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Thoughts 0n Middle man mark up

Lee Whitsel

Silver $$ Contributor
Bought a Arkon scope. Nice I like it and the price was nice order direct from the web sight. They say that's how they can keep the cost down. Made me think. In the 1974 time frame I rented a house my landlord was 1/2 owner of a big True Value Store. I was paying my rent one day and asked how much profit is there on things in your store just curious. She told me on a gallon of paint it's over 100% profit and more on other things. Then in that same time fame of mid 70's we had a big Christmas Party. My wife's elderly uncle was having at his home. He was a Office personal for Ridgid Tool Co. He told me they had a 3/4" drive rachet tool set for the plumbing business they made the tools had another company make a box with their name on it. Their total cost to make the tools and place them in the box and ready to ship out to middleman warehouses was $25.35 at that time and he showed me the price of cost on his office paper work no joke. That same tool let listed for $125.00 in store. A 500% increase. In the 80's I had a neighbor and family friend who still own 3 NAPA auto Parts stores. I asked one day at our neighbor hood BBQ when you give me 10% of anything I buy from you does that hurt your profit's much. He looked at me and said I don't selling anything in our stores that does not have at least a 50% to 80% mark up. I don't even notice your 10% of on a few parts. Just not long ago I was listening to a Auto talk show and the auto expert was speaking on cost of new cars. He stated that Chevy love's selling their Suburban there's a huge mark up on them a big money maker. At the big east coast Sporting Goods trade show in Harrisburg, Pa. I was chatting with a rep for one of the largest sporting goods dealers in the country. I asked about how much mark up on these products he said very bluntly I've toured the Leopold Plant and many others as well and if you know how much mark up on Leopold scopes there is, you would choke. They make huge profit's on foreign parts assembled in the U.S. Just like NAPA and all the rest. Be nice if they could sell direct and save consumer a lot of money and be able to save enough to maybe buy 2 at a time?
 
The dollar was worth more, hourly pay was less, fundamental expense was cheaper. I doubt profit margins on many things are as high as they used to be. There’s a lot of overhead costs nowadays.

Although, I have a friend who used to work as an independent auditor. She told me one day, that a particular department store could bring in a woman’s blouse and put it out at $80. She said as time went by the blouse would go on sale several times until it hit the final clearance rack for $3. At $3 the store was still making profit…
 
Well Dang,
And here I am only charging like 30-40% markup
I had no idea the markup was so high, except for the Napa Auto parts thing.
I know every time I go in, they almost always mark whatever I buy down on their own without me even asking or saying I have a commercial account
Like they know their list price is unreal to begin with.
----------------------
I have noticed when places like Walmart have a closeout sale
The price is more than 50% off which shows a hint of the markups
 
Dive shop I used to frequent had a standard 100% markup on received goods. More on stuff that didn't move quickly. Not unusual. Buying direct didn't help, as manufacturers knew resellers were marking up, so they did that too (which is fair to the resellers, I suppose.) In general, the more hands it goes through, the more you'll tack on to the cost.
 
I'd say there are three types of operations to get a product to market.
First is the manufacturer which organized to sell in high volume, then distributors [or middlemen] who are organized to bridge the gap between manufacturers and retail customers and finally a retail store.
There is a cost required for each operation that depends on the volume of customers.

Take toilet paper as an example.
The manufacturer sells in 'ginormous' quantities to a relatively few distributors [I would imagine there are at least two levels of distributors due to the overall volume]. The last tier of distributors sells to retail stores and, of course, sells retail customers - who probably number in the millions.
If the manufacturer or the distributors were to sell direct to retail customers, they'd have to add staff and systems to handle the volume of transactions.

On the other hand, for products that have a relatively small volume, there may not be much difference in cost between selling to distributors and selling direct to retail customers.
 
Pyscodog said:
I need a 5AH battery for my Dewalt saw. At the local Lowe's the battery (1) is $129 and tax. I can get a two pack on Amazon for $63
Click to expand...
Amazon is a phenonemun => made Bezos a billionaire. They found a way to cut the cost to bring many products to the retail market.

At the same time, I've found buying batteries [and some other products] from Amazon to be iffy when the seller is a third party. Even some that are sold/shipped by Amazon themselves.
I've found it not unusual to have the batteries die quite quickly - some enterprising person was able to buy real cheap some almost expired/expired batteries and pass them along.
There are also imitation products sold through Amazon.
 
I've worked in retail management for decades. Standard practice is generally 300% markup.

Amazons business model has changed a little over the years. At its core, it is still a book store, but now their thing is to make 3rd party sellers wait 90 days to receive payment on good, must abide by Amazon's return policy and often are not allowed to sell same product for less than listed on Amazon. If they have a product that sells really well, they steal the design and make it under Amazon brand and push theirs while suppressing the original in searches. Then they have their own delivery now, too.

With a little bit of digging, you can often find the same products cheaper outside of Amazon, if the free next day shipping isn't a concern.

I do love Amazon, have been a prime member for years and even have a Prime credit card that gives me 6% cash back.
 
Before I retired our labor rate was $260 an hour. Our top scale was $49 an hour. Bottom scale was $20 an hour. There were quite a few from mid to bottom. Parts markup was 30%, external customers, 10% internal customers. Mileage was $3 a mile. Profit on equipment sales needed to be no less than 10%, or there was a meeting in the corner office with the salesman.
 
And each day we lament over the fact that local stores are dying out, and shout out about the shipping problems we all have. I miss talking to old Bob Mizell at RPM gunshop and seeing all the used guns he carried. You ever get mad because you couldn’t reach a responsible person on the phone at an internet site?

Some things you just can’t buy over the internet. And my heart misses them.
 
Knotwild said:
couldn’t reach a responsible person on the phone at an internet site?
Click to expand...
Yeah. This kind of customer service is terrible! And the times I've spent with someone overseas with a thick accent going through a script.
And, how about the idiot chatbots?

If at all possible, I don't buy products with this type of customer support.

It's such a relief when an easy to understand, knowledgeable person picks up the phone.
 
I use Amazon as little as possible, but admit it is hard to beat at times. I think we as consumers ultimately hurt ourselves when we use Amazon or even the big internet based stores. Local stores support the community and our sport specifically. I don't mind paying a little more for an item at the LGS or hardware store as I know the people who own it and know they support us. I can't count the number of times I've needed a special item a day before a match or a hunting trip and I was able to run to the LGS 45 minutes away and get what I needed and it saved me. Being greeted by name when walking in is a nice treat too.

From a business side, inventory costs money. We all want convenience and it has a cost.
Scott
 
There is also a misunderstanding of profit, mark up, and discount.

If I buy and item for $50, mark it up 100% to $100, then discount it 50% to $50. I haven’t even broke even if you count the costs of labor and flooring.

Same thing $25 purchase, 500% markup to $125, 10% discount to $108, ends up 75% gross profit before any other associated expenses. Pretty soon that 500% mark up ends up 60% profit if you’re lucky. Not a bad margin, but not nearly the 500% people think it is.

Realize the difference between mark up and profit. A 100% mark up, is never 50% profit after expenses.
 
There's a semi-local gunshop that I go to fairly often that's had powder ($32-$45 per lb) and primers for ($65-$85 per K) since covid started and the owner was happy with his margins. Online places were getting twice or nearly twice the amount (some still are).So I support as much local as I possibly can. You don't have to be a genius to figure out who's raking you over the coals.....
 
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