Question

Topic: Strategy

Consumer Electronics Wholesale / Retail Pricing

Posted by marka on 7/5/2012 at 4:22 PM ET 250 Points
Hello all,

Couple of years ago we have started importing consumer electronics from China and market them under our brand name... Products such as tablet PC..

Our main challenge is finding that wholesale/retail markup formula.. As you know, beside having a good product, retailers want to know how much money will they make .. at the same time, we have to be at a competitive price to be able to sell..

Is there a magic formula that we can use, I heard once that in consumer electronics it works like this:

Cost: $100 comparabile retail price is around $160-$200
My sale price is 20% = $120
My rep is 10% = $132
Add 5% for shipping and handling (this may vary depends on the country) = $138.6

Wholesale is 20% = $166.32
Retail is at 30%= $216.22

If this is correct, then our price is way too high and can't be sold..


So I guess the questions is, what is the formula(s) that we can use to price out a product.. Where can we find that markup list in that we can use?





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RESPONSES

  • Posted by Andy Fracica, MBA on 7/5/2012 at 5:06 PM Member
    From what I understand, in the US consumer electronics are sold on small profit margins at high volume. If you could import and retail, you would stand to profit nicely and undercut competition.

    I hope this helps,

    Andy
  • Posted by marka on 7/5/2012 at 6:36 PM Author
    Thanks Andy for the response.. I guess what I'm after is that margin, what is it? :) I can't retail myself, it's very expensive to get into both businesses.
  • Posted by Andy Fracica, MBA on 7/5/2012 at 7:08 PM Accepted
    Marka,

    Here are some articles that might help you:

    https://techcrunch.com/2009/09/28/neweggs-ipo-filing-reveals-the-financials...

    "As a retailer, NewEgg’s's profit margins are slim. It was only 1.4% in 2008. Amazon’s profit margins are around 3.3%, which is double Newegg’s margins."

    https://smallbusiness.chron.com/reasonable-profit-margin-17989.html

    Retail Electronics Industry Profit Margins
    The average gross profit margin in the retail electronics industry come in on the mid to low side at 30.76 percent, but like all retail businesses, labor expenses are relatively high and the average net profit in the industry is only 4.68 percent. A net profit in the range of 5 to 8 percent would be reasonable for a retail electronics store.

    https://resources.alibaba.com/topic/302773/Buying_Myth_2_I_can_make_a_huge_...

    The Truth: There are more electronics wholesalers and retailers in business than any other type of product. The only way to increase your profit margin is to buy in huge quantity of 10,000 of each item and re-sell them direct in your own retail store-thus eliminating the 'middle man'. If you are a wholesaler purchasing electronics to re-sell at retail prices then expect your profit margin to be 10%-20% depending on the item.

    https://articles.economictimes.indiatimes.com/2012-02-04/news/31024915_1_du...

    We operate on 2-3% net margin and our overheads are high. If this (low margins) continues our business will become unviable," Giria said.
  • Posted by marka on 7/6/2012 at 4:28 AM Author
    Thanks Andy, that was very helpful!
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