reply to post by randomname
this is serious, how is wal-mart supposed to pay it's chinese suppliers while selling it's products with a 90% mark up on the dollar.
I'm quite curious where you get such a figure from.
There are two major factors in the cost of a product. First is the cost necessary to purchase merchandise. For example - a glass of soda from the
fountain only costs about $0.15 - less if you purchase the syrup and CO2 in greater bulk than our restaurant.
The next is the cost to shelve and service the merchandise and/or customer. This one is more tricky to work down to a per-unit price. If your
restaurant is only selling soda, for example, and you have three employees with a total pay-roll of $1500 per week, your utilities -average-
$100/week, and your rent/loan on the property is $200/week, you have a total of $1800 that must be met in weekly revenue aside from the cost of your
Now, we rapidly start to enter nonlinear math. If you don't know what that's all about - it's pretty simple: the price you sell merchandise at and
the volume you sell both determine your revenue for the given time span. Other factors influence this (you can't possibly sell more glasses of soda
in a day than you can physically dispense in that time frame) - but if I sell each glass of soda for $500, then I only need to sell four glasses of
soda to cover my overhead. However, if I sell them for $0.30 - I need to be able to push 12,000 glasses of soda per week to meet my overhead.
While, technically, a 100% mark-up - I'm not really making any kind of a profit at that rate.
Further - to turn that kind of volume, I will probably have to bring on additional machines, employees, and likely have longer opening hours - all of
which will have an impact on my overhead.
Now - business in the service industry varies in the extremes. We've had some -bad- week-days where there have only been a few (less than ten)
tables the entire night. We've had week-days where the staff got gang-raped and former employees drafted back in to combat the hordes of
This makes it hard to figure a per-unit or a per-hour cost. However, you can refine the data resolution to hourly quotes - how many sodas do you need
to sell in a given hour to meet the overhead costs for that hour? What hours routinely meet their quotes and what do not? Selling sodas in the
morning is probably not as good of an idea as selling them at lunch and/or dinner time.
And, just for the sake of things - let's make this a -real- restaurant and sell something more than sodas and apply all of the same craziness and
compound it on top of itself. You'll have days when you are running to the local supermarket to buy shrimp because you're running out of stock (or
because the manager is dirka-dir and didn't order any). You'll have days when all you are serving is steaks and you'll have entire weeks where
it's a Truck-Stop-Tuesday marathon. You'll have times you can't keep deserts in stock and other times when you couldn't give them away.
This amount of uncertainty in all of the retail industries makes prices hard to figure. Manufacturing is mostly done on the back-end; an order comes
in for a thousand parts and you know how much material that will take, how many man-hours, how many machine cycles, the average amount of down-time
for any given operation, etc - you can plan everything like clock-work.
When you are completely dependent upon someone walking in and making a purchase... it's difficult to figure what is a 'fair' mark-up, and what
isn't. 30%? 50%? 150%? 250%? - It all depends upon how much volume you can drive at any set price.
As has been said before - the average net profit wal-mart goes away with is 3%. Far less than your average beverage manufacturers (30%) and
pharmaceutical companies (10%). That falls within the average of all Fortune 500 companies - usually ranging between 3 and 5%.
If they are selling things at a 90% mark-up - they aren't getting unreasonably rich by doing so.