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
The important detail missing is that an unsold $450 phone isn’t a $450 *loss*, because you still have the phone. Maybe you can return it to the manufacturer – a lot of goods are “sale or return” for retailers – and recover the $450, or maybe you can still sell it for $450 or $400 later in the year, recouping most or all of that cost. Selling at $400 is a $50 loss, so overall you’re still $400 up on that batch of phones.
The worst outcome is if that handset gets broken or stolen from the store, so can’t be sold or returned at all. Too small for insurance, so the whole profit from the batch of handsets is gone.
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