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
In addition to the other great answers, many retailers sell accessories with a high profit margin alongside the “main” products. So a smart phone might have a low profit margin but phone cases and charging cables and headphone adapter cables and pop sockets can all have very high profit margins and a significant percentage of customers will buy several new accessories along with their new phone.
At grocery stores, the items in the checkout line like candy and gum and magazines have a higher profit margin and longer shelf life than the actual groceries. And enough customers buy some of those items along with their groceries that it boosts the overall profit of the store.
You just wait until you sell it. They’re like bonds basically, in that you pay a big chunk of money, and get more money you paid back over time
I have some experience on both the manufacturing side and retail side. For example, in manufacturing and distribution, we paid the contract manufacturer $X. We would then sell to the retailer for roughly double that. The retailer would then sell to you for roughly double that. That $130 pair of running shoes you bought at your local running store? The store paid $65 to Nike or whomever. Nike in turn paid about $35 to the Chinese contract manufacturer.
Sometimes the items you sale come with a sales guarantee from the distributor. Whatever items left unsold are reimbursed to the merchant. So you don’t have to worry too much about unsold items.
Another thing is just sales history. You can look at your recent sales history and trends to semi-accurately predict how many of X item you’ll need to order, reducing waste.
When I managed a 7-11 we tried not to have anything below a 50% margin. There were things we couldn’t help have low margins on like chips and cigarettes but most of the time you’re looking at least a 40% markup on items
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