What is the average markup for distributors?

[sudh]

Hi there, I am working with a non-profit business incubator and one of my clients is thinking about starting a tractor/forestry equipment dealership. I was curious if anyone could give me a rought estimate of their markup from wholesale to retail prices.

Thank you so much!!
Sonita

 

[wallace]

Do you realize what you are asking?

 

[whitedogone]

100% give or take

 

[Erik_in_Hoyt]

If he's going to have a storefront or warehouse with stock on the shelves, then a 100% or larger markup on small stuff is not unusual.
Less for larger items.
If it's a high volume enough business, then the markup can be lower because he will be making his profit in volume. for example: if he needs $5000 a month to keep the business afloat, he can do it by making 200 per saw on 25 saws or only 50 per saw on 100 saws.
Another way to look at it: Making a $200 profit on a $400 sale sounds like a high margin, but will keep a business afloat. making that same $200 profit on a $1000 sale will break you because you've been paying interest on the $$ used to purchase the higher $$ item, you won't sell as many of them because they're high end, etc... UNLESS it was a special order item and you got at least 1/2-2/3 of the $$ for it up front.

 

[montanaman]

Hi there, I am working with a non-profit business incubator and one of my clients is thinking about starting a tractor/forestry equipment dealership. I was curious if anyone could give me a rought estimate of their markup from wholesale to retail prices.

Thank you so much!!
Sonita

Nice first post there!

If you ask the customer, too much, ask the dealer, not enough........

 

[stevem5215]

My wife had a bridal store business. We averaged over a 50% profit on all dress sales and other merchandise. That was on 200k+ a year in sales. It still wasn't enough to cover the expenses of rent, light, heat, employees, taxes etc. You may think that a business doesn't deserve what you are paying them but I can tell you first hand that they need to keep the doors open so whatever profit they are making it might just be barely enough to keep it all going. Small business pays the bills in this country in taxes to state, & federal.

Steve

 

[montanaman]

My wife had a bridal store business. We averaged over a 50% profit on all dress sales and other merchandise. That was on 200k+ a year in sales. It still wasn't enough to cover the expenses of rent, light, heat, employees, taxes etc. You may think that a business doesn't deserve what you are paying them but I can tell you first hand that they need to keep the doors open so whatever profit they are making it might just be barely enough to keep it all going. Small business pays the bills in this country in taxes to state, & federal.

Steve

Steve,

I can appreciate what you are saying! Most customers would never believe it, but on small outdoor products, I'm dealing with far less than half the profit that you had coming in. Look at the time you spend with a customer, the fuel and bar oil that you put into the saw they eventually decide to buy after the three visits they pay you trying to decide what they want, and then the profit you lose processing their "rewards" credit card.......

You have rent, phone bill, insurance, tools to buy, inventory costs sitting on the shelves, advertising expenses, etc. With the current economy, I have people wanting things repaired that should be thrown away, and anyone wanting something new, really looking for some half price deal! I have never spent so much time educating people on products and not selling anything, as I have this year.

I would honestly make more as a greeter at Malmart, and not deal with all of the stress!

I had a customer tell me that I was so much easier to deal with than another dealer in town and I just explained to him that they had been doing this longer than me! It will wear you down over time.

 

[sudh]

Thank you all for the input!!!

I actually scoped out a few other forums and found the answer to my question. Here is what I found out:

Mytractorforum.com discusses markup here.

The specific example: $800 profit off of $10,049, so roughly 8% (This was a John Deere X720) many other commenters agreed this seems average because dealers make their money on service and parts more than original sales.

Tractorpoint.com discusses markup here.
One commenter says the norm is 22-25%

Tractorbynet.com discusses markup here. And here.

Kubota has a mark-up of 20% on tractors, later in the forum, it says that the markup needs to be at least 7% for the dealer to breakeven.

In another thread dealer and customers said that the markup is 10-15 above cost (which is usually 75% MSRP).

I think this is really interesting becasue the profit margins are WAY lower than normal businesses. I can see how it is tough for dealers to compete. They really have to have the service angle of it to make up for the low margin on the sales end.

Also, one of the suppliers we are working with said that for their equipment, Dealer mark up is 20% plus 5%, what does that 5% mean?

 

[LAWALLSTRACTOR]

I will just comment that there are many dealers working on less than 8%.

 

[Scooby074]

In this day, with internet shopping and forums for price comparison, i imagine that markup is at a all time low.

It seems people will travel 100 miles to save $10. Completely ignoring fuel costs this is ridiculous

Things like Amazon with free shipping have done alot to cut into a stores profits.

Unfortunately for me as a consumer stores up here havent grasped the concept of internet shopping, and still wont deal.

As a case in point, my Makita mitre saw was $750 at a local, small building supply chain, and $600 at home depot.ca with free shipping. I went to the store, spoke to the manager giving them the chance to price match. Rudely, i was told that HD.CA "wasnt in my immediate area" (ummm... yeah it is, the internet is in every area) and as such they wouldnt price match. So what would a normal person do? I gave my business to HD.ca, both for my Mitre saw, and the Dewalt cordless trimsaw and nailer. When its all figured out, between these 2 purchases i saved $300.

Another case was for a new computer hard drive... same thing. NewEgg was ~$40 cheaper. Tried to get a major local comouter store to match.. got the same answer... So i bought from newegg.

Retail either has to adapt or die. I bent over backwards, wasted my time and gas, to give the deal to a local retailer, only to be told to get lost, in no uncertain terms..........