if you were running a store, would you rather make a $4 sale, or a $99 sale?

[rudeguy]

Originally posted by: AmericasTeam

Originally posted by: SagaLore

Originally posted by: Jzero
How do you know what his profit is on the items?
Maybe he would make $3 on the $4 disks but only $2 on the $99 board.

Right. I use to work at a computer store. The markup on the high priced items are amazingly low, and then when you factor in the cost of keeping it stocked, having it shipped, and all the other expenses - you barely break even. The money makers are the less expensive items. Kind of like how a restaurant will charge you $1.25 on soda that cost half a cent. Or like how gas stations make money off the snacks/coffee people buy, but barely break even on the gasoline.

The guy wouldn't budge on the motherboard because by having that motherboard on the shelf, it attracts customers to buy those floppies.

Gas stations make decent money selling gas. Especially here in Cali.

As for the computer part - just like any other business
Its all about the GP

I always thought it was about marketshare and recognition. If people know they will get a good price from you, they will always come back.

 

[CubicZirconia]

Originally posted by: 911paramedic
I don't know why, but I just thought of this. When MTV lauched the first song was (I believe) :music: "Video Killed the Radio Store" :music:

While reading this thread I was singing :music: "Internet killed the PC store" :music: to myself.

That was actually "Video Killed the Radio Star"

Gas stations make decent money selling gas. Especially here in Cali.

Maybe in Cali (I wouldn't know), but they barely make any money at all on gas here in MN. We're talking a couple of cents per gallon max.

 

[LordMorpheus]

who goes to a shop to buy floppies and then decides to buy a mobo he sees on the shelf?

That like going to an auto dealership to get your oil changed, and then telling the manager to forget it and just sell you the car over there.

 

[CPA]

First off, based on your descriptions, most of you haven't a clue what "profit" really is.

When you say "he bought it for X and sell it for Y, his profit is Z" is incorrect. His gross profit is Z.

Now, subtract labor, overhead and tax and interest expense and you get operating income, which is by far more important than gross profit. These expenses are generally variable, so they cannot always be applied evenly to different products. Now, how easy do you think it is for the manager to calculate his actual profit when consider these items.

 

[emmpee]

Originally posted by: GoodDad
your thinking is very flawed. First off, the market could definately handle more of his widgets (motherboards,) how many B&M places do you know of to buy computer parts at that will give you a fair deal?

How do you know that the market could handle more motherboards? You state that the supply is low, but you make no mention of the demand. Do you really think lots of people in your town are clamoring for motherboards?

Lastly, why not make $4 on a sale? Its cash in his pocket. He has to pay the same overhead costs whether he makes the $4 or not. And yes, it is his store. I am not mad at the guy, I just dont understand why you wouldnt want to put cash in your pocket. Its kind of like saying that you dont want to pick up that $5 bill on the street because you are saving room in your pocket for $100 bills.

Why can't you understand that someone could have walked in the door RIGHT after you (or an hour after, or a day after) and bought the motherboard for full price?

Example: Why don't all new car dealerships give in to customers, and sell the cars on the lot for cost + $1? Because someone else will GIVE THEM MORE MONEY.

 

[Jzero]

Originally posted by: CPA
First off, based on your descriptions, most of you haven't a clue what "profit" really is.

When you say "he bought it for X and sell it for Y, his profit is Z" is incorrect. His gross profit is Z.

Now, subtract labor, overhead and tax and interest expense and you get operating income, which is by far more important than gross profit. These expenses are generally variable, so they cannot always be applied evenly to different products. Now, how easy do you think it is for the manager to calculate his actual profit when consider these items.

I don't think anyone was interested in overanalyzing it quite to that extent. It was simply an explanation that $99 in revenue isn't $99 in profit which is why the seller might not have been to keen on discounting the higher ticket item.

 

[fyleow]

Originally posted by: CPA
First off, based on your descriptions, most of you haven't a clue what "profit" really is.

When you say "he bought it for X and sell it for Y, his profit is Z" is incorrect. His gross profit is Z.

Now, subtract labor, overhead and tax and interest expense and you get operating income, which is by far more important than gross profit. These expenses are generally variable, so they cannot always be applied evenly to different products. Now, how easy do you think it is for the manager to calculate his actual profit when consider these items.

Well I don't think any of us want to make it too complicated. The major thing here is that he obviously thinks the quantity demanded for the motherboard at $169 is high enough to match his available supply so he would not lower the price.