Home Forums Money matters Help with distributor buy price calcs

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  • #1226945
    Biz Keeping
    Participant
    • Total posts: 9

    Hi guys. I have a side hustle where I make and sell muesli and other food items. I have been approached by a distributor to sell my products in WA. I haven’t dealt with a distributor from this point of view before. The distributor has sent me this in an email and I’m not clear on what it means…

    “ Just going through the pricing ….. is there room to move on the distributor buy price? Currently stores are looking at a minimum of 25% GP. We are struggling to reach this even giving ourselves a 18% GP (delivery not included).”

    I have provided wholesale and retail prices only.

    Can someone please explain this using an example of $19.95 RRP $13.30 WS.

    Thanks 😊

    #1226950
    Biz Keeping
    Participant
    • Total posts: 9

    I should also mention that I have done my own calcs which show I am within these percentages so I think I must be doing something wrong or misunderstanding what she’s saying.

    #1226954
    Chris-K
    Participant
    • Total posts: 16

    Hi Biz Keeping

    A retailer gross margin of 25% means they are willing to pay the distributor $14.96 to sell it at $19.95 RRP

    Assuming the distributor wants to make a 50% margin their buy price from you would be $7.48

    You need to make sure the $7.48 covers your cost to make your product and factors in a profit to you.

    Hope this helps.

    #1226957
    Biz Keeping
    Participant
    • Total posts: 9

    Thanks for your reply Chris. From her wording, isn’t she indicating that her margin, as the distributor, is 18%? I read it that 18% is possibly the lowest she’s willing to go?

    #1226962
    Chris-K
    Participant
    • Total posts: 16

    Yes good point , then in that case

    Assuming the distributor wants to make a 18% margin their buy price from you would be $12.27

    How does the $12.27 make your profit look ?

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