There are several options for the coefficient for setting prices. Trade markups are set for each industry according to its own rules.
Basic
With its help, planned values of the profit rate are formed, covering all the company's expenses, the size of the minimum tariff is determined, to which the seller will make accruals to increase the organization's profit. In this case, all indicators that affect the net income per unit of product will be taken into account.
Additional
An entrepreneur has the opportunity romania email list to increase the trade margin in cases where there is a separate agreement with the client for the purchase of goods. A higher price is set only if there is a specific justification for this. The reasons may be:
higher demands on product quality;
the presence of additional options in the offer;
the presence of a complex logistics system.
Dealership
It is used when there are intermediaries in the chain of product distribution, who also bear certain costs associated with logistics and want to receive their share of the profit. As a result, the final cost of the product is affected by the length of the distribution chain, which may include more than one or two intermediaries.
Types of trade markups
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Wholesale
The wholesale trade markup when calculating the cost of products is freely established by enterprises participating in the wholesale trade chain, except for cases stipulated by the legislation of our country, and includes the following expenses:
customs;
transport;
warehouse;
production;
sales.
To automatically regulate and maintain the required level of profit, it is calculated as a percentage of the purchase price.
Retail
The formula for the trade markup on a product when sold at retail looks like this:
Rnc = OPTprice – Ts / Ts x 100%
Where:
OPTcen – wholesale price of goods;
Ц – purchase price.
For consumers, the retail price is the final value, and entrepreneurs regulate it themselves. The main task here is to determine the break-even point of the business, especially during sales and special promotions. For example, for large networks, a 5% calculation error leads to multimillion-dollar losses.
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Forms of trade margins
There is an absolute and relative form of markup. In the first case, it is expressed in a numerical value. For example, an entrepreneur purchased candies from a manufacturer wholesale at a price of 100 rubles per box, and sells them at retail for 130 rubles. The absolute markup will be 30 rubles.
But most often, entrepreneurs use the percentage expression of this indicator. This is the relative markup. In this case, the trade markup can be determined using the following formula: