Date: Sat, 24 Apr 2004 11:20:06 -0700
Reply-To: Mark Tuovinen <mst@AK.NET>
Sender: Vanagon Mailing List <vanagon@gerry.vanagon.com>
From: Mark Tuovinen <mst@AK.NET>
Subject: Re: 2.1 hose price deal NVC
Content-type: text/plain; charset=us-ascii
Norm,
Your math re: cost and markup( 60% cost, 40% markup) are in the ballpark for most brands that I have worked with over the last 21 years. A 5% margin will not keep the doors open however. Lets say I sold $1,000,000.00 of merchandise last year, at 5% I generated $50,000.00 in profit, that won't even pay my salary and backside expenses, insurance, etc, never mind covering the support staff. In my department we have three people that handle 90% of the sales and three support staff, parts manager, delivery driver, and shipping & receiving clerk. On top of this you have to cover a portion of the salaries for the accounting staff, cleaning person, building maintenance, lot attendants, business owners, etc. Each department also pays its share of the utilities, space rent, lot and building maintenance(including removing 113.5 inches of snowfall), insurance, and a myriad of other expenses. Now add freight charges, returns, damaged merchandise, obsolesence, mistakes, and shrinkage(thef
t). Equipment and supplies take another bite out of profits, delivery trucks, computers, postage meters, business forms, pens, staples, etc, all cost money and have to be replaced regularly. I know that at least one national parts store chain considers 30% to be the minimum acceptable margin for retail sales, and 27% for wholesale. My wife owns a nationally franchised childrens store, to be profitable it has to maintain margins between 42% and 60% depending upon the item. As consumers we all want the best deal possible, but a 5% margin for the vendor won't work. Vendors are consumers also, and have the same needs, wants, and desires as the rest of us. If they can't make a reasonable profit they will go out of business, then we will have to buy our vanagon parts from the national chains, which typically means lower quality parts, and poorly trained staff.
mark in AK
--- Original Message -----
From: Norm - RoweBoat <norm@ROWEBOAT.COM>
Date: Friday, April 23, 2004 9:11 pm
Subject: Re: 2.1 hose price deal NVC
> I used to work in the Parts Dept. at an Olds/Cadillac, GMC Truck
> dealership.Our prices were across the board 60% cost, 40% markup.
> So even if we sold
> to someone at a 35% discount, we still had a %5 margin. Not much,
> but most
> grocery stores operate on a 5% average profit margin.
>
> Norm
>
> -----Original Message-----
> Date: Fri, 23 Apr 2004 12:01:19 -0700
> From: Mark Tuovinen <mst@AK.NET>
> Subject: Re: 2.1 hose price deal NVC)
>
> George,
>
> Is that 35% off of the manufacturers suggested retail price, or
> the dealers
> retail, after he has recalculated with a new pricing matrix? I
> have spent
> the last 21 years in the automotive industry, most of them in
> dealershipparts selling to wholesale accounts and none of them get
> 35% off of the
> manufacturers retail, even those that spend $140,000.00 a year. No
> dealercan operate at that discount level, they couldn't pay their
> bills. For your
> dealer, favorite list vendor, or local parts store to provide you with
> quality parts, service, and trained professional staff, they have
> to make a
> reasonable profit, you can't do that at 35% off. Many places do
> use a
> pricing matrix that recalculates the retail price, usually it is
> factoredfrom cost, with lower cost items being marked up more then
> higher priced
> ones. This is why things like body clips, screws, etc, can cost so
> much more
> at the dealer, if they did not mark up the price they would lose
> money on
> every sale. One dealership I worked for once calculated that it
> cost $2.50
> for every parts invoice generated. Your local dealer may like you
> enough to
> give you special pricing, but that would be an exception, as a
> rule they
> can't do it for everyone. Check with your local clothing, grocery,
> hardware,etc, stores, I guarantee that they can't operate on a
> margin as thin as that
> left after your local dealer gives you 35% off.
>
>
> Mark in AK
>
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