Margins on rifles
- Thread starter TheUnprofesional
- Start date
Ar180shooter
CGN Ultra frequent flyer
- Location
- Ottawa, ON
That seems a little low. 20-25% is more the norm, but it depends on the item. Rifles are usually closer to the 20% (sometimes below), and pistols closer to 25%. This is mostly a volume thing, as rifles always move faster than pistols (or other restricted firearms). On inexpensive items like SKS's, the margin is usually higher, and on an item like a Swiss Arms, your 10% figure is pretty accurate.
Really? Do tell, because I've never seen anything close to that on a new firearm sold at retail. But if you're interested, I could sell you a Norinco CQ 556 for $2200.
Sometimes yes, sometimes no. I've seen cases where larger stores like Cabelas or LeBaron are selling the firearm for what it costs the local store, or close to it.
The markup on firearms is much less than things like clothing, shoes and camping equipment. Which can be up to 300%. It varies by brand. Some as much as 50% but most are not much more than 10 to 20%. On special orders it can be what ever the retailer wants. The buyers will ask what do we think we can get for this product. If it sells great, if not they will cut the margin till it sells (even sometimes at a loss).
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- Location
- East ontario
Ar180shooter
CGN Ultra frequent flyer
- Location
- Ottawa, ON
First off, get the terminoligy correct. There is "Markup" and there is "Margin" otherwise known as "Profit Margin". They are NOT the same thing and in fact very few business people use the term markup as it is rather useless.
Markup refers to the percentage by which an item is "marked up" over its' cost price in order to set the selling price. If I pay $50 to buy an item and I was to sell that item for $100 then it can be said that I have "Marked it up" by 100% (my original cost of $50 plus 100% of that cost is another $50 so added together we get $100).
A 50% markup would mean I sell it for $75.00, (50% of the $50 cost is $25 so add the $25 to the $50 cost and you get $75.00).
Most business people will use the term Profit Margin or "Margin"... meaning the percentage of the selling price that represents the gross profit on the item sold. In the above examples... the item that sells for $100 has a 50% gross margin.... the item that sells for $75 has a 33.3% gross margin.
It is IMPOSSIBLE for anything to have a 300% Margin (as someone earlier suggested). Even if you buy an item for $1.00 and sell it for $100,000 making a $99,999 gross profit the actual "Margin" would be $1.00 divided by $100,000 which equals .001% not 300%.
An item could have a 300% Markup... buy it for $50.00 and sell it for $150 and you have marked the item up by 300%.
Keep in mind also that this only represents the "Gross Profit Margin" and is NOT the actual profit.
If a dealer is selling items (for example) at 25% Margin he then has to deduct from that "gross profit" the rest of his variable and fixed costs. As an example, if the customer paid for the purchase using a credit card then the dealer is paying @ 3% to 5% right off the top to the credit card company for processing the credit card payment (that's NOT just 3% to 5% of the profit made on the item but a percentage of the ENTIRE SALE including the shipping, taxes, etc. even though the dealer doesn't actually have any profit from those parts of the sale).
Break that down for a minute... you sell an item for $75 with a 33.3% profit margin ($25 gross profit). The item has $20 shipping added and there is HST charged on top... so actual retail sale is $75 + $20 shipping + $12.35 HST = $107.35 total. The credit card company charges the dealer 4% merchant charge (for example) so right off the top there is a cost of $4.29 deducted from the $107.35 that the vendor gets paid. So... of the $25.00 gross profit that we started with the vendor just lost 5.72% of the $75 selling price to the credit card company who took $4.29 from the initial $25.00 gross profit. Down to $20.71 "profit" the dealer can now begin to deduct all of his other costs to see what is actually left as "NET Profit"... but in that one single step we've already gone from 33.3% gross profit down to 27.6% and that was just the credit card fee that came out.
He also needs to deduct all of the other costs (labour, insurance, rent, utilities, payroll taxes, etc.) and once that's done then and only then does he actually get to see what percentage of the sale is his "NET Profit". In some cases there is NO NET Profit... it is quite possible to sell items that have a Gross Profit but actually lose money from the perspective of NET Profit... and if that happens too much then the business goes bankrupt.
Any retail firearms business in Canada that is operating on 5% to 10% Gross Profit Margins isn't even covering their operating costs and will go bankrupt... it's that simple. The idea that you can "make it up in volume" is a joke... if you are losing money on a sale then volume only results in more losses. You have to be making a profit on a sale in order for volume to do you ANY good. In the past 40 + years in various businesses I've seen a lot of companies go broke "making it up in volume".
I would suggest that retailers in Canada need to be making a 20% to 30% gross margin (average across the year), in order to be "healthy" and profitable"... and if they're not profitable then why would anyone expect the business to operate... if the owner doesn't end up making a profit for all his work and risk then what person in their right mind thinks the owner will continue to operate... would you risk your money and work day after day for free?
Markup refers to the percentage by which an item is "marked up" over its' cost price in order to set the selling price. If I pay $50 to buy an item and I was to sell that item for $100 then it can be said that I have "Marked it up" by 100% (my original cost of $50 plus 100% of that cost is another $50 so added together we get $100).
A 50% markup would mean I sell it for $75.00, (50% of the $50 cost is $25 so add the $25 to the $50 cost and you get $75.00).
Most business people will use the term Profit Margin or "Margin"... meaning the percentage of the selling price that represents the gross profit on the item sold. In the above examples... the item that sells for $100 has a 50% gross margin.... the item that sells for $75 has a 33.3% gross margin.
It is IMPOSSIBLE for anything to have a 300% Margin (as someone earlier suggested). Even if you buy an item for $1.00 and sell it for $100,000 making a $99,999 gross profit the actual "Margin" would be $1.00 divided by $100,000 which equals .001% not 300%.
An item could have a 300% Markup... buy it for $50.00 and sell it for $150 and you have marked the item up by 300%.
Keep in mind also that this only represents the "Gross Profit Margin" and is NOT the actual profit.
If a dealer is selling items (for example) at 25% Margin he then has to deduct from that "gross profit" the rest of his variable and fixed costs. As an example, if the customer paid for the purchase using a credit card then the dealer is paying @ 3% to 5% right off the top to the credit card company for processing the credit card payment (that's NOT just 3% to 5% of the profit made on the item but a percentage of the ENTIRE SALE including the shipping, taxes, etc. even though the dealer doesn't actually have any profit from those parts of the sale).
Break that down for a minute... you sell an item for $75 with a 33.3% profit margin ($25 gross profit). The item has $20 shipping added and there is HST charged on top... so actual retail sale is $75 + $20 shipping + $12.35 HST = $107.35 total. The credit card company charges the dealer 4% merchant charge (for example) so right off the top there is a cost of $4.29 deducted from the $107.35 that the vendor gets paid. So... of the $25.00 gross profit that we started with the vendor just lost 5.72% of the $75 selling price to the credit card company who took $4.29 from the initial $25.00 gross profit. Down to $20.71 "profit" the dealer can now begin to deduct all of his other costs to see what is actually left as "NET Profit"... but in that one single step we've already gone from 33.3% gross profit down to 27.6% and that was just the credit card fee that came out.
He also needs to deduct all of the other costs (labour, insurance, rent, utilities, payroll taxes, etc.) and once that's done then and only then does he actually get to see what percentage of the sale is his "NET Profit". In some cases there is NO NET Profit... it is quite possible to sell items that have a Gross Profit but actually lose money from the perspective of NET Profit... and if that happens too much then the business goes bankrupt.
Any retail firearms business in Canada that is operating on 5% to 10% Gross Profit Margins isn't even covering their operating costs and will go bankrupt... it's that simple. The idea that you can "make it up in volume" is a joke... if you are losing money on a sale then volume only results in more losses. You have to be making a profit on a sale in order for volume to do you ANY good. In the past 40 + years in various businesses I've seen a lot of companies go broke "making it up in volume".
I would suggest that retailers in Canada need to be making a 20% to 30% gross margin (average across the year), in order to be "healthy" and profitable"... and if they're not profitable then why would anyone expect the business to operate... if the owner doesn't end up making a profit for all his work and risk then what person in their right mind thinks the owner will continue to operate... would you risk your money and work day after day for free?
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List price is the same as Manufacturer's Suggested Retail Price (MSRP). Most firearms manufacturers publish this number on their websites and most dealers/shops in Canada will sell the firearm at or very close to that price if the US/Canadian dollar are similar in value. List price or MSRP however is not the price the dealers/shops pay for the firearms.
On another note, look at some of the above site sponsors. They have some pretty decent sales right now. Some prices for higher end rifles have been cut back by about $600. About a month ago if you would have went to those shops and tried negociating a better price, to save let's say $300, they'd have told you it was impossible because they paid that much for it and have to make a living! Do you all really think they are now selling a firearm at a loss just to get it off the rack to make place for something newer???
I come from a family with 4 small businesses (parents, uncles, cousins, ect). I will say I do understand that most businesses are here for one reason, to make money. Getting rich is not the goal but hey there is bills and wages to pay and everyone likes to have a vacation once in a while. But SOME places are so out to lunch on their prices. I give you an example. 2 locally owned and operated firearm dealers, one has a store front and approx 8 employees, the other 2 guys working out of one of their garages (former cgn sponsor) exact gun from the place with much higher over head was $200. Low overhead shop $329 WTF!! Why is it i can get a TT-33 from most places online for $170ish yet local im looking at $290? I do support local if it is within a reasonable price, dont get me wrong. But when I can order a stock online for my 870 and even after paying frieght it is still 40% cheaper something aint right.. I have looked at 2 guns iIwant to purchase the GSG .22Lr and the VZ 58 local are within $10 of that with frieght. I am sure they did the math and know how much they can ask. Lastly Recently a CGN sponsor sold norc 780's for what $89 marked down from somewere near $300 im sure they did not loose money on that deal, May have not made anything on the sale but just goes to show.
A friend of mine is a Remington dealer and his cost for a Rem 700 SPS Varmint was around $135. Add in shipping and a minimal $50 profit for him and my price is perilously close to the $620 price at Wholesale Sports.
$50 profit on a $600 rifle isn't exactly a lot of money not does that leave a lot of room for haggling.
$50 profit on a $600 rifle isn't exactly a lot of money not does that leave a lot of room for haggling.
TheUnprofesional
Member
- Location
- West Coast
$135 dollars that must be typo?
With the remington 700's i would think there would be more profit/margins as you go up in models, so the base model at $650 bucks, sure there might be only 100 bucks profit. But the essentially same model 700 that retails for $1,200-$1,700 because it has a different plastic stock or slightly different rifling pattern etc. Surely they must be make more like 500 bucks off those. As there is really no more material or realistic cost of production, just perceived value to customer through features. Love to hear dealers take on that. Seems 700's would be one of the best comparisions as there is so many models varying in price
Ar180shooter
CGN Ultra frequent flyer
- Location
- Ottawa, ON
Nope, closer to $200-$250.
- Location
- Southern Ontario Canada
- Location
- Redcliff, Alberta
Your above example does not add up. I understand the calculation for Gross Profit Margin to be as follows:
Gross Profit Margin = (Revenue - Cost of Goods Sold) / Revenue
Gross Profit Margin % = Gross Profit Margin * 100
as such your example would result in 99.999% gross profit margin %, not 0.001%
Gross Profit Margin = (100,000 - 1) / 100,000 = 0.99999
Gross Profit Margin % = 0.99999 * 100 = 99.999%
Thanks and have a nice day.
Your above example does not add up. I understand the calculation for Gross Profit Margin to be as follows:
Gross Profit Margin = (Revenue - Cost of Goods Sold) / Revenue
Gross Profit Margin % = Gross Profit Margin * 100
as such your example would result in 99.999% gross profit margin %, not 0.001%
Gross Profit Margin = (100,000 - 1) / 100,000 = 0.99999
Gross Profit Margin % = 0.99999 * 100 = 99.999%
Thanks and have a nice day.
You're quite right... The .0001 figure represented the cost percentage... 99.999 would be the gross profit. The point is that profit margin can never be greater than 100 percent and that's only possible when cost of the item is zero... It is impossible for margin to be 300 percent as was stated at one point by one person. Only markup can be greater than 100 percent... And markup is a useless term.
Why is it a useless term?
Let me re-phrase: it is a useless term to me as a business person.
Perhaps this will help...
Markup vs Gross Margin; Which is Preferable?
Though markup is often used by operations or sales departments to set prices it often overstates the profitability of the transaction. Mathematically markup is always a larger number when compared to the gross margin. Consequently, non-financial individuals think they are obtaining a larger profit than is often the case. By calculating sales prices in gross margin terms they can compare the profitability of that transaction to the economics of the financial statements. (courtesy of WikiCFO)
Though markup is often used by operations or sales departments to set prices it often overstates the profitability of the transaction. Mathematically markup is always a larger number when compared to the gross margin. Consequently, non-financial individuals think they are obtaining a larger profit than is often the case. By calculating sales prices in gross margin terms they can compare the profitability of that transaction to the economics of the financial statements. (courtesy of WikiCFO)
Markup is a term that creates the illusion that profits are higher than they really are... sounds great in a sales seminar, but at the end of the day when the financial statement is prepared and the accountants confirm if you've made a profit or lost money, the figures they are going to talk about are your:
- Sales Revenue
- Cost of Goods Sold
- Gross Profit (as a dollar figure and as a % of Sales)
- Operating Expenses
- and finally (hopefully) your NET Profit before Taxes and Depreciation.
A good business person knows their operating margins...
- they know what their "target" Gross Profit Margin is
- they know what their "actual" Gross Profit Margin is at any given time
- they know what their projected sales for the year are
- they know what their fixed costs are
- they know what their variable costs are
- they know what those different costs represent as a % of the projected sales revenues
- they know if they are making or losing money
In over 40+ years operating a wide range of businesses, the ONLY time I have ever used "Markup" calculations was back in University when I was taking my Economics Degree and then ONLY because it was required in the course material that we learn the term and understand what it was.
TheUnprofesional
Member
- Location
- West Coast
Let me re-phrase: it is a useless term to me as a business person.
Perhaps this will help...
Markup vs Gross Margin; Which is Preferable?
Though markup is often used by operations or sales departments to set prices it often overstates the profitability of the transaction. Mathematically markup is always a larger number when compared to the gross margin. Consequently, non-financial individuals think they are obtaining a larger profit than is often the case. By calculating sales prices in gross margin terms they can compare the profitability of that transaction to the economics of the financial statements. (courtesy of WikiCFO)
Markup is a term that creates the illusion that profits are higher than they really are... sounds great in a sales seminar, but at the end of the day when the financial statement is prepared and the accountants confirm if you've made a profit or lost money, the figures they are going to talk about are your:
- Sales Revenue
- Cost of Goods Sold
- Gross Profit (as a dollar figure and as a % of Sales)
- Operating Expenses
- and finally (hopefully) your NET Profit before Taxes and Depreciation.
A good business person knows their operating margins...
- they know what their "target" Gross Profit Margin is
- they know what their "actual" Gross Profit Margin is at any given time
- they know what their projected sales for the year are
- they know what their fixed costs are
- they know what their variable costs are
- they know what those different costs represent as a % of the projected sales revenues
- they know if they are making or losing money
In over 40+ years operating a wide range of businesses, the ONLY time I have ever used "Markup" calculations was back in University when I was taking my Economics Degree and then ONLY because it was required in the course material that we learn the term and understand what it was.
Essentially though if you mark up your product 60% percent and then i ask for 15% off, and your cost to stock item and sell it etc is 15% you then make a gross margin of 30%? or do i need to go back to school, ps i dont want to,lol
Let's test it out and see...
Item costs $70 so if we use 60% "markup" that means we add $42 for a selling price of $112.00 retail.
You now want me to give you a 15% discount so 15% of $112 is $16.80 so you are paying me $95.20.
You want me to use a figure of 15% to represent my operating costs, but 15% of what? 15% of my retail price ($16.80) or 15% of your discount price ($14.33)?
If my costs work out to 15% of my regular retail prices how would I be able to figure out that percentage on every discounted price? As the selling price is reduced the costs percentage becomes higher as well.
If we assume you meant that costs are 15% of regular retail then the selling price of $95.20 less the original cost of $70 gives a gross profit of $25.20 and a Gross Margin of 26.47%. Now subtract the $16.80 costs figure and you're left with $8.40 net profit.
To calculate margin divide the $8.40 by the $95.20 selling price and you have an 8.82% net profit margin.
Obviously not the 30% figure you suggested. This is a great example of why we don't use "markup" to calculate prices or analyze financial performance.
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- 54°52'56"N 112°10'7"W Alpha Bravo
Excuse my ignorance, How would/could you calculate all those costs into one single retail item? Ah maby it's too early, I think I need a coffee...
EDIT: Nm I got my coffee... lol
