Margin on promotional products?

Posted on 08/10/2007 by Henk KROON Categorized: Interesting Market information

margin

Posted by Horacio Placenti Reclamstation SL Spain

Selling prices from Chinese factories sometimes are seen increased several times before they arrive at a shop or an end client.

50% from factory to importer / wholesaler, + 50% to distributor, + 50% to end client.

WHEN AND WHY DO DISTRIBUTORS APPLY 50% MARGIN ?
When : Prices are usually doubled by distributors for orders under 1000 euros, for larger orders margins logically decrease to 25 %.
Why: We can give you some reasons which clearly explain why:

  1. 1) A distributor has to make the effort to seduce the end user, visit the client, send samples, fight with art etc..
  2. 2) A distributor usually pays a commission to the salesman who visits the client..
  3. 3) A distributor takes the end risk if clients refuse the goods for any reason (logical or not).
  4. 4) A distributor has to finance the order, as usually he must prepay the goods and final clients use to pay on long terms.li>
  5. 5) A distributor spends money and time traveling to trade fairs to find the best suppliers.

WHEN AND WHY DO IMPORTERS/WHOLESALERS APPLY 50% MARGIN ?
When: it clearly shows in all catalogs, with price scales according to quantities, minimum quantity 50% margin, from there decrease to 25%.
Why: We can give you some reasons which clearly explain why:

  1. 1) they invest for visiting factories and fairs.
  2. 2) they invest in expensive catalog printing.
  3. 3) they invest showing their articles at local fairs.
  4. 4) they invest making large stocks for the whole campaign.

Example: 10 000 ball pens medium quality bought in Spain by an end company and 1 color print, paid 0.22 euros/piece + VAT.

  • Unit price at factory for the importer/wholesaler: 0.06 Euro (1.000.000 pieces) **
  • freight, taxes and duties 0.01
  • importer margin 0.06
  • imprint cost 0.03
  • distributor margin 0.06

** Note: this importer should keep 990.000 pieces in stock for other distributors.

Note from the writer:

The tendency in other countries, just seen also in Spain, is that some big distributors avoid the importers and buy directly in China the exact production asked by an end client. The problem is that this order should be shipped by air, so the cost is increased highly, and the production time is long, as Chinese factories usually do not have their own stocks. Normally (except for large orders), it is convenient for the distributors to buy locally from the importers.

Posted by Horacio Placenti

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