Total: retail price of the toy is $51.75.

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Mimakte
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Joined: Sun Dec 22, 2024 3:45 am

Total: retail price of the toy is $51.75.

Post by Mimakte »

If you are trading through an online store, the markup percentage is calculated using the following formula: divide the cost of the product by the purchase price, subtract one, and multiply the result by 100%.

Let's take the cost of the product as $35 with a purchase price of $20, and apply the formula:

($35/$20 - 1)100% = 75%

The markup is 75%.

Despite the convenience and simplicity of this area code philippines mobile calculation, it is not very accurate and may yield errors. The figures obtained should be clarified in the process of sales and monitoring competitors' prices.

To effectively sell goods of a more expensive segment, a simple technique is used: large markups at a low purchase price. This is a shortcut to increasing profits.

Is it possible to simplify the task and make the same markup for all products related to one segment? Will the sales of these products increase equally? Most likely, this method will not work. As we already know, each product has its own purchase history, its own average market price and number of sellers. Therefore, the markup is determined separately for each product.

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The advantage of monitoring through services
Even if you are an experienced sales manager, you are unable to predict the maximum markup that will maintain high sales. It is impossible to calculate profit "by eye". This is an unrealistic task for an online store with a large assortment of goods (500 or more items). It is impossible to do without regular monitoring of the market and competitors' prices.

As we have already said, this is easily handled by automated services based on artificial intelligence. More and more managers are using them successfully. The systems are developing, the speed of work is increasing.

Having calculated the trade margin at the beginning of sales, you should not calm down and let things slide. Continuing to monitor the market, you will come to the need to change this indicator. You will see at what margin sales increase, are stable, fall, and you will inevitably make adjustments.

The advantage of monitoring through services


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Let's dwell on such an important factor as the minimum markup.

Regardless of the scale of your business, it follows a common pattern: the more you sell, the higher your income. Sales volume is affected by the retail price of the product. When calculating the markup, it is important to take into account your sales scale. A retailer can choose one of two strategies:

sell little, but with a high markup;

sell a lot, but with a small markup.

Which is more profitable? Is it possible to accurately calculate all the pros and cons of these two methods of work? Let's look at an example.

An online store purchased goods for $15,000. The trade margin includes: warehouse rent ($500 per month), employee salaries ($2,500), and other expenses ($1,000). Let's calculate the minimum margin that, if the entire batch is sold in 1 month, will cover the store's above-mentioned expenses.

The minimum markup is: (500 + 2500 + 1000) x 100% / 15,000 = 27%.

We add here the desired profit of 20% ($3,000) and as a result we get a final trade markup of 47%.

A high trade margin reduces sales volume and, accordingly, profit. The financial result also decreases if you set a small markup. However, in this case, profit can be increased by increasing sales volume.

Let's return to the example of our online store. If the purchased goods are sold twice as fast (in two weeks), then the costs will be reduced by half. And accordingly, the minimum markup will be reduced by half, according to the formula:
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