markm1111 Posted March 28, 2022 Posted March 28, 2022 It's late at night and unfortunately I should be working, but I can't help chiming in. I like a bargain as much as the next person, but at the same time I do like businesses to survive so that the industry continues into the future. A zombie thread has been revived to apparently talk about how much retailers are making over the cost price. The fatal flaw of many businesses that don't survive is firstly focusing on revenue i.e. sales, and secondly focusing on gross profit i.e. sales less cost of inventory. A business, hence the people behind it, actually lives off net profit after tax. Wages and on costs, rent, insurance, advertising, fixed assets, warranty claim servicing, storage, interest on holding costs or investment etc etc etc all come out of that gross profit, then tax, only then does the owner get paid. In almost 40 years the best small business I ever saw (every hifi retailer is a small business) made 21% of sales as net profit after tax. It made the tiny little plastic rings that go on electrical wires in circuit boards with numbers and letters on them in different colors. The world's most boring product, but profitable. The vast majority of businesses I see and have seen are lucky to make double digit percentages of NPAT on sales. As a rule, anyone making $100k in the pocket from $1 mil in sales is going ok. Not so easy, and a long way from the gross profit figures you are talking about above. I'm sure there are people out there taking advantage of ill informed customers, which is wrong, but at the end of the day many retailers don't end up with a huge amount of profit. If they do, they are probably taking on huge risk in stock holding and forward purchasing that most people never even dream about. It's a risk reward equation that not many people are willing to take on. I guess I'm just trying to say, don't assume the worst, it is still usually just a few bad apples spoiling it for the rest. Peace out 6 1
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