Pricing Formula
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Any topic is acceptable, and topic drift is permissible.
Re: Pricing Formula
Actually, that is not even close to right, hi hi.
Mfg. to Mfgr. Rep is usually only 2 to 5% on a finished product.
Mfgr. Rep. to Distributor is usually only around 5 to 10%
Then Distributor to Wholesaler is around 15 to 20%
Wholesaler to Retailer is around 21 to 25%,
And then the Retailer doubles his price, adds inbound freight, to get the retail sale price.
Except Jewelry stores and Restaurants who work on a 1000% markup, hi hi.
If you cut out one of the steps above, then the person before that makes a larger amount, by selling at the next level markup schedule.
Mfg. to Mfgr. Rep is usually only 2 to 5% on a finished product.
Mfgr. Rep. to Distributor is usually only around 5 to 10%
Then Distributor to Wholesaler is around 15 to 20%
Wholesaler to Retailer is around 21 to 25%,
And then the Retailer doubles his price, adds inbound freight, to get the retail sale price.
Except Jewelry stores and Restaurants who work on a 1000% markup, hi hi.
If you cut out one of the steps above, then the person before that makes a larger amount, by selling at the next level markup schedule.
Re: Pricing Formula
Considering I found this on Pinterest I'd not give it a lot of economic credibility. It's also worded ambiguously ... (for what you are worth). I'm not sure what that means. It's probably intended as a joke but you told me once that you use a formula that involves doubling the cost, or something. I guess it's not useful information, but I was thinking it might be entertaining.
Re: Pricing Formula
The product I make and sell to my mfgr. rep. for six bucks, I only make 25 cents on. He makes around 20 cents selling to a distributors, and after that it mainly depends on the distributors. But the final retail price in stores is anywhere from 18 to 21 dollars.
I have one main distributor who sells directly to retail stores, cutting out the wholesaler, and at those retail outlets the price is usually around 18 bucks, but at other places who buy from wholesalers it is 20 to 21 bucks.
I have one main distributor who sells directly to retail stores, cutting out the wholesaler, and at those retail outlets the price is usually around 18 bucks, but at other places who buy from wholesalers it is 20 to 21 bucks.
Re: Pricing Formula
It takes a lot to get a product to market. In my mind it should be simple. The manufacturer should be able to sell directly to the consumer and eliminate a lot of the complications in between. I realize, however, that you manufacturing a product in Tennessee would require a lot more in terms of resources to sell it directly in Europe, for example. You can't afford that burden even if you wanted to attempt doing it. That's life in a capitalistic society and I don't see it changing under the present business plan. There are a lot of complaints about the cost of any consumer product you care to mention, and I think that is derived from people not knowing how value is added and contributes to the costs. Your $6 bottle of juice could not be sold for that price in the international market because the value of the product increases along the way. The formula in the graphic doesn't break things down to show how value affects the pricing. One more reason for me to now think it was a joke.
Last edited by yogi on 03 Mar 2021, 17:24, edited 1 time in total.
Re: Pricing Formula
My product is sold all around the globe, but naturally only two those who can afford to own reef aquaria.
In the beginning, I did sell directly to the end consumers. And I sold it at a fair retail price, back then it was 15 bucks a bottle.
And honestly, I was losing money selling at retail, because of all the other things involved. Mostly related to taxes and much higher shipping costs.
I finally landed a couple of wholesalers to sell my product to the retailers. I made more money per sale of course, and many had me drop shipping to the retailers for them.
When sales got high enough, I took on a distributor who had international contacts with wholesalers. After that I took on about four more distributors. One of them was fairly large, and had their rep contact me about them becoming my mfg. rep. I had to take a small cut in price, but then at that time, they supplied all the distributors, and took care of labeling for the international market.
Now, 20 years down the road, I do all the labeling, and what they sell overseas they have an add-on foldout label in the language for where the product is going, so it still has our full-color label on the bottles.
In the beginning, I did sell directly to the end consumers. And I sold it at a fair retail price, back then it was 15 bucks a bottle.
And honestly, I was losing money selling at retail, because of all the other things involved. Mostly related to taxes and much higher shipping costs.
I finally landed a couple of wholesalers to sell my product to the retailers. I made more money per sale of course, and many had me drop shipping to the retailers for them.
When sales got high enough, I took on a distributor who had international contacts with wholesalers. After that I took on about four more distributors. One of them was fairly large, and had their rep contact me about them becoming my mfg. rep. I had to take a small cut in price, but then at that time, they supplied all the distributors, and took care of labeling for the international market.
Now, 20 years down the road, I do all the labeling, and what they sell overseas they have an add-on foldout label in the language for where the product is going, so it still has our full-color label on the bottles.
Re: Pricing Formula
Yes, that's what I said. As a manufacturer you can't afford to get into the retail sales. It's just not profitable enough. The chart doesn't show why that is true, thus I question the reasons for it to be published. Then, too, nobody needs a reason to pin something on Pinterest.
Re: Pricing Formula
But Retail is the only part of the chain of distribution where there is a 100% markup.
All the rest of the chain works on 2 to 20% very few at 25%.
Except for Jewelry stores and their 1000% markup, and some restaurants.
But the big thing about being a manufacturer is you only deal with one person, your mfgr. rep. hi hi.
All the rest of the chain works on 2 to 20% very few at 25%.
Except for Jewelry stores and their 1000% markup, and some restaurants.
But the big thing about being a manufacturer is you only deal with one person, your mfgr. rep. hi hi.
Re: Pricing Formula
From my own experience with customer service, I think it's a brilliant idea for manufacturers not to deal directly with consumers. I've run into a few CSR's that know what they are doing, but that is the exception rather than the rule. Part of the problem there is that companies hire other companies to do the warranty and customer service. Those hired hands can only read a script, and some of them can't even do that very well.
Re: Pricing Formula
Despite all the middle man markups, to the end consumer, it is actually cheaper to go through a chain of distribution than to try and sell direct. It also means, a manufacturer would have to do things they have no experience in doing, and taking up more space than they have to do it.
Our florist was in affect a manufacturer, and one of our slogans was from greenhouse to you.
But internally, we were still a multi-level distribution system.
Both in plants and cut flowers.
The growing department was one division, then we had the wholesale division, and of course the retail outlets.
The growing department still had to get their plants or cut flowers to the storage areas and flower coolers, which was like the distribution center, waiting to go to the wholesale department.
The retail departments are who handled exchanges, returns, and refunds, since they are who sold the products.
Our florist was in affect a manufacturer, and one of our slogans was from greenhouse to you.
But internally, we were still a multi-level distribution system.
Both in plants and cut flowers.
The growing department was one division, then we had the wholesale division, and of course the retail outlets.
The growing department still had to get their plants or cut flowers to the storage areas and flower coolers, which was like the distribution center, waiting to go to the wholesale department.
The retail departments are who handled exchanges, returns, and refunds, since they are who sold the products.
Re: Pricing Formula
One of the irksome things about online shopping is the distribution mechanism. Some sellers will handle the RMA's seamlessly and even provide prepaid shipping labels to complete the task. Others won't take any returns at all and want the buyer to deal with the manufacturer. The exception would be damaged goods during delivery.
A florist could indeed be considered a manufacturer. The different departments your business had to handle distribution to customers was still one company unless you went through the trouble of incorporating each different department. The different functions might have been in different locations, but there was only one boss for them all. LOL So, there was a lot of truth to the company slogan.
I can appreciate the expense involved with getting a product from the factory to the customer. In some cases like the florist there weren't too many complications to prevent direct sales. Other operations, particularly international ones, would be crazy to take on all the expenses involved with door to door delivery.
A florist could indeed be considered a manufacturer. The different departments your business had to handle distribution to customers was still one company unless you went through the trouble of incorporating each different department. The different functions might have been in different locations, but there was only one boss for them all. LOL So, there was a lot of truth to the company slogan.
I can appreciate the expense involved with getting a product from the factory to the customer. In some cases like the florist there weren't too many complications to prevent direct sales. Other operations, particularly international ones, would be crazy to take on all the expenses involved with door to door delivery.
Re: Pricing Formula
Most of the small businesses I started, I did sell direct to the public in the beginning.
But I was wise enough from being raised in the business world to know to set my retail prices accordingly, so that I could eventually take on the middlemen without it affecting the consumer price, it only affected how much I could sell to them for.
When I did hot foil stamping, I gave those placing larger bulk orders a super break, such that my price was about 1/3 to 1/2 less than my competition. I invested a lot of money into foundry type so I didn't have to have plates made, except for generic things I sold many of to warrant the cost of the plates.
I started out with plates for 1st, 2nd, and 3rd place ribbons, and later added 4th, and 5th place.
But I could still customize by adding cold type at the top or bottom of the ribbons I was printing.
Had to have custom safety pins made that did not have the coil on them, which meant I had to buy a ton of them. Even so, I ended up using nearly all of them when I shut down that business.
Actually, computer generated work with specialized hot foil printers appeared on the scene. They didn't look quite as good as true hot foil printing, but they could handle any single color image, aka line art type of images. I suppose they used much thinner foils than true hot foil stamping did. I could spot one printed on a press versus one printed using a hot foil printer, because the grain of the ribbon was evident within the printed area.
In this type of business, I knew there would never be a middleman to speak of. I sold directly to retailers, such as carnival supply houses and the like who stocked the generic ribbons. So as long as I was underselling my competition, they all bought from me, hi hi.
But I was wise enough from being raised in the business world to know to set my retail prices accordingly, so that I could eventually take on the middlemen without it affecting the consumer price, it only affected how much I could sell to them for.
When I did hot foil stamping, I gave those placing larger bulk orders a super break, such that my price was about 1/3 to 1/2 less than my competition. I invested a lot of money into foundry type so I didn't have to have plates made, except for generic things I sold many of to warrant the cost of the plates.
I started out with plates for 1st, 2nd, and 3rd place ribbons, and later added 4th, and 5th place.
But I could still customize by adding cold type at the top or bottom of the ribbons I was printing.
Had to have custom safety pins made that did not have the coil on them, which meant I had to buy a ton of them. Even so, I ended up using nearly all of them when I shut down that business.
Actually, computer generated work with specialized hot foil printers appeared on the scene. They didn't look quite as good as true hot foil printing, but they could handle any single color image, aka line art type of images. I suppose they used much thinner foils than true hot foil stamping did. I could spot one printed on a press versus one printed using a hot foil printer, because the grain of the ribbon was evident within the printed area.
In this type of business, I knew there would never be a middleman to speak of. I sold directly to retailers, such as carnival supply houses and the like who stocked the generic ribbons. So as long as I was underselling my competition, they all bought from me, hi hi.