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    When you buy a product what % gross profit do you think the company makes?

    I'm curious what people think companies make...

    46 Comments

    All depends on product bought and where from

    Original Poster

    FreeDeal

    All depends on product bought and where from


    Fully appreciate it's a very open question but still...

    ipswich78

    Fully appreciate it's a very open question but still...


    I understand where you are coming from, but if you gave examples, it would be much better.
    e.g.
    Apple (ridiculous amount on mark up)

    Depends on the size of the company, larger operating costs need larger gross profits. 25%-35% i would say is average for a fairly small/medium company.

    FreeDeal

    All depends on product bought and where from



    Exactly. You can't answer this question without more information.

    It costs apple about £200 to make an iPhone then charges £6-700. They then have to take in to account marketing and research. Product development. Shipping etc so it probably costs about £250 per phone. However it all depends on volume. The more you make the cheaper it is to make. However. When the PS3 first came out they sold for $599 however for the first few thousand it cost them about $800 to make so they were making a loss to start with. With the PS4 it cost Sony about $380 to make and they were making $19 dollars profit on each one which now it is only a case of churning them out is probably closer to $100 per PS4. They way they make their money is through games and licensing etc.

    Go and look at the company report (assuming it is public). Look at their turnover and profit. That gives you the average margin. (well actually not that simple, but it is a start)

    Alternatively look for sector margin info (ie google it!). Supermarkets, for example work on very thin margins <10%; but watch companies like Rolex work in very very high margins!

    Edited by: "StillNoRF" 26th Jan

    Original Poster

    I'm not asking this question as a right or wrong answer approach. I was just curious as to what people think companies make.

    Pharma companies .. Now there's a mark up

    StillNoRF

    Go and look at the company report (assuming it is public). Look at their … Go and look at the company report (assuming it is public). Look at their turnover and profit. That gives you the average margin. (well actually not that simple, but it is a start)Alternatively look for sector margin info (ie google it!). Supermarkets, for example work on very thin margins <10%; but watch companies like Rolex work in very very high margins!



    That would be the operating margin, you would have to add back in overhead costs to get gross margin.

    My wife works at Boots and has been reliably informed No7 products are 90% profit, so they still make a large profit even when the 70% off sale is on. Just sheer greed in my opinion.

    blaggy59

    My wife works at Boots and has been reliably informed No7 products are … My wife works at Boots and has been reliably informed No7 products are 90% profit, so they still make a large profit even when the 70% off sale is on. Just sheer greed in my opinion.


    Correct, cosmetics are very cheap to make - marks ups are huge in this sector!

    blaggy59

    My wife works at Boots and has been reliably informed No7 products are … My wife works at Boots and has been reliably informed No7 products are 90% profit, so they still make a large profit even when the 70% off sale is on. Just sheer greed in my opinion.



    That doesnt sound reliable.

    And to answer original question, depends on the business really, but i would say 25-40% is very reasonable like someone above said in a small or medium company.

    Kikesin

    Correct, cosmetics are very cheap to make - marks ups are huge in this … Correct, cosmetics are very cheap to make - marks ups are huge in this sector!



    No7 is boots own brand, this can make their margin better but doubt that its as high as 90%, even so large retail companies have high operating costs if they are high street store.

    What about a 240v led bulb from pound land.
    I'm guessing they would be lucky to make 10 % profit on that

    A pharma product I was involved in the manufacture of ,was costed at £57000 for a batch .from goods in to packed and finished goods out ... Electric , gas , wages , everything .
    Sale price £1,800,000 now that's a mark up.
    Edited by: "plodging" 26th Jan

    It consists of electrical contacts , outer casing, capacitor and bridge rectifier, LEDs and led heatsink . Plus box.
    All for a pound

    CoeK

    No7 is boots own brand, this can make their margin better but doubt that … No7 is boots own brand, this can make their margin better but doubt that its as high as 90%, even so large retail companies have high operating costs if they are high street store.


    It can easily be as close as 90% mark up on simple products like nail varnish, lipgloss etc.
    A normal size nail varnish bottle can cost roughly 20p to manufacture (based on 50k qty approx), which they then sell for £2 +

    coffee shops - 90% + GP I believe on their coffee sales.

    between 20% and 95%

    lumsdot

    What about a 240v led bulb from pound land.I'm guessing they would be … What about a 240v led bulb from pound land.I'm guessing they would be lucky to make 10 % profit on that


    I would say 25%

    plodging

    A pharma product I was involved in the manufacture of ,was costed at … A pharma product I was involved in the manufacture of ,was costed at £57000 for a batch .from goods in to packed and finished goods out ... Electric , gas , wages , everything . Sale price £1,800,000 now that's a mark up.


    Thats a big gross margin but i always though pharma companies had huge ops costs, research, marketing etc

    300% minimum

    CoeK

    Thats a big gross margin but i always though pharma companies had huge … Thats a big gross margin but i always though pharma companies had huge ops costs, research, marketing etc


    That's ops cost inc, most big pharma send out R&D to India , .. 90% cheaper than the west. Yeah and marketing is big bucks .. But these were not OTC so not advertised like nurofen. .. Explains the £30 billion profits annually

    Edited by: "plodging" 26th Jan

    plodging

    That's ops cost inc, most big pharma send out R&D to India , .. 90% … That's ops cost inc, most big pharma send out R&D to India , .. 90% cheaper than the west. Yeah and marketing is big bucks .. But these were not OTC so not advertised like nurofen. .. Explain the £30 billion profits annually



    Don't get me wrong i think big pharmacy companies are morally bankrupt. I just understand they have large costs and in theory they have to make as much profit as they can. Though i think they should be required to be more socially responsible.

    CoeK

    Don't get me wrong i think big pharmacy companies are morally bankrupt. I … Don't get me wrong i think big pharmacy companies are morally bankrupt. I just understand they have large costs and in theory they have to make as much profit as they can. Though i think they should be required to be more socially responsible.


    Very true , but they have such power they charge virtually what they want . The only fly in the ointment is when the product loses patent and generics appear .. Prices tumble . So they make as much as possible while the patent is in place .

    George lucas on licensing princess leias likeness 100 percent

    Original Poster

    lumsdot

    George lucas on licensing princess leias likeness 100 percent


    Eh? Show your workings please...

    lumsdot

    What about a 240v led bulb from pound land.I'm guessing they would be … What about a 240v led bulb from pound land.I'm guessing they would be lucky to make 10 % profit on that



    ​cant imagine them paying over 50p per bulb landed in their main warehouse in UK.
    most probably much less.

    On the basis that gross profit is asked rather than net profit then I would say at least 30% gross profit and aim for 50%.
    .
    Namely in Sales - Cost of Goods Sold = Gross Profit (£100 - £50 = £50 therefore £50/£100 = 50% gross profit
    .
    small retail business typically have between a gross profit margin of 25 % and 35 %.

    plodging

    Very true , but they have such power they charge virtually what they want … Very true , but they have such power they charge virtually what they want . The only fly in the ointment is when the product loses patent and generics appear .. Prices tumble . So they make as much as possible while the patent is in place .



    Everything is worth what its purchaser will pay for it.
    Its not morally right, but somewhere out there budget is being signed off to pay those prices... Problem is that to hold big pharma to ransom puts lives in jeopardy.

    I tend to work on a two stage pricing policy:

    If I work for a large corporate, one of the big 4 or Pharma Co, my rates are v high, this covers all my expenses and profit requirements and the additional margin allows me to do more worthy projects where the client has a tiny budget or none.

    paulsalmon77

    Everything is worth what its purchaser will pay for it.Its not morally … Everything is worth what its purchaser will pay for it.Its not morally right, but somewhere out there budget is being signed off to pay those prices... Problem is that to hold big pharma to ransom puts lives in jeopardy.


    Indeed and they know it . But next time you wonder where a lot of the NHS budget goes consider the rake off by Pharma companies .

    I've had it said restaurants charge double the cost of the ingredients for the meals they serve
    except pizza which is obviously a lot bigger margin

    Onlybreduced

    I've had it said restaurants charge double the cost of the ingredients … I've had it said restaurants charge double the cost of the ingredients for the meals they serveexcept pizza which is obviously a lot bigger margin



    ​the food doesn't cook itself.

    FreeDeal

    I understand where you are coming from, but if you gave examples, it … I understand where you are coming from, but if you gave examples, it would be much better.e.g.Apple (ridiculous amount on mark up)


    iphone 6 16GB parts = $200 (Probably a bit less for apple with a huge volume discount), they sell for $650 at launch

    Buy Apple = you've been ripped off big time

    *Sloman*

    iphone 6 16GB parts = $200 (Probably a bit less for apple with a huge … iphone 6 16GB parts = $200 (Probably a bit less for apple with a huge volume discount), they sell for $650 at launchBuy Apple = you've been ripped off big time



    ​i think apple will be paying $50-$100 for the component parts.

    Every company i've worked for made over 100% profit on each unit. When I worked for a leading softdrinks company a 2ltr bottle cost approximately 11pence in materials although advertising doubled this cost. I drink Pepsi now as I refuse to pay such a mark-up.

    if you sold a product you researched and manufactured, how much margin would you be willing to charge?
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