Let’s take a phone merchand for example. Let’s say that he sells the phones for 500$, but his income from a phone is 50$ because they are sold 450$ from the factory. So, if just ONE phone isn’t sold, he’d lose 450$, and he’d need to sell 9 phones (450÷5) just to come back to the starting point.
This question also works for any kind of merchandizing, including food (which becomes unsellable after a few days unlike phones).
So how do they make profit of it ? I’m confused
This post is the same as a post I made 1 hour ago that corrects some words, sorry for my bad english.
In: Economics
This was described in a book “store wars: Battle for mindspace and shelf-space”.
Yes, retailers operate on rather thin margins. How do they compete with manufacturers in terms of financials? Because its not about the profit its about return on capital.
Most of the time retailers have varying favorable terms with suppliers: they pay 90-120 days after they sold an item.
Retailer sells 90 phones for $1000 = $90000 before they pay a single dollar to supplier. This allows them to “sit” on mountains of cash. So as long as your profit margin is positive, you are good.
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