Retailing’s Holy Grail

Just thought I would address the topic of shops making a profit from the stock they sell.

Simply put the profit you make on the stock you sell keeps your business thriving. For many consumers who do not comprehend, they believe ‘profit’ means they are being ripped off by the store.

The reality however is that without a certain percentage profit on return shops, stores, supermarkets would shut their doors and the business would fail; customer choices would be gone for good and the services lost. After paying cost price for the goods from suppliers retailers have then got to make enough money to cover all such things like; tax, VAT, wages, salaries, rents, business rates, commercial mortgages, business insurance, loans, bank charges, company pension scheme contributions as well as employees NI and PAYE contributions……not to mention electric bills, gas, water,, running company transport, advertising legal & professional services among others. So as you can see it is a lot of expenditure to gain from stock!

Profit is not a dirty word it is an absolute necessity. The hardest part is getting enough profit to sustain the business. Some sectors of retailing make very little ‘mark-up’ on their goods while others enjoy a very large margin between cost and selling price.

Remember the days when CD’s first came out? So a CD cost less than 80 pence to produce but the public were happy to pay £10 or more for the finished product which meant retailers in that area were enjoying a mark-up of more than 10.

Coffee chain are currently charging £3 for a latte which is estimated it costs as little as 30p to make, shot of coffee ground, splash of milk seriously frothed up, the ceramic cup bought and washed plus the baristas time. So again maybe around x10 profit margin. Ten is a decent mark up to cover all of those business costs and still make a profit, no surprise why we see so many occupying the hight streets.

The ‘used tech’ store CEX its shops have recently made big expansion on the high street. For example, the buy DVD’s of you for just 1p and sell them for 50p…so they sell stuff really cheaply but they buy it for almost nothing. Similarly charity shops have a big presence on the high street because they get all their stock given free, 99% of the staff are volunteers working for free plus charities get significantly reduced (if any) business rates.

Businesses who buy items for £10 but where consumer expectations of certain sectors or due to internet pricing sabotaging means they can only realistically sell it for £19.99 means they can only mark up by x 2.

Clothing and fast fashion can get jeans for £10 and in certain ‘designer’ stores can enjoy x4 mark up selling at £39.99.

It is interesting to see that depending what sector of retail trading you are in determines just how hard or easy it is to succeed.