Retail oil markup, how much?
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30% to 40%
I would expect about 30% but it could be higher.
There is an easy way to determine the markup of any retail product sold anywhere. Just take a few moments with weekly flyers and do some simple math.
Grab the flyer, look for the sale price. Write down the original price and the sale price. Do this for whatever period of time seems appropriate. You want good data, so one or three examples is not good enough. There are reasons for selling products below cost, for example. So you want a dozen or two dozen inputs before you do your math.
Don't worry, the math is easy.
So, find the lowest sale price. Throw it away. Do the same for the highest sale price.
Add up the remaining prices; regular in one column and sale in the other.
So ...
4.00 ... 3.00
3.50 ... 2.96
3.75 ... 3.19
____________
11.25 ... 9.15
Divide the lower price by the higher. That's your margin.
9.15 divided by 11.25 = 0.81
The sale prices are 19% lower than the regular price (in this example). That's the Profit Margin.
Now, there is a difference depending on which way you are going. A discount is smaller than a markup. Consumers should be aware of this ... 10% off plus another 10% on is 99%, not 100% of the original price. Similarly, a series of discounts like 10% plus 10% plus 10% is 28% off, not 30% off.
Anyway, back to discovering our retail markups on anything sold by anyone anywhere.
Divide the big number by the smaller number (the opposite of your first calculator move).
11.25 divided by 9.15 = 1.234
The markup is 23.4%
You will find, when you ask someone who should know the answer, that your calculations are very close, if not right on, the actual numbers. The reason is retailers don't want to lose money but do want to rid themselves of inventory, so they offer items at a rock bottom price on sale.
The other issue that might rear it's head is seasonal variations. Certain products are closed out to reduce inventory at certain times of the year. You can account for that by continuing your little exercise once a month; you will see the period of the year when the usual pattern breaks and the lowest prices of the year arrive.
This is, by the way, very good information to have; it will save you huge amounts of money when you know whether to buy now or wait for the lower price later in the year.
There is an easy way to determine the markup of any retail product sold anywhere. Just take a few moments with weekly flyers and do some simple math.
Grab the flyer, look for the sale price. Write down the original price and the sale price. Do this for whatever period of time seems appropriate. You want good data, so one or three examples is not good enough. There are reasons for selling products below cost, for example. So you want a dozen or two dozen inputs before you do your math.
Don't worry, the math is easy.
So, find the lowest sale price. Throw it away. Do the same for the highest sale price.
Add up the remaining prices; regular in one column and sale in the other.
So ...
4.00 ... 3.00
3.50 ... 2.96
3.75 ... 3.19
____________
11.25 ... 9.15
Divide the lower price by the higher. That's your margin.
9.15 divided by 11.25 = 0.81
The sale prices are 19% lower than the regular price (in this example). That's the Profit Margin.
Now, there is a difference depending on which way you are going. A discount is smaller than a markup. Consumers should be aware of this ... 10% off plus another 10% on is 99%, not 100% of the original price. Similarly, a series of discounts like 10% plus 10% plus 10% is 28% off, not 30% off.
Anyway, back to discovering our retail markups on anything sold by anyone anywhere.
Divide the big number by the smaller number (the opposite of your first calculator move).
11.25 divided by 9.15 = 1.234
The markup is 23.4%
You will find, when you ask someone who should know the answer, that your calculations are very close, if not right on, the actual numbers. The reason is retailers don't want to lose money but do want to rid themselves of inventory, so they offer items at a rock bottom price on sale.
The other issue that might rear it's head is seasonal variations. Certain products are closed out to reduce inventory at certain times of the year. You can account for that by continuing your little exercise once a month; you will see the period of the year when the usual pattern breaks and the lowest prices of the year arrive.
This is, by the way, very good information to have; it will save you huge amounts of money when you know whether to buy now or wait for the lower price later in the year.
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Originally Posted By: dareo
Pretty small at Wal-Mart, 20-30%.
I think wal mart actually sells more oil than the auto parts stores, so they get it at a cheaper price from the wholesaler to begin with.
Pretty small at Wal-Mart, 20-30%.
I think wal mart actually sells more oil than the auto parts stores, so they get it at a cheaper price from the wholesaler to begin with.
Wal mart sells a lot more motor oil than the auto parts stores because wal mart is usually much cheaper. Auto parts stores are total rip offs when it comes to oil unless its on sale and even then you have to compare.
An interesting little exercise that means little since we don't know what any given retailer has in any given product nor do we know what guarantees and rebates for unsold goods were offered by their suppliers and this little bit of arithmetic isn't going to tell us.
Most sales have some amount of supplier participation. The retailer is not eating the entire cost of the discount offered. This is a part of any supplier's marketing program and may also be required by retailers if a supplier wants shelf facings. It's also pretty well understood that retailers sell shelf facings to suppliers with some suppliers even coming in and stocking the shelves themselves.
Retailers like to offer sale pricing to attract store traffic and suppliers depend upon retailers as a distribution channel even if some of those retailers operate entirely online.
If a supplier has agreed to compensate a retailer for unsold goods, it will usually be cheaper for the supplier to allow the retailer to deeply discount those goods on clearance rather than to gather them up from a number of locations for resale to a lower tier retail channel.
OTOH, I believe it was Macy who said that the first markdown is the best markdown. IOW, margins can only get worse and maybe negative from there.
Most sales have some amount of supplier participation. The retailer is not eating the entire cost of the discount offered. This is a part of any supplier's marketing program and may also be required by retailers if a supplier wants shelf facings. It's also pretty well understood that retailers sell shelf facings to suppliers with some suppliers even coming in and stocking the shelves themselves.
Retailers like to offer sale pricing to attract store traffic and suppliers depend upon retailers as a distribution channel even if some of those retailers operate entirely online.
If a supplier has agreed to compensate a retailer for unsold goods, it will usually be cheaper for the supplier to allow the retailer to deeply discount those goods on clearance rather than to gather them up from a number of locations for resale to a lower tier retail channel.
OTOH, I believe it was Macy who said that the first markdown is the best markdown. IOW, margins can only get worse and maybe negative from there.
Possibly, but it's probably a loss leader for them. Gets people in the store to buy a filter, other parts, tools, makes people more likely to come back.
Not necessarily.
The suppliers may be rebating AZ for this unsold product or offering other incentives on those lines from each supplier that AZ is keeping on the shelves.
AZ may also be reaping a shelf facing bonanza from these suppliers that more than offsets any loss on clearance pricing.
Finally, the oil that AZ sold at full cost may have had enough margin built in that AZ can afford to take a loss on the oil it has on clearance.
I was at an AZ the other day scoping clearance oil and actually saw a customer pay full pop for a jug of M1. People do this every day and the average shop that needs a particular oil for a particular engine isn't going to Walmart for oil when AZ will deliver it to them.
AZ apparently does okay on motor oil despite the annual clerance. Were this not the case, they'd be offering a much smaller selection of it.
The suppliers may be rebating AZ for this unsold product or offering other incentives on those lines from each supplier that AZ is keeping on the shelves.
AZ may also be reaping a shelf facing bonanza from these suppliers that more than offsets any loss on clearance pricing.
Finally, the oil that AZ sold at full cost may have had enough margin built in that AZ can afford to take a loss on the oil it has on clearance.
I was at an AZ the other day scoping clearance oil and actually saw a customer pay full pop for a jug of M1. People do this every day and the average shop that needs a particular oil for a particular engine isn't going to Walmart for oil when AZ will deliver it to them.
AZ apparently does okay on motor oil despite the annual clerance. Were this not the case, they'd be offering a much smaller selection of it.
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