Hello you, the Savvy!
Yet again, on BBM, I am discussing something with a friend. We usually bounce business ideas off of each other. He deals with HUGE suppliers in different fields and I thought of asking him about one of those, here is how it unfolded... BTW, I am "C", he is "T".
DISCLAIMER: I censor some words because they are facts I cannot publish, nor do they fit the reason for posting the blog post. It is more of a discussing business concepts and NOT to publish names and specific information. Everything in [...] is censored information :)
C: Dude
C: What's the name of the [censored] company u work with?
T: [Company Name]
C: Is that the name of the brand too? Of [product description] and stuff
C: Like, do they have their own brand?
T: [Brand Name]
C: Or only oem/odm
T: Only [country name] made [product]
C: They don't do [other product]?
T: [Famous Brand 1], [Famous Brand 2] etc...
C: Do u guys have stocks?
T: At any given point, [number in currency] in stock in the warehouse in [country]
T: + other locations in [continent] and [region]
C: I know, but I mean cancelled orders
C: Or last season
C: Bulk stuff
T: Yes
T: We have last season
T: we missed out on containers for [certain holiday season]
T: That usually does a good job cleaning out stock
C: What are the prices on extras u have? Like a container or 2 of stocks?
T: I think we have [number] [size in ft] containers at like 160k each... Actual dist value no less than 300k... Retail around 500k
C: For stock, that's really expensive
T: And thats what I know of
T: Naw its not
T: You're talking pennies on the dollar here
C: Relative to [cheap manufacturing region], yes
C: And its 30% retail
C: That's normal profit margin
C: When selling bulk, it should be more
T: My numbers may be wrong, I dunno... I need to ask
C: I meant more profit
T: But [country] made is always more expensive than [cheap manufacturing region]
C: When buying bulk, u need to sell 50% retail price or more discounted
T: And quality far better
T: Retail is 500k sell is 160k
T: your margins are huge [censored nickname]
C: Which means u need to buy literally @ 10% retail
T: Well over 100%
T: But again, that's on [currency]
C: No man, 160 is around 27% of 500
T: I don't know what import is
T: You're calculating wrong way
C: No, u r
C: if u buy @ 10 u should sell at 30
T: 500 / 160
T: Not other way around
T: Margins are over 300%
C: But actual retail price should be 60 or more
C: Man, u r giving me normal retail price is 500
T: At least
C: When u buy in bulk u cannot sell NORMAL retail
T: You're getting it for 160
T: Your profit is 340
C: U have to sell 50% retail at a maximum
T: Its not 30% :)
C: I.E. U need to sell at 250 or less
C: Read what I'm writing [censored insult hehe]
T: Let's discuss this tomorrow [censored nickname], I gotta be up at 5am
C: :P
T: Dude I'm half asleep
T: Lol
C: Me too
C: My eyes are closin
C: Lol
C: N8
C: N8
T: Night [censored nickname]
So, my point is the following:
If I were to buy something as a bulk product to sell in a discounted store I would want to use the following formula:
R: Retail Price listed on the packaging
I would buy a bulk product as a maximum of 15% of R, i.e. 0.15R
He is saying that 160 is the selling price, retail price is 500, i.e. here he is selling at (160/500)R = 0.32R
If I am buying at 0.32R and I plan to sell at 0.50R, my profit margin is (0.50/0.32)R = 1.56R, i.e. I am not even doubling the money I spent as an initial investment! Taking into account import customs, transport, overheads, etc... This is not a good business deal for me...
HOWEVER, if I were buying at around 0.15R and plan to sell at 0.50R, my profit margin is (0.50/0.15)R = 3.33R, i.e. I am more than tripling my investment, i.e. profit is (3.33-1)R = 2.33 times or 233%. This is of course not taking into account all the import customs, transport, overheads, etc... But, having a 233% profit margin gives me much more leeway to take into account the mentioned costs, in fact, off the top of my head, if my import taxes, transport, overheads are high, I should still be able to make around 150% profit of my original 0.15R I am willing to spend (assuming those costs are HIGH) on the BULK products. This is an OK profit and quite acceptable even if not very good in terms of discounted and bulk products.
In fact, most bulk products are sold in the KILO/LBS in terms of anything made of fabric, food, some porcelains, metals, etc, or highly discounted in other product categories depending on the product. Factories/outlets/etc usually sell in BULK to clear inventory and in general they've already made some sort of profit on the product they've already unloaded within normal prices. So any money/extra profits they bring in on the bulk should be considered as recovered losses on past potential income and not actual profits on the products (since those bulk products are past season or unsellable otherwise).
Am I being unreasonable? Or maybe thinking of things the wrong way? Or maybe in the inverse as "T" suggested in the conversation above...
Let me know, the Savvy... maybe I am being unjustly Coy!
C
Yet again, on BBM, I am discussing something with a friend. We usually bounce business ideas off of each other. He deals with HUGE suppliers in different fields and I thought of asking him about one of those, here is how it unfolded... BTW, I am "C", he is "T".
DISCLAIMER: I censor some words because they are facts I cannot publish, nor do they fit the reason for posting the blog post. It is more of a discussing business concepts and NOT to publish names and specific information. Everything in [...] is censored information :)
C: Dude
C: What's the name of the [censored] company u work with?
T: [Company Name]
C: Is that the name of the brand too? Of [product description] and stuff
C: Like, do they have their own brand?
T: [Brand Name]
C: Or only oem/odm
T: Only [country name] made [product]
C: They don't do [other product]?
T: [Famous Brand 1], [Famous Brand 2] etc...
C: Do u guys have stocks?
T: At any given point, [number in currency] in stock in the warehouse in [country]
T: + other locations in [continent] and [region]
C: I know, but I mean cancelled orders
C: Or last season
C: Bulk stuff
T: Yes
T: We have last season
T: we missed out on containers for [certain holiday season]
T: That usually does a good job cleaning out stock
C: What are the prices on extras u have? Like a container or 2 of stocks?
T: I think we have [number] [size in ft] containers at like 160k each... Actual dist value no less than 300k... Retail around 500k
C: For stock, that's really expensive
T: And thats what I know of
T: Naw its not
T: You're talking pennies on the dollar here
C: Relative to [cheap manufacturing region], yes
C: And its 30% retail
C: That's normal profit margin
C: When selling bulk, it should be more
T: My numbers may be wrong, I dunno... I need to ask
C: I meant more profit
T: But [country] made is always more expensive than [cheap manufacturing region]
C: When buying bulk, u need to sell 50% retail price or more discounted
T: And quality far better
T: Retail is 500k sell is 160k
T: your margins are huge [censored nickname]
C: Which means u need to buy literally @ 10% retail
T: Well over 100%
T: But again, that's on [currency]
C: No man, 160 is around 27% of 500
T: I don't know what import is
T: You're calculating wrong way
C: No, u r
C: if u buy @ 10 u should sell at 30
T: 500 / 160
T: Not other way around
T: Margins are over 300%
C: But actual retail price should be 60 or more
C: Man, u r giving me normal retail price is 500
T: At least
C: When u buy in bulk u cannot sell NORMAL retail
T: You're getting it for 160
T: Your profit is 340
C: U have to sell 50% retail at a maximum
T: Its not 30% :)
C: I.E. U need to sell at 250 or less
C: Read what I'm writing [censored insult hehe]
T: Let's discuss this tomorrow [censored nickname], I gotta be up at 5am
C: :P
T: Dude I'm half asleep
T: Lol
C: Me too
C: My eyes are closin
C: Lol
C: N8
C: N8
T: Night [censored nickname]
So, my point is the following:
If I were to buy something as a bulk product to sell in a discounted store I would want to use the following formula:
R: Retail Price listed on the packaging
I would buy a bulk product as a maximum of 15% of R, i.e. 0.15R
He is saying that 160 is the selling price, retail price is 500, i.e. here he is selling at (160/500)R = 0.32R
If I am buying at 0.32R and I plan to sell at 0.50R, my profit margin is (0.50/0.32)R = 1.56R, i.e. I am not even doubling the money I spent as an initial investment! Taking into account import customs, transport, overheads, etc... This is not a good business deal for me...
HOWEVER, if I were buying at around 0.15R and plan to sell at 0.50R, my profit margin is (0.50/0.15)R = 3.33R, i.e. I am more than tripling my investment, i.e. profit is (3.33-1)R = 2.33 times or 233%. This is of course not taking into account all the import customs, transport, overheads, etc... But, having a 233% profit margin gives me much more leeway to take into account the mentioned costs, in fact, off the top of my head, if my import taxes, transport, overheads are high, I should still be able to make around 150% profit of my original 0.15R I am willing to spend (assuming those costs are HIGH) on the BULK products. This is an OK profit and quite acceptable even if not very good in terms of discounted and bulk products.
In fact, most bulk products are sold in the KILO/LBS in terms of anything made of fabric, food, some porcelains, metals, etc, or highly discounted in other product categories depending on the product. Factories/outlets/etc usually sell in BULK to clear inventory and in general they've already made some sort of profit on the product they've already unloaded within normal prices. So any money/extra profits they bring in on the bulk should be considered as recovered losses on past potential income and not actual profits on the products (since those bulk products are past season or unsellable otherwise).
Am I being unreasonable? Or maybe thinking of things the wrong way? Or maybe in the inverse as "T" suggested in the conversation above...
Let me know, the Savvy... maybe I am being unjustly Coy!
C
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