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  • OT, dealer markup on major appliances.......????

    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.

  • #2
    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
    Gary


    Appearance is Everything...

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    • #3
      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.
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      • #4
        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.

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        • #5
          Lowes Veteran Discount

          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.
          Bill

          Being ROAD KILL on the Information Super Highway and Electronically Challenged really SUCKS!!

          Every problem can be solved through the proper application of explosives, duct tape, teflon, WD-40, or any combo of the aforementioned items.

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          • #6
            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.
            Free software for calculating bolt circles and similar: Click Here

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            • #7
              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.

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              • #8
                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.

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                • #9
                  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.
                  You might not like what I say,but that doesn't mean I'm wrong.

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                  • #10
                    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.
                    Home, down in the valley behind the Red Angus
                    Bad Decisions Make Good Stories​

                    Location: British Columbia

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                    • #11
                      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.

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                      • #12
                        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.
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                        • #13
                          Originally posted by Circlip
                          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!

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                          • #14
                            Originally posted by Evan
                            ????? 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.

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                            • #15
                              Originally posted by The Artful Bodger
                              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.

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