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
Loosely speaking, products are sold with a considerably higher margin than you mentioned. A $500 retail price means a $250 wholesale price. So, if a product doesn’t sell, you keep cutting its cost until it does sell, and *usually* you can at least break even.
So then you might ask: why don’t wholesalers just undercut retailers and sell stuff directly at much lower cost? Well, they *do* sometimes. That used to be an untenable approach because retailing required buildings and sales staff and so on. Now, everybody buys things online, so retailers are under assault on two fronts — the wholesalers themselves are getting into the retailing business (online, on their own sites, on Amazon, and on sites like Temu), *and* retailers (like Costco) are getting closer to becoming wholesalers themselves. If you’re a storefront retailer in a mall for example, that means you’ve got intense pressure right now.
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