As we all know, sellers are constrained from advertising sale prices on any products who’s manufacturer has a MAP policy, unless they are selling a discontinued item. They are not prohibited however, from selling a product at any price they want, as long as they do not advertise it. That’s why you can always negotiate a better price with almost any dealer for a MAP product if you contact him in advance privately.
It is helpful to know what sort of price you may expect as reasonable for a MAP product however, because the while the dealer may offer a discounted price of something like 10, chances are if he were given a firm offer from the outset rather than asked for a price, he would accept any reasonable offer. After all, it’s still better to move some stock and make a 20 profit than have it as a shelf queen. So what to offer?
As a general guideline, MAP mark-up typically is around 70-75%. So to get a rough idea of what a dealer’s FOB cost for an item might be, you could take the MAP price and divide it by 1.7 to be safe.
Now that you know a dealer’s FOB cost, you have to remember he probably also paid shipping. So what to offer a dealer?
What do many dealers want when they put something on sale? They’re generally happy to make 20. So using this information let’s look at a popular 4*18650 flashlight that has an MAP price of $199.95. If you contact the dealer and ask them for a better price, they may offer as much as 10 off, and maybe you’d get it for around $180.00. However if you figure his cost on that item is around $118.00 ($200/1.7=$117.64), you could multiply $118.00*1.2 and come up with close to $142.00. Add another $8.00 to more than cover the dealer’s shipping cost to obtain the item, and you could make an offer of $150.00, and it would probably be accepted. Now you have saved $30.00 over what the dealer probably would have offered if you just asked for a better price.
Try it next time you’re buying MAP and report back if it works or not.
So a good rule of thumb for dealing with MAP: Do not contact a dealer and ask for a better price. Do the math, then contact the dealer and tell him what you’d be willing/able to pay for a given item. The worst they can do is decline the offer (and if they do it’s probably because they actually don’t have current stock), but a majority of the time if your offer is fair, it will be accepted.
I think asking for a discount on one item is tacky .It says to the person they don't know how to price their products . If you are buying quantities or have bought large amounts of items in the past then asking for a discount is appropriate . If the person comes to you out of the blue and asks for a discount I think it's just insulting.
all i know is that i didn’t buy the xtar vp1 when it was 32$ (with blf code even cheaper) from fasttech and now after MAP i can not find it under 40 $…
I’m having coffee right now with John, the dealer we get our SAR equipment from. He also has map products. I read this to him:
and he simply put down his latte and smiled while he shook his head.
Then I was able to read him this:
He just smiled again and calmly said, “guess I have a thick skin, but they would be more than welcome to come to my flea market and insult me so I could buy a few more of these great Lattes.”
I’m back at my desk now. I’ll just say that as I returned form my coffee break, I reflected on what I learned over that Latte. I think it would be, “perhaps we should let the dealers make up their own mind about things, rather than doing their thinking for them”.
I also reflected on the thought that forum members are free to make up their own minds as well. If you feel uncomfortable in making an offer to a dealer because you may insult him, then pay the MAP price, walk away, and feel good about your moral standards. For the rest who cannot afford MAP, make an offer, take the deal, and walk away feeling good about your buying acumen. That way, everyone wins, even the dealers who live in a free market economy and therefore may understand the process of buy and sell in that demographic.
I wasn't thinking about MAP .. Which is an artifically inflated price .Not one that a seller would create normally when considering the cost of doing business.
I’d tend to agree. Some could argue, and in fact do, that it allows the little mom and pop business to compete with the big boys on an even playing field. But in fact it could also be seen as a thin veneer on the veil of ‘price fixing’, which is illegal in many places.
Health Food stores work on a standard margin of 100% which is termed in retail, “the perfect profit”. Clothing stores however, mark up much more than 100, I talked to an owner that sold baseball hats that told me he enjoyed margins of 1,000 - 2,000% on many hats (I assume that meant he sold a $1.00 hat for $10.00 - $20.00). So while 75% may seem reasonable to some, in my opinion, as long as there are products like Convoy hosts and noctigon MCPCB’s around, I can get the same quality for a fraction of the equivalent MAP based product.
I NEVER pay retail when buying an item online. If its not on sale or doesnt have a coupon then kiss my sale good bye. Sorry bargaining is how I was raised, it doesn’t matter that I have the $$ to pay retail. Sellers have a huge markup and they are taking us customers to market with EVERY sale, even on their “sale” items so no I do not feel bad what so ever on making offers.
Point and case; ebay seller had a 600mW RGB laser projector for something like $270 shipped DHL. I hit ‘make offer’ and threw in a $150 offer knowing darn well I’d get a counter. They came back at $220 shipped ($50 off for one offer). I go back at $175 shipped and boom final counter of $200 shipped DHL. I spend 2 minutes with minimal effort and I saved ~$70 and do I feel bad, HECK NO. They still made a bunch of money off me and I got a killer deal, win win. Now you guys can go pay $270 for the same thing and feel happy while I sit here and laugh at you for being stupid. Should you feel bad for making a seller an offer, HECK NO!
Cheers
EDIT: only time I’ll pay retail online is when I know its a forum members shop. I don’t mind helping out those guys because they help us out.
You are figuring the profit margin in a different way than the retail sector does.
They use this formula Selling - Cost, divided by Cost.
So an item sells for $18, cost is $5 Gross Profit Margin would be 72.2%
Sell it at $10 it becomes 50, double your money equals 50 GPM.
The only way to hit a true 100% is if you got the item for free and sold it for any amount.
Normal Retail list price of electronics used to be 40% Gross Profit Margin, Street price would be closer to 33, sales at or near 25
I sold stereo equipment for 15 years, we used to have a little hand held wheel that would show you GPM at a glance. Stuff gets burned into your mind to the point to where you look at an item on the shelf and know within a few dollars what the cost is.
Now keep in mind that the retailer is also getting Advertising money as a kickback credit on his bill, but ONLY if he is advertising at MAP if it is force.
So there is not only the threat of losing a product line but also of losing money if you break MAP. Ways around MAP as a dealer are to throw in freebies. That is why you see Bose products being sold at MAP but getting a free Gift card, Speaker Stands, etc. Dealer can do this all day long and Mfg. will stand pat no problem.
Most good money made is through the sales of Accessories, Labor, Extended Warranty, etc. Once the customer says yes to the big item, they start saying yes to a lot of little extra items. Think of it as the Dessert at a restaurant. Lot’s of Profit
Profit on China flashlights? Might be less than you think. The internet has changed what you can get away with as a seller.
I am sure one of our vendors could explain how thin or thick the margins are or could be much better than me.
Thanks for that Keith. I agree with your analysis of retail price markup strategies in retail. There are tons of sites where there is information about running a retail business, I did not want to go down that path. All it did was take and actual example of a MAP product that I know about (the $199.95 flashlight), and based my calculations on the known cost of it. As it was only one item from one manufacturer, I agree there could be lots of variations, and feel free to suggest ways to improve on that formula, I’m sure users would be grateful for that. However I don’t recall in my limited experience seeing any MAP flashlights offered with gifts, free speakers, etc. I suspect a lot of people looking for certain items just want a bottom line price, not an additional free pair of speakers, gift certificate, etc. I wanted to keep my formula simple and easy to work with as something you could use to calculate a fair offer price that stands a chance of success. I still think if that method is employed to come up with an offer, it should mostly work, I guess time will tell on that count.
That what my friend did over coffee yesterday, and hence I did not have to guess about what the profit is on China Flashligts, and hence the post, done in the hopes it may help out some of my BLF’ers, while at the same time understanding any business for a seller is better than no business.
