Retail Markup

[Triskeliongirl]

Does anyone know what the typical retail mark up is? Now, I am not complaining, I know these folks have to run a business, warehouse and ship goods, pay employees, etc. But that Terry 50% sale got me thinking, why did they do it??? It seems like a big price cut to take on stuff people would have paid full price for. I need 24" front tires, I don't have a lot of choice in supplier and they never go on sale, so why 50% off on popular and even back ordered stock???? Didn't they just lose my future full price sale? I wouldn't have bought the clothes I bought, but I might have bought others when they went on sale, which would have been the ones that they couldn't get rid of, not their popular ones. Was it to make their sales revenues looks good for the month to some investor types? Was it to get us all into a shopping frenzy (but if so, if just made me stop shopping since I am all set for a while)? Was it to get us used to ordering from terry again (I admit I order from TE unless its an item that terry carries and TE doesn't, service is so much better at TE, and of course I want to support Susan when I can to thank her for creating this community.......but dang 50% off, hard to not do some damage). Just curious your thoughts, especially if any of you are in retail.

[Blueberry]

I have a family member who sells retail, and the general rule is to double wholesale prices. HOWEVER, since Terry is the manufacturer, they won't actually have to pay wholesale (except for the items like Gore that are made by others). So, their actual cost would be much less than 1/2. Probably 20-30% of retail on most items.

[Triskeliongirl]

SO, then what was the point of putting all the Gore stuff on sale? They probably lost money on it with free shipping (and I hope they manage to group the multiple orders for shipping that their webiste problems generated).

What I am really looking for is the marketing strategy behind the sale, and wheter you guys think it helped or hurt them? Maybe it would help in the long term if it gets people to try their house brand, and if they like it become loyal customers in future, esepcially for chamois, etc.?

[snapdragen]

Helps them clear out last year's stock so they can bring in current stuff. I would think the longer they have to store old stock, the more costly it is to them. So, cut the price and clear it out!

[Triskeliongirl]

Of course I get that part, but then why not restrict the sale to last seasons/years items, like the regular closeout and sale section of TE. They put on sale non-seasonal items like tires, and even permitted you to order backordered new stock like the new team terry LS jerseys that aren't even due in until Jan. But, maybe getting their computer to decide correctly what items are and are not on sale would have been too hard.... I know its not really an important question, it just made me curious though.

[Kalidurga]

I've worked in retail for longer than I care to admit Where I currently work, our markup ranges from double to triple depending on the cost of the goods to us and "perceived value" on the part of the consumer. (And, shhhhhh, don't tell my boss I told you that!! ) If a manufacturer is able to give us a low cost on something that is well-made and looks expensive, then we can set the retail higher. I have no idea whether to think cycling apparel vendors would have similar markup guidelines or not, but it's possible that they might use a sliding scale like that as well.

Once a year, we have a sale in which we mark goods down as far as 75%, which means we make a negative gross margin on those items. As snapdragen mentioned, though, it's a great way to clear out aged merchandise and free up our open-to-buy to get fresh, new goods into the store. If there were a way to check the season of the Terry goods put on sale, that might give you your answer.

[RoadRaven]

Yeah, like Snap says... to recover costs really...

Sometimes they still make a little money but other times, particularly with less popular stuff they hope like heck they can recover the costs... remember, as a rule these places have to front up with the money before we consumers ever come on the scene... its a huge gamble for retailers and wholesalers.

And remember that out of that mark up comes all their costs - wages/salary (which is often the biggest cost), rent and other shop costs like electricity and hopefully at the end of it they make a profit for themselves...

[Zen]

There's also a chance that someone buying from the sale will also buy something that's not on sale.

[RoadRaven]

There's also a chance that someone buying from the sale will also buy something that's not on sale.

*points finger at self*
GUILTY

[Velobambina]

Maybe they needed a quick inflow of cash? I find it interesting, despite the fact that the email Terry sent to limited customers apparently encouraged folks to "share the news," that they did not send a mass email to ALL their customers. If they wanted to reward their preferred customers, seems that it would have been better to give each of those folks a special coupon code or something that would work only w/the customer's name. Seems like their available stuff has really been picked over---all the good things sold out. Not sure if inventory clearing to make way for new stuff was the real reason, since we are in the midst of the holiday season and the next "new" stuff would seem to be spring gear? Maybe it was an anticipation of a slow holiday shopping season, since that's forecasted?

If there's something I really want, I am willing to pay full price, too. Unfortunately, I've waited for sales in the past, only to discover that my size has been sold out either before the item went on sale or before I could get my order in at sale price.

I have to admit to being disappointed because I intended to put the snow leopard print cashmore top on my list for Santa. It's now sold out in my size. So is the Exte Ondo jersey I've been eyeing, but I have a couple places where Santa can still get it at full price.

[Grog]

I agree with all that's been said, and would add that it's also a way to get people shopping early for Christmas gifts. In smaller family-sized businesses, the pre-Christmas time can be HELL, and a tiny glitch at the last minute (a sick employee that doesn't come to work for a few days) can turn into a big nightmare. Perhaps they're trying to get people to buy NOW, even if at less of a profit for them, than later...

[snapdragen]

Retail markups can be pretty intense. When I was making and selling jewelry, I'd at least quadruple the cost of whatever item I was selling.

[Triskeliongirl]

But spadragon, were you factoring the cost of your labor into that?

[Running Mommy]

Ok, as a soon to be new bike shop owner, here is the deal..
On clothes it's usually around what they call "keystone" which would mean if it was 10.00 at cost the retail would be 20.00.
I've never heard of anything in this industry that gets higher than keystone.
Like someone said, if it was their own brand and they were just paying for cost of manufacturer, they would be making money even at 50% less.
As for the Gore and other brands, there are two possibilities. First they may have just been trying to clear out stock for the new stuff, as it's coming soon.
Second, they may also have scored some manufacturer close outs. Retailers can pick up some extra revenue if they get a sweet deal on close outs from the manufacturer. The manu is trying to get rid of it, so they basically unload it for cheap, and then the retailer brings it in, makes it LOOK like it's a markdown, and still makes some nice $$. BUT as a retailer you have to becareful with that. Sometimes closeouts bomb. There is a reason why they didn't sell in the first place ya know.
Now as for mark ups on bikes, they are MUCH less! Usually between 36-43%. And when you consider that most bike shops need to maintain about a 42% markup overall just to keep the lights on, well they aren't making a ton of money on bikes. So rest assured, most lbs owners aren't living the high life over that bike you just bought. In fact the place they make the money is in clothing, parts, and accessories. But even then most lbs' that I know try to stay competitve with the online market- which is very hard.

[snapdragen]

But spadragon, were you factoring the cost of your labor into that?

That's where I ran into trouble, I always undervalued myself!