"You're not making any money with those prices" is the phrase we hear most often, and it's doubly wrong: it miscalculates the margin and it miscalculates the time. An item under €10 has a higher margin percentage than almost everything else in the store, and above all turnHere's the full count, with the actual numbers from our catalog.
Oggi a catalogo ci sono 424 articoli ordinabili. Il prezzo all'ingrosso mediano è di 1,49 €, e 85 articoli su 100 costano meno di 3 € all'ingrosso. Rivenduti al prezzo consigliato, 87 su 100 restano sotto i 10 € al pubblico: la fascia in cui il cliente compra senza pensarci. (numeri contati sul catalogo, non scritti a mano: cambiano da soli quando cambia l'assortimento)
You pay 2 euros for an item. You display it at 5.90 including VAT, which net of VAT makes 4.84. The margin is 2.84 euros per item, that is, 59% of the net selling priceWith a full three-times markup (exposed at 7.20), it rises to 67%. These are percentages that are almost never seen above 20 euros: the more the item costs, the more the markup compresses, because the customer knows its value.
The margin per item doesn't pay the rent: it's the margin per meter of shelf space over the year. Twenty three-euro items that come out in a week yield more than one sixty-euro item that comes out in three months, given the same amount of space. The right question isn't "How much do I make on this?" but "How many times a year does this shelf get emptied and refilled?" The range under ten euros is the most volatile, which is why it supports small shops, where every meter has to work.
With items under €3 wholesale, a €150 order gets you dozens of items to try. The same price on €20 products gets you seven items and no information. Buying small and frequently means that mistakes cost as much as testing: if an item doesn't sell, you discount it and close it down, without being left behind. It's how we've learned to manage our stores, after being left behind enough times.
Three points, always the same. First: the calculation based on the price including VAT—the true profit is the price divided by 1.22. Second: invisible costs—shipping, labeling and repair time, breakages, end-of-season sales—these aren't insignificant costs on low-priced products. Third: the wrong price range—an item at 5.40 sells less than the same one at 4.90, and at that point the margin is eaten up by the end-of-season discount. Choose the price range first, then check that the markup is appropriate.
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It depends on your traffic, but in a local store, the low-end segment almost always wins: more receipts, higher turnover, less idle capital. Expensive items make sense as window displays, few and far between.
It's simple: with a markup three times the price you pay, the margin on the net selling price (including VAT) is 67%. What varies are the management costs, which depend on your store, not the product.
Each listing in the dedicated catalog already contains the recommended retail price. This helps you see the margin BEFORE ordering, not after the shelf is full.
