Home – New Forums Marketing mastery Do businesses legally make money from others?

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  • #966522
    Alf
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    Just curiously – Do businesses ‘legally’ make money, from other businesses?

    For example – a take-away shop, goes to woolworths and buys a carton of coca-cola 24 cans for say $20. They then take those cans back to their shop, and sell for $2 each, equaling $48 – $20 (original cost) = profit of $24.

    The question i’m asking is, is there any legal obligations to coca-cola, or woolworths? does it depend on the company your buying from? the quantity? How does this work?

    Are there agreements between companies for this type of business? permits? contracts, etc..?

    If an office supply company went to officeworks, and bought $1000’s worth of printing paper, could they then turn around the following day, and put it on their own shelf for twice the price?

    Just curious.
    Thanks

    #1019077
    ShakeForCharity
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    I personally do not see anything ethical or illegal about what you’re suggesting.

    There are some specific cases where you can not by from a Safeway and sell it in your own store. The only one I can think of is Fredo Frogs. If you by a bag of frogs you will find each frog is marked not for resale.

    Another example where you can not do this is with copyright protected material. Although you could sell the chattel yourself you can not re-sell the IP.

    Out side of those examples I see little reason why you can not do what you’re suggesting. In fact I have heard of vending machine operators doing exactly this. They go to a large discounter like Costco to purchase their items and then place it in the Vending machines. In some cases this is a cheaper alternative.

    There is nothing to stop wholesalers from selling there own products at retail. However you will rarely find them undercutting other retailers. The majority of whole salers generate the majority of their revenue from retailing partners. The last thing they want is to upset them. In many cases you will find there are license agreements that prevent the resellers from discounting their products to much.

    I hope some of this helps.

    #1019078
    accstat
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    Hi Alf,
    In some circumstances there are legal implications. The fact that you have purchased the product from a retailer designates certain goods as second-hand once purchased (even though they are new goods being purchased for secondary retail) and thus the resale requires a second-hand dealers license. Please note this is only is certain cases. In other cases it is not a problem for the buyer but the seller (i.e woolworths) may have agreements with the distributor (i.e coke) that prevent them knowingly selling to people who intend to on sell.
    Best regards,
    James

    #1019079
    SteveDavidson
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    ShakeForCharity, post: 23091 wrote:
    If you by a bag of frogs you will find each frog is marked not for resale.

    Is this actually legally binding at all, though? I’ve certainly seen examples of things marked ‘not for individual sale/resale” being sold individually.

    Given that (most) buyers do not sign contracts when they buy things, the items in question can have whatever psuedo-legal boilerplate they like on it – it doesn’t make it binding on the buyer or anyone they resell to.

    #1019080
    accstat
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    SteveDavidson, post: 23222 wrote:
    Is this actually legally binding at all, though? I’ve certainly seen examples of things marked ‘not for individual sale/resale” being sold individually.

    Given that (most) buyers do not sign contracts when they buy things, the items in question can have whatever psuedo-legal boilerplate they like on it – it doesn’t make it binding on the buyer or anyone they resell to.

    It is not legally binding on the purchaser, it is there, more often than not, to allow manufacturers to avoid having to meet food labelling requirements on each item in a multipack.

    #1019081
    Past-Member
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    Alf – getting back to your original question. If you have a shop you would purchase items wholesale from distributors, not Woolworths for example. Distributors sell at wholesale prices and the shop then puts it’s own markup on it. Sometimes distributors negotiate a special price for larger volumes – which is why Woolworths can sell items cheaper than the corner shop. There is a recommended retail price to sell at (RRP) but the shopkeeper is able to set their own prices to sell at.

    Insurances, rent, wages, legal (accountant, tax etc), courier costs all have to be taken into account and the final selling price in a shop is worked out to go with all of that.

    Another example, if a shop sold greeting cards, they would buy from the distributor, company or artist for a wholesale price, which is normally 50% of the RRP. This means that even if the shop has a ‘sale’ later at 50% off RRP they will still get their investment back.

    RRP is recommended price only – there is no obligation to stick to it.
    If you are thinking of setting up a shop you must source distributors and suppliers who will sell to you at a wholesale price.

    #1019082
    spinninghill
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    related, but off on a tangent. If you get a Coca Cola vending machine, they will require you to stock it with their products – IE, wholesale from a Coke distributor. Same for Coke fridges I believe. They then often sell the cokes at a premium wholesale price – at times 50%-100% greater price than what you can buy them on special at Wollies and Coles etc for.

    #1019083
    Anon
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    I see it all the times at Coles, Woolies, Dan Murphys etc… People with a work uniform on (fish and chip shop, deli uniform, pub) filling up trollies of cases of drinks. No doubt they are going to resell them in their own store at a markup. It’s completely legit.

    #1019084
    nora horkpaw
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    as a owner of a small business I would like to put a few thing on the table…..
    people see the logic of buying a woollies case of coke for e.g. $20 and reselling individually for total… say $40, and saying that we are making 100% profit.
    I only wish 100% profit…..

    In reality all items must have a resale mark up value of at least 100% or more, this sounds unfear from a customer point of view.

    but understand, after the point of purchase you have…$$$
    – employee wage/ time to shop for item
    – transport cost e.g. fuel, rego, wear and tear.
    – employee wage/ time to unload into shop
    – employee to fill fridge
    – employee to clean, maintain fridge
    – electricity to power fridge ( if item doesn’t sell, this cost multiplies daily)
    – rental of fridge
    – cost of shop that houses fridge (rent, mortgage)
    – employee wage/ time to document purchase for accounting

    So why as a customer should I have to pay you 100% marked up on a product

    Because at a 20% mark up, you can buy a worm coke on a dusty shelf…..

    to put into perspective.
    for a item to sit on a shelf costs the shop less then to cool, freeze, or heat an item on a continues bases with this comes use by dates and restrictions on heating time lines that all need all to be conceded in the pricing possess.

    As fare as Not for Individual resale items.
    yes it is frowned upon
    yes it is perfectly legal
    no the producers of the product cannot do anything about it

    by law
    once you buy a product You own that product. you can do what you like.
    E.g. re-sell, use, throw away, re-package (yes you, heard right re-package).

    I hope this helps

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