Generally we are all aware that the price of the products we buy have margins applied to the final distributor’s purchase price, however in some cases and products, the final sales prices to the final consumer are established from the factory.
We will explain it with an example, a baker sells a loaf of bread to the supermarket for €0.5 and the supermarket sells it to the final customer for €0.75, or a mobile phone store sells a mobile phone for €300 when he bought it for €200.
In each case, depending on the demand for the product and the prices of the competition, the final distributors set their prices.
In addition to what has already been explained, there are businesses that offer discounts to distribution companies or professionals in the same sector or sectors similar to their activity, which normally used to be wholesalers.
However, there is a curious paradox that a product marked with a final price, let’s say €100 for the end customer, can have up to an 80% discount for a distribution or installation company in the same sector, for example. We can buy a small water pump to empty a private pool, for example, for €500 as an end customer, but with a price of €200 (60% less) if we were a pool cleaning services company.
If we look closely, we will see how there is a huge and artificial profit margin created on certain products in the prices marked for the final customer, since when they purchase a product for €500, continuing with the previous example, they are paying at least 30% more. than the price that is supposed to correspond, if the installer will apply a 30% increase on its purchase price.
If we analyze the issue a little more deeply, it can be considered that the business that sells to the distributor still has a profit margin on the price at which it has sold the product, let’s say 15%, which would mean that the Wholesaler’s sales price would be €500 pvp less the 60% discount to the installer or service company less the distributor’s 15% profit, that is, the purchase price of the item from the wholesaler would be €125, which suggests that the starting price of the factory item would be even lower.
The question is not whether or not it is correct to apply margins on the purchase price of an item, which will then be resold, since this is the basis of the distribution chain.
The question is why the end customer has to endure such an abusive price increase in some cases on certain items, since assuming a 60% extra cost used in this example represents a clear abuse with respect to obtaining a balanced profit.
It is true that an installer must also make a profit, but if this is 60% (in the example shown), only with the parts or elements he needs to carry out his work, it already generates great business before doing anything.
In conclusion, you will have to study the market, see where the margins for the installer are greater, and dedicate yourself professionally to this activity, since between the margin you obtain on the elements necessary to carry out the work, plus the costs of carrying out the work, can provide considerable benefits with respect to the task to be performed compared to other activities.
And in the meantime, all final customers will endure these hidden and camouflaged increases in the final prices of certain items, and we say camouflaged prices since these final sales prices are often already marked by the manufacturers, establishing the profit margin themselves. from the item leaving the factory, for its distribution chain or companies providing services related to its products
