Manufacturer to retailer price and vat HELP! meeting tomorrow!!

Jono!

Hi, I could really use some help,

I'm having trouble understanding if our price will actually work selling to the distributor and for them to sell to the retailers.. with Vat.

So our aim is to sell at 2.50 plus vat to the wholesaler. The RRP of the product will be 5 including vat.

Can someone help me with the breakdown in between? I don't know how exactly its worked out.

& Do the wholesalers and retailers consider reclaimable vat as part of their % margin?


Im speaking with the distributer tomorrow and would really like to understand the process/breakdown not to look like an eejit!

jimmii

How much will the retailer be buying it for? Just for the example I'm going to say 3.50 and assume that this is a standard rate product.

You sell it to the wholesaler at 2.50+VAT= 3.08 on your VAT submission you have .58 that you then send to Revenue.
Wholesaler sells it to retailer 3.50+VAT = 4.31 on their VAT submission they have .81 - .58 which they then send to Revenue.
Retailer sells to end user at 4.06+VAT = 5 on their submission they have .94 - .81 which they then send to Revenue.

For that sort of breakdown its going to need to be a fairly high volume product.

When talking margins etc most people just deal in net prices not gross no point taking into account money that isn't yours.

Jono!

The price to the retailer was part of what I wanted to be able to work out. So thanks for that.

Im then still a tiny bit confused about the exact figure profit figure the wholesaler and the retailer end up with.

In this case the wholesaler would end up with 1 euro and the retailer with 56c.

The difference in the .81 -.58 and the .94-.81 being the amount returnable after deduction of vat paid?

This is correct right?

jimmii

Jono! wrote: »

The price to the retailer was part of what I wanted to be able to work out. So thanks for that.

Im then still a tiny bit confused about the exact figure profit figure the wholesaler and the retailer end up with.

In this case the wholesaler would end up with 1 euro and the retailer with 56c.

The difference in the .81 -.58 and the .94-.81 being the amount returnable after deduction of vat paid?

This is correct right?

Yeh you VAT return is the difference between your VAT received on sales and your VAT paid on purchases.

I just used those numbers for convenience that would be very thin margin for the retailer but 1 and .56 would be the profit at those price points. What type of product is this? The margin the retailer is going to expect varies hugely depending on the type of retailer. Retailers will look for anything from a 10% mark up to a 200%+ mark up.

Jono!

Thank you Jimmii, Really appreciate it i've been playing with the figures for the last hour, I think I confused myself totally in the end. Nearly closed up shop

Presuming your in retail, do you have any idea of the % margins generally expected by wholesalers and retailers?

Jono!

Apologies. I didn't see the full reply.

This is an e cigarette type product. news agents and convenience stores are the target

jimmii

Jono! wrote: »

Thank you Jimmii, Really appreciate it i've been playing with the figures for the last hour, I think I confused myself totally in the end. Nearly closed up shop

Presuming your in retail, do you have any idea of the % margins generally expected by wholesalers and retailers?

It varies massively depending on the type of retailer. A supermarket will be delighted with a food product thats getting 10%+ whereas a gift/homewares/fashion retailer is going to be looking at a 100% mark up minimum.

jimmii

Jono! wrote: »

Apologies. I didn't see the full reply.

This is an e cigarette type product. news agents and convenience stores are the target

That wouldn't be my area to be honest I think there are a few people here who have experience in the convenience market who will have a better idea. Given how competitive the market is becoming the margins are presumably dropping quite a lot as more people try to make some money before regulation presumably comes in at some point and makes it a harder market to enter.

Jono!

I understand thanks for your time Jimmii. It's much appreciated.

jimmii

Jono! wrote: »

I understand thanks for your time Jimmii. It's much appreciated.

No bother. Good luck!

Delacent

Jono! wrote: »

The price to the retailer was part of what I wanted to be able to work out. So thanks for that.

Im then still a tiny bit confused about the exact figure profit figure the wholesaler and the retailer end up with.

In this case the wholesaler would end up with 1 euro and the retailer with 56c.

The difference in the .81 -.58 and the .94-.81 being the amount returnable after deduction of vat paid?

This is correct right?

Unless this is an extremely high volume fast moving product, your pricing / margin is way out.

On a low price product a distributor will need 25%+ margin (about 40% mark-up) - they have stocking costs, distribution costs and finance costs.

Retailers will want a similar margin.

Vat really only comes into it at the end as both distributor and retailer can claim back vat.

Lets look at €5 retail - that's 4.06 before vat.

Let's say the retailer will work on a small margin of 20% (that's about what multi packs of coca cola give them)

That's a cost from distributor of 3.25

Distributor 25% equates to about €2.40.

Very very tight as I can't see the retailer working on 20% on a probable low volume (in comparison to Coca-Cola), low price seller.

A €5.95 price point may be better option or a near €2 cost from you.

Bandara

I have some retail stores that would be your perfect target market.

Why/How do you think I will buy off you / buy via your wholesaler / hear about your product ?

(I'm asking to understand your sales thought process, and advise if I can)