reasonable markups

[WTA]

What do you all think is a reasonable markup for a large international companies dealer to be charging for parts?
I think 10-20% myself. That's about where most business's are.

I asked the price on a filter assembly today from our dealer and he told me I think 108.00. I gave him the part number to look up too. I found it on a bigger dealers website that also had the price listed except that big dealer had the price listed as 31.00. I called to verify that also and it was not a misprint.
I told my dealer how much cheaper it was at the other dealer and he said he couldn't understand how.

So still thinking there must be a misprint or something I called two more dealers. Both were within 5 dollars of the cheap one I called. No misprint I guess.

My dealer here also told me 56 dollars for the air cleaner on my tractor. Just the filter. It's 26.00 at the big dealer.
Have any of you run into this kind of junk locally before? I'm doing all my shopping online from now on.

 

[Farmwithjunk]

Cost of item + freight and handling + mark-up = huge increase by the time a middle man sells you the same part. And it's only going to get worse.

 

[chh]

I needed a new seat on my 4243 a few weeks ago. MF dealer quoted the original equipment Grammer seat around $660 from MF, $290 what appeared to be the same Grammer seat from another supplier. I ended up getting a "universal" fit seat for $89.
When I was in he was trying to crossmatch a pump for an air ride seat in a JD tractor. The JD dealer said it could not get the pump itself, you had to get the whole seat assembly for over $1000. He was pretty sure it would match with a $100 pump available from a local truck supply.
When I worked on a grocery store our markup was 12%. The grocery business on average has about a 1% after tax profit margin.

 

[LoneCowboy]

So, you think a person should pay
all the taxes, fees, permits, property taxes, OSHA compliance, classes, EEOC, building inspectors, sales tax compliance, etc etc etc
rent
utilities
phone
employees
health insurance
pay for inventory (so something is in stock when you come in)
hold the inventory
write off the inventory if no one buys it and nothing breaks or gets lost.
and
somewhere maybe make a wage in there

for 10 to 20% GROSS margin.

uh huh
feel free to open your own store anytime.

BTW, most grocery stores are 40 to 50% markup. Almost any retail is. The warehouse gets their 30 to 40% markup too.

 

[sammyd]

When I sold and serviced dairy equipment and had to buy a part from a competitor we got a dealer discount from them and marked the part up 40% when we sold it to the farmer. About what we marked up our own stuff.

 

[RickB]

I think 10-20% myself. That's about where most business's are.

Sounds to me as if having a tractor down really isn't affecting your bottom line too much. You are gonna get pretty hungry working for 10-20% anyway. Your local dealer is probably working on 100% or more based on the comparative figures you have posted.

 

[WTA]

It has effected my bottom line. I'm made 74 dollars off the farm in 2 months. That's not figuring in my costs though. Having that tractor down has completely killed my bottom line from farming. I've had to spend my own money fixing warranty stuff causing me not to be able to afford fertilizer one month. It ruined all of my alfalfa with an oil leak and wasn't here to bale my bermuda before it rained this month. If it wasn't in the shop getting fixed again it would have been here. My whole growing season is planned out on the calender already, has been since February. It tells me when to cut, bale, fertilize and everything else. The whole point in selling the antique tractors and getting a new one was to minimize the possibility of breakdowns screwing up my schedule.

As for going broke in a business, My standard markup is only 12% and I have more business than I know what to do with. I've been turning away work for 4 months now so I can get caught up on military jobs. It's by no means a get rich business and the money I do make is off of services not parts. I could charge more but the business I am in is a very small community of small shops. Probably less than 7 or 8 of us doing this in the country. It's pretty competitive though so I keep the prices down. The farm on the other hand is based on market value of the crops. I can't charge more for my hay than other people are selling it for if I want to sell it. We're a little cheaper than average and our quality is so far above average I don't have trouble selling it at all when we actually get some hay in. I have people calling from all over the country looking for good alfalfa right now.

Back to ridiculous markups. I've been around a bit. I can't count the states I've lived in on both hands anymore and I've lived in other countries too. THis dealer is getting over 200% on some things. close to 100 on others. He gets away with it because, as I've seen in other places, people don't bother shopping around. If another dealer were to set up shop in town then this one would be out of business in a week. Or be forced to come down to a more reasonable markup level and then be forced to hire some real mechanics and make a living off the service like most garages and dealers do.

Most of the things I sell through my business have to be sold at the same price the manufacturer sells them for. We have price contracts on them to prevent competition. For me it works great. Somebody has to install the parts and that's where I am able to put food on the table but even then I don't rip off the customers.

One last thing. A 10-20% gross margin isn't bad at all when you consider the average price of most of the items this dealer would sell. 600 dollar connecting rods, 3500 dollar injection pumps, around here they could do 20 or more 30 dollar air filters a day. They will make more than enough on a standard markup considering the value and quantity of what they sell.

 

[Trac-Tech]

Hi Guys
I'll just add my 2 cents worth here, no one has mentioned if the cheaper parts were genuine parts? This always makes a difference and sometimes the sperious parts can be better than the genuine parts. But in most it comes with some sort of sience going into the R&d of what is required and needed for the application by the OEM. I would seriously check the credentials of hyd filters and engine air filters if they are not genuine. I've seen many failures of hyd systems due to sperious filters being fitted. The same also applies to oil.
Also you all need to remember that the dealer has to make a decent margin in order to offer a service and keep offering that service. Yes, shop around, but if the guy with the higher prices has it on the shelf and offers immediate service, then you really arent paying that much more. Also ask the question about the difference in price, if he is a reasonable person, he'll either match the price or give a reason for the difference. If you dont ask, you dont get.
Hope that helps.

 

[WTA]

I did mention that. I called other new holland dealers. They are selling genuine parts. The exact same part numbers and everything. I even asked them that specifically when I called.
This parts guy came an inch short of calling me a liar on the price for that fuel filter housing he tried to charge me for. He did not budge on the price one bit even after I gave him the name and number of 3 different dealers selling it a LOT LOT lower than him. That's not good business at all. I'm not paying for it though so it doesn't really matter. If he tries to charge me for it still then it will be taken up in a different way with someone that can straighten this out.

 

[chh]

BTW, most grocery stores are 40 to 50% markup. Almost any retail is. The warehouse gets their 30 to 40% markup too.


Afraid not. I worked in the business for 14 years. 12% is common on regular grocery items in discount chains. Full service stores run about 15%. Now its a different story on health and beauty aids, toys ect. 40 to 50% is common on those items. Grocery stores chains are lousy stock market investments. The competion factor is rough, especially since Walmart jumped into the grocery business. The warehouse percent was also around the same margin + freight costs. Freight was around 3.5% when I left the business 15 years ago, I'm sure that has jumped considerably .
From my conversations with dealers, I understand that they have some leeway on pricing for parts from the company, but are supposed to be relatively close to each other on pricing. That may not apply to all brands and companies however.