If merchants only get a small amount from what they sell, then how do they make profit if one or more of their product isn’t sold ?

Question

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

Answer 1

Contractual agreements can (and are) created between wholesaler and vendor to insure that the vendor does not lose money on unsold merchandise. This is how the wholesaler convinces the vendor to take a chance on selling their product.

Larger vendors (like walmart) DO NOT operate on a 10% margin because they are able to use economies of scale to vastly lower their per unit cost and thus a failure to sell all of the product is not as costly.