
Originally Posted by
kro
The fine line between profit, and profiteering. A business has to be making around 30% margin to grow.
If for arguments sake, the bulb is $12.00 from the importer, then it should retail for around 17-20 in a store that wants to be both competitive, but not undermine its margin. $50.00 for a bulb, and an aftermarket one at that, is excessive.
I see this constantly in my industry, our main competitor will quote a price to a customer, who then comes and tries us instead, and we are heaps cheaper on our bog standard book rate, which we can sharpen up again, and our competition lose a sale, and often a regular customer.
When I was running my own business back in the '90's my accountant told me I had to make 33% GP or I wasn't viable. In five years I increased turnover four-fold and my GP from 26% to 43%. Even at 43% GP average, which on my biggest seller meant a 110% markup, I was still considerably cheaper than my competition! For example, a torch I sold for $65.00, was $84.00 from my competition, yet I made as much or more per item due to me being the importer's largest reseller giving me better buy rates. The funny thing is, my cometition was, (is), a national chain. However the Energizer batteries I only made 5-10% on and often sold them at cost. My second biggest selling item was the same price as the supermarkets yet I still had a 30% GP on that. But I sold it in bulk and bought by the tonne ex-factory.
Many of the items I sold as a one-man show were cheaper than the big stores and my business was growing faster than I could capitalise. I was about a month away from doubling turnover on the bulk stuff when I got sick.
Lesson? Don't work yourself into the ground, listen to your accountant and take it in stages, take care of your health and you'll survive to be competition to the bigger shops who can take the knocks and still be around. There's a reason why Coleman's are still in business despite being typical of the seemingly rip-off margins on some items.
The car/bike parts industry is always about these stories. I ordered my VA lowers direct from the manufacturer in the States as Suzuki NZ didn't have anything for my bike and they arrived in four days at a very reasonable $195NZ at my door including shipping insurance! In 6 months, Bikesport Helensville was unable to get the leather tank protector from Suzuki NZ despite it being a listed accessory and despite repeated assurances it would be "in next week". Mathew gave up and cancelled the order and suggested I get it myself from the States direct.
You don't get to be an old dog without learning a few tricks.
Shorai Powersports batteries are very trick!
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