General Retail Business Issues/Markups on Products

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Question
Dear James:

I'd appreciate your answer to the following:

I've been in contact with a company in the Philippines who'd like me to distribute their products in Canada.  From what I can determine the product is now being brought in from the U.S. and retails between $2.00-$3.00 Canadian.  In making my calculations, can I assume that the retailer would mark up 100% on the wholesale price or is this too high?  Generally, what percentage should I as the middle man get?  I would be trying to find clients for the manufacturer overseas. I wouldn't be handling the import/export of the product itself.

Best Regards,
Howard

Answer
Howard,

It is not possible for me to be completely accurate without knowing what the item is. However, as a rule, a retailer will want at least a 50% margin on selling price (which you call 100% of cost).  So, an item which a retailer will sell for $3.00 will cost them at most $1.50. Wholesalers generally make at least a 30% margin, again on the wholesale selling price so on $1.50 you will need a first cost to you of $1.05 at most. Ideally if you have marketing costs, distribution, inventory and other costs your first cost should be even lower to give you enough margin to support all those activities. What a wholesaler often brings to a retailer is the ability to provide immediate shipping on items in small quantities.  That is why you can make the margins you do.

Hope this helps and good luck.

General Retail Business Issues

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James E. Dion

Expertise

Most questions about trends in specialty retail, how customers are changing both in the US and Europe. Demographics for all countries as they relate to retail trends and issues. Store Operations, Buying and Merchandising.

Experience

Over 40 years in the retail industry, store level, store manager, buyer, merchandise manager, Vice President.

Education/Credentials
BS Psychology, MS Psychology, PhD(abd) Industrial Psychology Illinois Institute of Technology

Past/Present Clients
Microsoft, Harley-Davidson, Ritz-Carlton, Hummer, Williams-Sonoma, Ace Hardware, Coleman Spas, Aldo, Intel, Dell, Safeway, New Balance, IBM, Kodak, Bata International, Nortel Networks, Honey Baked Ham Co., Man Alive, Highsmith
B.S Chicago State University M.S. Chicago State University PhD (abd) Illinois Institute of Technology

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