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View Full Version : OT, dealer markup on major appliances.......????



DR
12-08-2010, 09:35 PM
Anybody have a feel for the dealer markup on major appliances?

The situation is we bought about $3K in new ones. Dealer is local operation selling for roughly 7% below Home Depot and Lowes.

During delivery the dealer's installer noticed a small dent in the refrig, we settled for $100 discount off the $1600 price. $1600 is substantially below the MSRP.

After installation we noticed a more sizable and more noticeable dent on the other side. This one will be quite obvious because of it's location.

I offered to keep the refrig for another $400 discount. They said no, because $400 is more profit than they made on the complete package. As it is now, if we demand a new one they're faced with at least 2 hours of a two man crew in a truck for the exchange, plus they have to sell at a discount a damaged, "used" refrig since we're using it now.

In this case, we're in the driver's seat since payment was by credit card. I am willing to negotiate a bit though and keep the damaged unit. But, I would like to understand a little about their markups.

goose
12-08-2010, 10:04 PM
So the product was either damaged goods in the warehouse, and/or damaged during delivery by the retailer. If you're not happy with it, and understandably so, have the unit replaced. It will be someone else's problem, you won't have to concern yourself with "markups" and "profits", and any worries will be lifted from your mind. Otherwise, to use these defects in a back and forth niggardly exchange is unbecoming (imho). Also, markup and profit are different.


Gary

Evan
12-08-2010, 10:36 PM
Gross margin on appliances is approximately 95 to 100 percent from the cost of manufacture to the retail price. Incremental markup from the retailer to the consumer is around 55 to 60 percent. That is for the MSRP. Adjust accordingly for competitive discounts and sales. Of the cost of manufacture about half that is labour and other costs such as shipping. The other half is the cost of materials. In any particular class of products such as appliances (known as "White Goods") the retail price can be very closely calculated by the weight of the product. Using the weight as a baseline you can then determine if the price asked is fair, overpriced or discounted. For White Goods in the average quality range the retail price is approximately 4 times the cost of materials per pound.

So, if two fridges or stoves weigh about the same but differ greatly in price the higher is likely over priced since the cheaper one isn't likely being sold at a loss. Conversely, if a much larger unit weighs the same as a smaller unit you should investigate to find out why. It is the heaviest components that lend themselves to cost cutting measures. I recently scrapped a Maytag washing machine motor and was planning on saving the copper windings to recycle. As soon as I cut into them I discovered that they were aluminum wire that was enamelled to look like copper.

Farbmeister
12-09-2010, 07:01 AM
A rough number would be 30% at each level.

30% markup at manufacture.
30% at wholesaler
30% at retail

But you could easily adjust them +20% and still be in the ballpark.

If you were calling me to complain about dents I would offer you one 'adjustment' than have you sign a waiver/acceptance form. How do they know you are not kicking in panels for discounts?

Some blame also goes to the delivery guys who did not unpack and make you inspect sign for it.

BigBoy1
12-09-2010, 07:16 AM
Our local Lowes gives a 10% discount at checkout for any veteran who can show a military ID card. Home depot also will give the veteran discount.

They have no problem with a 10% off the top discount.

Evan
12-09-2010, 07:36 AM
A rough number would be 30% at each level.


Very rough. The numbers I gave are on record from the US government Office of Management and Budget. There are few wholesalers left in the supply chain. You can buy direct from the factory in single units in many cases if you wish.

DR
12-09-2010, 12:23 PM
A little more info on the this situation.

My intention in posting was to find someone knowledgeable in appliance sales who could advise what typical amount of negotiating room the dealer has.

I paid for a new refrig installed with no dents. Nobody can argue that point.

They came and took my old refrig out which I had already sold to a neighbor. It was taken away immediately. In retrospect they should have unwrapped the new one and examined it for damage prior to removing the old.

The installer spotted the first small ding. I'm surprised he noticed it, I might not have seen it until later if at all. Now, why he didn't spot the much bigger one I have no idea unless they created that one moving it in.

After the first ding was discovered I talked with customer service requesting a new refrig. They agreed except I couldn't keep the dinged one while waiting a week for the new one. So, since my old was gone I was facing foods rotting. We settled for a hundred dollar discount.

After the installers were gone my wife came home and noticed the bigger ding while we were loading food into it. I called customer service to notify them. They said stop using the refrig. No way I could do that.

I made them an offer to keep it for a further discount. They refused my dollar amount and will deliver a new refrig next week. Again they requested we not use this one, or as he said if you must, "use it gently". Whatever the hell that means.

My offer for further discount will not benefit me. Custom cabinets are being built as we speak, it happens one cabinet can be modified at my expense to be a little deeper to almost completely cover the second ding.

I'm really surprised at the dealer's attitude on this whole thing. They are now faced with several hours of installer time for the exchange. That must be near equal to the amount I was willing to settle for.


And, finally, I checked this dealer's online reviews. Customer service rates very low for all reviewers. Most reviewers gave them good marks on pricing.

Ries
12-09-2010, 01:01 PM
I think their margins are a lot smaller than Evan's figures.
For instance, the 100 percent profit figure leaves me scratching my head- How, exactly, do you make stainless steel fridges for Zero Dollars?

In the good old days, most industries had a 50% margin for retailers. And 15% to 30% for wholesalers. As mentioned, in many industries, wholesalers no longer exist, and their cut has been split between the manufacturer and the retailer.

But in many, many market segments, 50% of retail price to the store is long gone. There are a few places left- high end fashion, sometimes, but they also tend to mark down items relatively quickly that dont sell, to negative markups.

Consumer electronics markups are often very slim. Record, and later CD, markups have been slipping for years. New hardcover book markups can be as small as a few percent.
Costco, Walmart, Best Buy, and the Internet have been huge game changers.

I know that the major appliance dealers have price floors written into their contracts with their retailers- for things like SubZero, or Viking, if the company finds out you have been discounting too much, they may drop you as a dealer. The manufacturers are interested in keeping retail prices high, and consistent, across the country.

My guess is they are making between 10% and 30%, depending on the model, and that there are sometimes loss leaders where they make even less. Remember, like car dealers, a lot of appliance dealers arrange financing, and get a cut from that- and, even though the prime rate is low, and T bills are practically at zero, consumer financing on appliances is still in the 10% to 20% range. So even with zero markup, stores can make money.

Circlip
12-09-2010, 02:37 PM
Here we go again, Joe public wanting top value for least dollar. What is dealers mark up?? Set yourself up in business and try to sell your fellow man a deal that HE is happy with and put bread on your own table. We all know dealers have nothing to do but wait for us to grace their establishments and take the products off their hands??

Equipment has been known to fail in service within a warrenty period and is rightly covered by a guarantee, but if your too busy to bother to check at delivery stage that something you can easily spot from the appearence then you "Have a nerve" to expect the dealer to slash his wrists to satisfy a further fault you have now "Discovered" but your peace of mind can be satified by a further discount.

Seem to remember another thread where a buyer was trying to assemble a "New" machine from scrap at the dealers expense.

The dealer was at fault for not having you sign a received notice at point of delivery.

Been o the dealer end of this one, when selling cookers at far less than the RRP., got one pratt in the shop jingling the coins in his pocket asking "How much for cash" Wonder if he tries the same at the Supermarket??

What's the difference?????

Regards Ian.

Willy
12-09-2010, 02:51 PM
Originally posted by Ries

My guess is they are making between 10% and 30%, depending on the model, and that there are sometimes loss leaders where they make even less. Remember, like car dealers, a lot of appliance dealers arrange financing, and get a cut from that- and, even though the prime rate is low, and T bills are practically at zero, consumer financing on appliances is still in the 10% to 20% range. So even with zero markup, stores can make money.


So very true.
I remember reading an article several years ago when auto makers were offering deep discounts that the only profit GM was making at the time was through GMAC (General Motors Acceptance Corporation).
Building automobiles was just a means to an end.

The Artful Bodger
12-09-2010, 02:56 PM
Evan, your 100% seems about right. I have checked and I can buy Chinese machine tools in single units from the factory's outlet and have them shipped to my home in NZ for about half what the local distributor would sell to me.

So in that case the local distributor, who is the only one between factory and customer, makes 100% markup.

Evan
12-09-2010, 03:04 PM
I think their margins are a lot smaller than Evan's figures.
For instance, the 100 percent profit figure leaves me scratching my head- How, exactly, do you make stainless steel fridges for Zero Dollars?


????? 100% means doubling the price. It's real and correct. Remember, I said that is for the manufacturers suggested retail price (MSRP). Dealers may sell for less.

ADGO_Racing
12-09-2010, 03:07 PM
Here we go again, Joe public wanting top value for least dollar. What is dealers mark up?? Set yourself up in business and try to sell your fellow man a deal that HE is happy with and put bread on your own table. We all know dealers have nothing to do but wait for us to grace their establishments and take the products off their hands??

Equipment has been known to fail in service within a warrenty period and is rightly covered by a guarantee, but if your too busy to bother to check at delivery stage that something you can easily spot from the appearence then you "Have a nerve" to expect the dealer to slash his wrists to satisfy a further fault you have now "Discovered" but your peace of mind can be satified by a further discount.

Seem to remember another thread where a buyer was trying to assemble a "New" machine from scrap at the dealers expense.

The dealer was at fault for not having you sign a received notice at point of delivery.

Been o the dealer end of this one, when selling cookers at far less than the RRP., got one pratt in the shop jingling the coins in his pocket asking "How much for cash" Wonder if he tries the same at the Supermarket??

What's the difference?????

Regards Ian.

Thank you very much! Everyone seems to expect something FREE. Some of the problem lies with people having absolutely no clue what is involved in manufacturing something. The rest is people have no clue as to the REAL cost to manufacture something. Sure I can make something in my shop for $2.00 or $3.00 of scrap laying around, but the time, utilities, tooling, insurance, taxes, etc, etc, etc...Now it is a $300.00 expense for me to make an item I can purchase from MSC or others for $200.00.

I am not "cash rich", nor am I "time rich", Buying tools, appliances, material, machines, etc, it is all part of doing business. I won't even tell you what my shop rate is, and it is about to go up! People come in here and want things done. Specialty stuff requires a 50% non refundable deposit.

I am a dealer of many different parts that I do not manufacture. I am always amazed (with few exceptions) at what I pay Vs the MSRP. If I were to actually sell at those prices, I would be paying the manufacturer to sell their crap! So, I look around and try to be competitive. I have no idea how these guys are selling things at "jobber" price, and make ANY money. In most cases, even buying in "quantity" by the time I pay shipping, there is almost nothing left at MSRP!

ADGO_Racing
12-09-2010, 03:11 PM
????? 100% means doubling the price. It's real and correct. Remember, I said that is for the manufacturers suggested retail price (MSRP). Dealers may sell for less.

Come down here and look through my price lists Evan. Show me exactly where MSRP is 2x what I pay. This I would Like to see. Some product lines I get "warehouse pricing" instead of "wholeslae Pricing" and it still DOES NOT come close to 2x (100% mark up)! Also the Manufacturers pricing does not include shipping, take that out of MSRP and there is ZERO profit.

ADGO_Racing
12-09-2010, 03:13 PM
Evan, your 100% seems about right. I have checked and I can buy Chinese machine tools in single units from the factory's outlet and have them shipped to my home in NZ for about half what the local distributor would sell to me.

So in that case the local distributor, who is the only one between factory and customer, makes 100% markup.

And what is the shipping price from the factory to you? This is a cost to the local distributor.

Ries
12-09-2010, 03:20 PM
we are using two different terminologies here.

Personally, in the 20 years I have been wholesaling, and retailing, I have always found it simplest to discuss the retail price, and then to talk about dividing that up.

So when I say 50%, I mean HALF of the retail selling price.

I know, there are all kinds of ways of figuring, and discussing, markup, but I just think its very confusing to tell somebody that half of what they pay is 100%.
So then, they are paying 200%.
Of something.

And I still say, most retailers are lucky to make 30% of the SELLING PRICE as their cut.

gary350
12-09-2010, 03:47 PM
I would tell them to come get the refrigerator and give me a full refund. They can not charge you any fees for picking up a damaged item and giving you a refund. They will probably realize it is best to work out a deal.

I buy all my appliances from a place that sells only damaged items. I bought a gas kitchen stove about a year ago paid $300 for some minor sheet metal damage and 3 broken feet adjustments. It took me 2 hours to fix it myself. The same stove is $750 at Lowe's and Home Depot.

I bought a refrigerator 3 years ago it was the deluxe model only difference between the deluxe and cheaper model is the deluxe model has glass shelves that were broken the cheaper model has metal wire shelves. The frig also had some damage on the side that will be hidden behind the cabnets. I bought it $200 discount then I paid $50 for the metal wire shelves and saved $150.

The Artful Bodger
12-09-2010, 03:59 PM
And what is the shipping price from the factory to you? This is a cost to the local distributor.

Shipping from the factory to me is included in the cost of buying from the factory outlet. Incidently, if I bought from a local distributor I would be charged for shipping from his warehouse to my home which would make the difference even greater.

DR
12-09-2010, 04:19 PM
Here we go again, Joe public wanting top value for least dollar. What is dealers mark up?? Set yourself up in business and try to sell your fellow man a deal that HE is happy with and put bread on your own table. We all know dealers have nothing to do but wait for us to grace their establishments and take the products off their hands??

Equipment has been known to fail in service within a warrenty period and is rightly covered by a guarantee, but if your too busy to bother to check at delivery stage that something you can easily spot from the appearence then you "Have a nerve" to expect the dealer to slash his wrists to satisfy a further fault you have now "Discovered" but your peace of mind can be satified by a further discount.

Seem to remember another thread where a buyer was trying to assemble a "New" machine from scrap at the dealers expense.

The dealer was at fault for not having you sign a received notice at point of delivery.

Been o the dealer end of this one, when selling cookers at far less than the RRP., got one pratt in the shop jingling the coins in his pocket asking "How much for cash" Wonder if he tries the same at the Supermarket??

What's the difference?????

Regards Ian.


Interesting comments, even if they are total nonsense as applies to this deal.

Yes, I have been in business both retailing and wholesaling for a good many years. I've also been a landlord for near thirty years. I know the trouble dealing with the general public very well. In most of my dealings I've taken the position the customer is always right, no matter how wrong they are.

Actually, I was not too busy to check for damage. I watched them unload and partially unwrap it. Keep in mind these are wrapped in a sticky, protective plastic film. They do not remove the majority of that until the appliance is in the house. That's their rule, not mine.

To their credit they did point out the first ding prior to installing. I did not pay or want a dinged appliance. This is in no way my fault it's dinged and I should not have to pay full price (even if it means them slashing their wrists).

As to the second ding, that's worse than the first and in a more visible place. That location still had the protective plastic on it. The more I think about it, I believe they dinged it moving into the house.

I offered a reasonable con promise on that. We will change one of our cabinet sections to cover that ding. My cost on the cabinet change will about equal the discount I asked for. To date they have refused that offer.


Obviously, I want to get the best deal for my money, who doesn't? If I don't get what I'm promised I expect compensation. The discount compensates me somewhat over the life of the appliance knowing every time I walk past it and see the ding I'll feel better knowing they paid.

DR
12-09-2010, 04:26 PM
I would tell them to come get the refrigerator and give me a full refund. They can not charge you any fees for picking up a damaged item and giving you a refund. They will probably realize it is best to work out a deal.

I buy all my appliances from a place that sells only damaged items. I bought a gas kitchen stove about a year ago paid $300 for some minor sheet metal damage and 3 broken feet adjustments. It took me 2 hours to fix it myself. The same stove is $750 at Lowe's and Home Depot.

I bought a refrigerator 3 years ago it was the deluxe model only difference between the deluxe and cheaper model is the deluxe model has glass shelves that were broken the cheaper model has metal wire shelves. The frig also had some damage on the side that will be hidden behind the cabnets. I bought it $200 discount then I paid $50 for the metal wire shelves and saved $150.


Thanks for the reply.

We have purchased a number of damaged appliances over the years because the damage is usually minor and cosmetic.

This is what puzzles me about their attitude. Damaged appliances sell for substantial discounts. Yet they're willing to take the chance of getting this one back, not only damaged, but used.

I feel I've been completely reasonable with these jokers.

ADGO_Racing
12-09-2010, 06:01 PM
The products I manufacture as well as products I purchase and resell, are used in a different realm. I do not accept returns (except in certain very specific circumstances). My in house QC is such that anything defective will unlikely make it on the shelf, and would certainly be caught before it leaves the premises.

It seems you need to speak with someone a little more authoritative, than the customer service employees. Maybe a trip in person to the store and find a general manager, VP or even the owner, will get you a little closer to the result you are seeking.

Evan
12-09-2010, 07:25 PM
Come down here and look through my price lists Evan.

Do you sell household appliances?

gary350
12-09-2010, 08:29 PM
I NEVER buy from anyone that will NOT take returns. This is the first question I ask before I pay for the item. I want it in writing.

I bought an item from Sears several years ago when I got home and opened the box item was broken. Returned to Sears they say that they are not responsible for damage I have to return it to the factory. I call the factory they say I have to pay postage to them and back to me again and they may not fix or replace the item after inspection. I very carefully package the item exactly as it was before I opened it then returned to Sears at a different time of the day to make sure I talked to a different person. This time I just asked for a refund, they ask if there is a problem, I say no just changed my mine, they gave me my refund.

Had the same problem with Toys R Us returned a broken it was refused a week later retuned it for refund no problem.

I have been trying to buy a Home Theater System most stores sell some pretty worthless over priced crap. Try and listen to the quaility of the system in the store with all the noise and I can't tell much about it. I want to take it home and test it because it will sound different at home than it will at the store but some stores say NO RETURNs. If they say no I take my $$$ to a different store. Some stores say if returned in 30 days in good working conditions they will give a full refund. I want that in writing.

I bought a chain saw it had a 30 day warrenty. It said so on the saw big sticker on the side sales receipt said so too. I took it home used it 2 hours and it wouldn't run anymore. I checked the spark plug it is working. Well I don't care what the problem is I am not going to spend my whole day trying to figure it out and I'm not paying a shop $65 an hour to work on it either. I returned it for a full refund.

I bought a Lasko fan got it home plugged it in and nothing happened. Returned it and got a full refund. No one in town sells anything but those cheap worthless $5 Lasko fans. I found a real nice 30 year old all metal fan at a flea market for $10 it works great. I wouldn't trade it for 50 Lasko fans.

I bought a new $40 toaster all it did was make warm bread. Returned it and got a refund. I bought a nice old $1 toaster at a yard sale it looks like it was made about the turn of the century but it makes great toast.

What ever happened to good quality products??? Everyone sells junk with no warrenty and no refund.

RussZHC
12-09-2010, 09:01 PM
Interesting comments about only purchasing where returns are possible...agreed but I would also suggest that when purchasing damaged goods (even if it is just "scratch and dent") as the OP was, that any return policy or warranty is out the window.
Sort of falls under "buyer beware"...you saw one dent, missed another...goes to inspection of merchandise before acceptance.

We have a fair number of local discount places who buy older but new and unused appliances etc., if I purchase at deep discount from them I don't expect even the original makers warranty/guarantee to be valid. At the very least find out before hand or accepting delivery, I am a bit surprised they are coming to collect the now used and dented fridge.

ADGO_Racing
12-09-2010, 10:43 PM
I NEVER buy from anyone that will NOT take returns. This is the first question I ask before I pay for the item. I want it in writing.

I bought an item from Sears several years ago when I got home and opened the box item was broken. Returned to Sears they say that they are not responsible for damage I have to return it to the factory. I call the factory they say I have to pay postage to them and back to me again and they may not fix or replace the item after inspection. I very carefully package the item exactly as it was before I opened it then returned to Sears at a different time of the day to make sure I talked to a different person. This time I just asked for a refund, they ask if there is a problem, I say no just changed my mine, they gave me my refund.

Had the same problem with Toys R Us returned a broken it was refused a week later retuned it for refund no problem.

I have been trying to buy a Home Theater System most stores sell some pretty worthless over priced crap. Try and listen to the quaility of the system in the store with all the noise and I can't tell much about it. I want to take it home and test it because it will sound different at home than it will at the store but some stores say NO RETURNs. If they say no I take my $$$ to a different store. Some stores say if returned in 30 days in good working conditions they will give a full refund. I want that in writing.

I bought a chain saw it had a 30 day warrenty. It said so on the saw big sticker on the side sales receipt said so too. I took it home used it 2 hours and it wouldn't run anymore. I checked the spark plug it is working. Well I don't care what the problem is I am not going to spend my whole day trying to figure it out and I'm not paying a shop $65 an hour to work on it either. I returned it for a full refund.

I bought a Lasko fan got it home plugged it in and nothing happened. Returned it and got a full refund. No one in town sells anything but those cheap worthless $5 Lasko fans. I found a real nice 30 year old all metal fan at a flea market for $10 it works great. I wouldn't trade it for 50 Lasko fans.

I bought a new $40 toaster all it did was make warm bread. Returned it and got a refund. I bought a nice old $1 toaster at a yard sale it looks like it was made about the turn of the century but it makes great toast.

What ever happened to good quality products??? Everyone sells junk with no warrenty and no refund.

Thats nice, but nobody in the racing world gives a "refund" or takes "returns". Yes, I have and do take "some" returns, but only through very specific circumstances. Someone buys the wrong item or size, ok, I'll take it back and give them the right item. Race engine, absolutely NOT, under any circumstances. You buy it, it is YOURS. I have no idea what you may (or may not) have done to it. Once we load it in the back of your truck, the warranty is expired. Same thing with a chassis, or suspension parts, etc... Racing is a world of abuse, there are no warranties, and no returns. It is stated clearly on every invoice, and a sign here in the office.

Circlip
12-10-2010, 05:27 AM
" If thine eye offends thee - - - - - Get a discount" :rolleyes:

Regards Ian.