Net Profit Margin at the IGC

[Fluffy Scarsdale]

According to Wikipedia, Net profit = Revenue -Cost. What is the average or typical net profit margin on items (not plants) sold in the retail garden center? Is a 41% profit margin high, low or in the ball park? 

[Eric Rohloff]

41% of a $1 item or a $100 item? Then how many of each did you sell?;)

[Fluffy Scarsdale]

Perhaps I should have said typical, instead of average;)         

Eric Rohloff said:

41% of a $1 item or a $100 item? Then how many of each did you sell?;)

[Roger Bolger]

For slow movers and unique items that only we carry in the market - 60%+

For heavily price-shopped national brands and commodities with high sales volume - 40% or, reluctantly, less

For most merchandise with medium volume, 50%

For example:

Roundup grass and weed killer - ~30%

25lb bag of "generic" black oil sunflower seed -~40%

long handle tools, birdfeeders, domestic pottery - ~50%

private label and unique-in-our-market imports - ~60% or more depending on perceived value

An item with 41% margin would be acceptable only if it has at least a few of the following characteristics: All advertising handled by the manufacturer, customers have an existing need and understanding of the product, high sales volume / turn rate. 

FWIW, overhead and labor costs at most retail garden centers are growing, so there is likely to be less flexibility on margin in 2013. 

[Fluffy Scarsdale]

Thanks for that thoughtful reply,Roger.  I appreciate the info. That kind of info is hard to come by without a forum like this--even with Google:)

[Sid Raisch]

This varies a LOT and depends on a lot of factors. Apples to Apples is a key thing. IF the owners compensation and rent are at fair market value then average is 2.2% according to The Garden Center Group 2011 P&L Study. We have a Best Practice Group where 10% is expected.

To achieve Best Practice kind of profit gross margin (revenue-cost including freight) needs to be near 60% for most companies. The numbers Roger Bolger gave are pretty good. The main factor from there is the blend of products and categories at each level of margin. To get plus 50% margins the blend has to be very high on incomparable merchandise. On top of that the perceived value has to be enhanced with better than lip service to all three of product, facility and service.

Profit is a cost of doing business and should not be left to see what is left. It is the return on investment of owners equity and risk in the business. It has to be included in the price from the beginning or it is not going to be there.

Again, funny numbers with owners pay and rent have to be changed to market values.