%) over manufacturing cost. Of course there's packaging, shipping, etc. Who makes that money? Probably the person who packages the product and puts a fancy label on, or for supermarket brands, the supermarket.

Retailers have to cover shipping to NZ, rent, staff, returns, all kinds of things.

sxz

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Ultimate Geek

#1757956 7-Apr-2017 09:43

NonprayingMantis: Does the manufacurer price include GST?
If it's imported from Australia then probably not.
The price you paid of $175 includes almost $20 of GST.
So the actual revenue the warehouse got is around $150.
That seems like a reasonable margin.

Yes it includes GST. Manufacturers cost price was $110.92

muppet

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#1757972 7-Apr-2017 09:58

Holy Beep.

THAT'S how supply and demand works!

Stu

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#1757984 7-Apr-2017 10:08

If margins were even close to that in IT it would be marvellous.

People often mistake me for an adult because of my age.

Keep calm, and carry on posting.

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#1757986 7-Apr-2017 10:11

You'll also probably the find the red alert special resulted in a reduced price from the manufacturer/distributor so at normal RRP the margin would probably be similar.

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#1757994 7-Apr-2017 10:14

So you were happy until you found out they made more money than you wanted them to ? Ignorance is bliss. I guess if you want everything cheaper, you could setup a distribution business like TWH and see if it's really as good as you think.

TWH makes pretty slim margins overall I believe, so I'd suggest like every business, there are some items they make good margins on, and some they make very little on.

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#1758005 7-Apr-2017 10:25

sxz:

Thought you guys might find this interesting:

Video Baby Monitor - retails for $NZ250
The Warehouse RED ALERT deal sold this for $175 (or thereabouts). I was (am) very pleased with this price for this model.
It arrived this morning and included an invoice from the manufacturer to the warehouse(!) showing the manufacturer only charged the warehouse $NZ127 (including GST). Shipping must have come direct from the manufacturer in OZ.
I don't work in retail, so generally have no idea what markup retailers make on products, but I was genuinely surprised that even on the RED ALERT deal the warehouse still made nearly $50 from me. At $250 they would be making $123 (gross) on every product sold.

This is the model in question: https://www.noelleeming.co.nz/shop/computers-tablets/smart-home/baby-monitors/vtech-bm3500-safe-sound-video-audio-baby-monitor/prod144963.html

Edit: to clarify the manufacturer's charges included GST

You think every time there is a Red Alert TWH is then throwing money at you? Of course they make money. In a retail store, they make money even at 60% off.

BTR

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#1758019 7-Apr-2017 10:42

joker97:

sxz:

Thought you guys might find this interesting:

Video Baby Monitor - retails for $NZ250
The Warehouse RED ALERT deal sold this for $175 (or thereabouts). I was (am) very pleased with this price for this model.
It arrived this morning and included an invoice from the manufacturer to the warehouse(!) showing the manufacturer only charged the warehouse $NZ127 (including GST). Shipping must have come direct from the manufacturer in OZ.
I don't work in retail, so generally have no idea what markup retailers make on products, but I was genuinely surprised that even on the RED ALERT deal the warehouse still made nearly $50 from me. At $250 they would be making $123 (gross) on every product sold.

This is the model in question: https://www.noelleeming.co.nz/shop/computers-tablets/smart-home/baby-monitors/vtech-bm3500-safe-sound-video-audio-baby-monitor/prod144963.html

Edit: to clarify the manufacturer's charges included GST

You think every time there is a Red Alert TWH is then throwing money at you? Of course they make money. In a retail store, they make money even at 60% off.

I think you are missing the OP's point, what is a fair markup? I know Apple Products only have 5-6% margin in them which is why you very rarely see them on sale. I think anymore than 30% margin on a electrical item around that price range is criminal.

But we do live in a capitalist society where its not about the store making a profit to maintain business but to make their shareholders as much money as possible and if that means ripping people off so be it. That is why so many people import goods from overseas.

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#1758021 7-Apr-2017 10:45

Fair mark up eh ... I know I can get a specific Dell XPS model in USA for US999 (usually discounted well below that RRP). THe same model retails in NZ for $2200 NZD. That's as technological as they get ... right?

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#1758023 7-Apr-2017 10:47

BTR:

joker97:

sxz:

Thought you guys might find this interesting:

Video Baby Monitor - retails for $NZ250
The Warehouse RED ALERT deal sold this for $175 (or thereabouts). I was (am) very pleased with this price for this model.
It arrived this morning and included an invoice from the manufacturer to the warehouse(!) showing the manufacturer only charged the warehouse $NZ127 (including GST). Shipping must have come direct from the manufacturer in OZ.
I don't work in retail, so generally have no idea what markup retailers make on products, but I was genuinely surprised that even on the RED ALERT deal the warehouse still made nearly $50 from me. At $250 they would be making $123 (gross) on every product sold.

This is the model in question: https://www.noelleeming.co.nz/shop/computers-tablets/smart-home/baby-monitors/vtech-bm3500-safe-sound-video-audio-baby-monitor/prod144963.html

Edit: to clarify the manufacturer's charges included GST

You think every time there is a Red Alert TWH is then throwing money at you? Of course they make money. In a retail store, they make money even at 60% off.

I think you are missing the OP's point, what is a fair markup? I know Apple Products only have 5-6% margin in them which is why you very rarely see them on sale. I think anymore than 30% margin on a electrical item around that price range is criminal.

But we do live in a capitalist society where its not about the store making a profit to maintain business but to make their shareholders as much money as possible and if that means ripping people off so be it. That is why so many people import goods from overseas.

Apple products have a 5% margin because Apple is getting all the profit.

Apparently it costs Apple around $200US to manufacture a NZD1500 iphone. Which makes sense, given that a replacement APplecare Plus costs around NZD250.

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#1758024 7-Apr-2017 10:48

BTR:

joker97:

sxz:

Thought you guys might find this interesting:

Video Baby Monitor - retails for $NZ250
The Warehouse RED ALERT deal sold this for $175 (or thereabouts). I was (am) very pleased with this price for this model.
It arrived this morning and included an invoice from the manufacturer to the warehouse(!) showing the manufacturer only charged the warehouse $NZ127 (including GST). Shipping must have come direct from the manufacturer in OZ.
I don't work in retail, so generally have no idea what markup retailers make on products, but I was genuinely surprised that even on the RED ALERT deal the warehouse still made nearly $50 from me. At $250 they would be making $123 (gross) on every product sold.

This is the model in question: https://www.noelleeming.co.nz/shop/computers-tablets/smart-home/baby-monitors/vtech-bm3500-safe-sound-video-audio-baby-monitor/prod144963.html

Edit: to clarify the manufacturer's charges included GST

You think every time there is a Red Alert TWH is then throwing money at you? Of course they make money. In a retail store, they make money even at 60% off.

I think you are missing the OP's point, what is a fair markup? I know Apple Products only have 5-6% margin in them which is why you very rarely see them on sale. I think anymore than 30% margin on a electrical item around that price range is criminal.

But we do live in a capitalist society where its not about the store making a profit to maintain business but to make their shareholders as much money as possible and if that means ripping people off so be it. That is why so many people import goods from overseas.

I consider it a fairly typical markup for a retail product. If anything it's probably below the sort of margin some other retailers would make. This is not a big ticket electrical item such as TV.

KrazyKid

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#1758031 7-Apr-2017 11:05

Based on the numbers above TW made 26% GP or $40 on the goods.

(26% GP is 26c in every dollar profit before expenses)

That seems reasonable considering

- they have to pay staff costs, power, internet fees, rent, some shipping, business insurance, Tax (on profits), shrinkage, Credit Card fees, etc etc etc

Different retailers work on different models - a supermarket would love to make 26% GP overall, where a small business with a low turn-over may well go broke if they only made 26% GP

Fred99

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#1758036 7-Apr-2017 11:15

There's no such thing as a "fair" markup.

In setting selling price, you charge the maximum price that "the market" will bear. You're not running a charity.

That might be limited by competition or buyer resistance, might have short-term goals when you've got a one-off transaction with a customer you'll never see again, or it could be a market where repeat business is important, rip off a potentially good customer on one item, risk losing them forever.

Retailers will sell things at below cost - loss leaders, it's a well-established concept in FMCG.

The aspects about markup I don't like are when you're held over a barrel (the thread on replacement electronic car keys for example), the fact that variable margins applied on FMCG at supermarkets etc can make it nearly impossible for new suppliers to break into markets - thus limiting competition (and consumer choice), and "profit shifting" by global corporations used as tax minimisation. None desirable, and IMO it's "market failure", but almost impossible to effectively regulate and/or police.

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