I recently found a car that a distributor sells cheaper than the official company. How can the distributors in genral afford this decision financially?
In: 69
They’re selling cheaper than the *retail* arm of the manufacturer.
Using some approximate numbers:
* A manufacturer will have a cost ex-works (meaning at the factory’ gates ) of 50
* They will sell to a Wholesaler for 70 (guy handles the logistics and warehousing)
* Wholesaler will sell to retailer for 80
* Retailer will sell to final customer for 100.
The manufactuer can have its own retail operation, but will usually be more expensive:
* they’re not that good at retailing, it’s not their job, so they have worst costs
* they have no interests in undercutting their Trade (wholesaler/retailers) who are their biggest customers.
It’s even sometimes the other way around, the manufacturer sells directly and with high prices to provide a “price umbrella” to the Trade, so they keep selling its products.
Edit: I missed that OP was talking about cars, my comment was more general. Same principle though.
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