bikecomedy
New Member
If Fellers or any other distributor is making less than 22% gross margin on the long term I would have to see it to believe it. Walmart considered the one of the best retailers in the world runs around 24% year over year. A quick search shows that some of the finest run institutions run in the 30's http://www.fool.com/investing/gener...nd-target-have-the-worst-gross-profit-ma.aspx You're telling me you think Fellers does 10-15%. Don't agree that they do. However, if you meant net profit is still think it's high.
I use the term differently. Item costs $75 plus freight let's say $10 which is the actual cost I use for an item (COGS). Divided by what I call the gross margin - 45% results in selling price. 85/.55=154.54. The 154.54 is the price you need to sell to make your small business profitable and earn a net profit of 10-8%. To me the gross margin is the percentage used to determine the price I must charge to make a profit. It uses hard inventory cost (COGS) divided by a divisor which is the result of 100 percent and the gross margin percent difference. My number takes into account deduction of returns, allowances for damaged or missing goods and any discounts. These are not normally included in Gross Profit Margin as defined by Accounting Coach. BTW this is using a 3.5 turn rate. Walmart has a reported turn rate of 9. Can't possibly cover expenses and use their gross margin as an example of a distributor imo.
Have I been using the words gross margin the wrong way for years?
Well at the end of the day I understand what you where thinking. Thanks.
I use the term differently. Item costs $75 plus freight let's say $10 which is the actual cost I use for an item (COGS). Divided by what I call the gross margin - 45% results in selling price. 85/.55=154.54. The 154.54 is the price you need to sell to make your small business profitable and earn a net profit of 10-8%. To me the gross margin is the percentage used to determine the price I must charge to make a profit. It uses hard inventory cost (COGS) divided by a divisor which is the result of 100 percent and the gross margin percent difference. My number takes into account deduction of returns, allowances for damaged or missing goods and any discounts. These are not normally included in Gross Profit Margin as defined by Accounting Coach. BTW this is using a 3.5 turn rate. Walmart has a reported turn rate of 9. Can't possibly cover expenses and use their gross margin as an example of a distributor imo.
Have I been using the words gross margin the wrong way for years?
Well at the end of the day I understand what you where thinking. Thanks.