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former mentor




PostSubject: The math used to calculate retail profit   Sun Jan 10, 2010 1:07 pm

Someone asked me to post the math equation retailers use to calculate profit on a retail product, so here it is.

“Retail price” (MSRP) (minus) “Sell In” (wholesale price) (divided by) “Retail Price” = “Retailer’s Loaded Profit”

$3.99 (-) $2.50 (/) $3.99 = 37.3% Retail Profit.

Do it with your product...you can run it backwards to see what you would have to sell your product to a retailer for in order to get them the profit they will want to purchase your product.

This is the cornerstone of the relationship between a buyer and a manufacturer. Many retailers set limits on what they will allow the buyer to purchase in terms of profit. In grocery 30% is a workable number for general merchandise items (often as low at 3% for food) where as in big box retail they want at least 50% and often won’t even talk to you at less than 100%.

Remember, if the math doesn't add up - the product is never going to see a store shelf.
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