Quote:
Originally Posted by andy110m
All resale/distribution businesses are basically all doing the same 3 things.
Buy it, Stock it and Sell it. Whatever the "it" is doesn't matter.
As Darren says profit is often seen as a dirty word because people concentrate on the mark up, or how much extra is being added to the price. They should look at the amount of money which is left when the related costs are taken from the sale.
The distribution business I work in, our SDA (sales, distribution and admin) costs run around 26%. I believe the industry average is around 25%, (Darren will need to tell me how he's got his down to 10% because I'm impressed if that's the case.)
So for us to make the return we want, 8%, we need to add 34% to the cost of an item. And lets say the cost is £10, the sum isn't +34% which makes the sales price £13.40, its £10 /0.66 which gives a gross profit of 34% and would make the price £15.15. Or in other words, 34% of the sales price is profit, from which we pay the costs and end with our 8% return.
Not massive is it? Using Darren's £9.99 example its means we've gone to the trouble to set up a business and all the work related to that to make 80p. Or scale it up to our actual 2013 number, we turned over £640 million and achieved a profit of £34 million. Great you might think but because larger deals happen at smaller margins we ended up with 5.4% return.
UK businesses face many challenges, mostly as someone said government imposed taxes and charges. Complaining at the shops isn't going to help because these guys aren't in it to get rich, of course they hope to make a living but we need to remember most shops have a hand in our clubs and keep the racing alive. Without them we don't have a hobby.
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Couldn't have put it better myself Andy
With any RC brand or product brought into the UK as well as the duties imposed there is also the exchange rate to consider, and also the cost passed over by the manufacturer to ship the product to the distributor.
Most if not all businesses in the UK that retail RC products are owned and run by enthusiasts at the end of the day.
From my perspective any profits I make go towards putting fuel in the van to get to meetings and race fees, and towards my rent/rates/utilities/insurances etc. Anything I have left over goes towards our mortgage and household bills which would leave me enough for a pint and a packet of crisps - And with that said I'm more than a happy chap