PC retailers profit margins

  alpeshxp 13:32 24 Jun 2007

Just a general question that someone with inside information or knowledge may be able to assist with

With most high st pc retailers such as PCWorld, Currys, Dixons, Comet, Argos and Sony Centre anyone know what their average mark up is for pcs and laptops?

For example what is the ave profit margin on a laptop or pc unit retailing at £500 and £1000?

Any help is appreciated

  Kate B 15:14 24 Jun 2007

Margins on built PCs are I think very thin: the successful box-vendors do well on volumes. Dunno about boxed software, but the margins will be quite a bit bigger because the production costs of software once the R&D costs are covered are low.

  spuds 17:02 24 Jun 2007

The problem nowadays with big companies is that mark-ups are not straight forward like they were previously. Some companies have special contractual arrangements that work on a sales or return basis, others have a built-in manufacturers profit margins.

A number of companies like Argos use to offer 'price-match', but you will find most have stopped doing this, because they could not compete against each other, especially on loss leader product. The same applies to most major supermarkets.

Perhaps looking at an example computer wise. Check Ebuyer's figures (from their website) for their bulk buying offers.

  The Regster 18:14 24 Jun 2007

Margin on an average laptop is 10% gross. So from the £500, £450 is the cost of the machine from the manufacturer.

That leaves £50 to get it to the shop (although this may be included if the retailer haggles hard), open the shop, pay the bills, pay the staff and keep the Chief Exec in golf shoes.

By the time it gets to net margin (i.e. the real 'profit'), it is likely to be less than a tenner i.e. 2%.

If you look at some of the special offers from the big brands, they can deliver almost nothing to the retailer. Instead they have to sell other stuff to make the money - laptop bag, mouse, anti-virus and so on.

For all the hassle they get, it seems like pretty hard work. Bear in mind that the 10% figure remains fixed, so as prices drop, so does the cash from each machine (a few years ago the net contribution from an average laptop at £1,500 would have been £150, so retailers have seen a 66% drop in income per machine).

Added to which, price competition is even higher, so that '10%' figure is under downwards pressure, hence the decline in the number of vendors.

There may be some other upsides for the retailers, for example marketing contributions where cash contributions are made to cover printing retailer's brochures and so on, volume bonuses (£ for selling a target number of units), but these are no longer routine or massively generous.

Another cost is obsolescence, so if the machine isn't sold before it goes out of fashion, it will cost the retailer as they will have to reduce it to get rid. The reduction is likely to be higher than the gross margin, so obsolete stock will lose them cash. With the short-shelf life of PC specs, this is a huge cost if managed badly.

All in all, pc retailing (and manufacturing) is a tough environment. There are far easier ways to make a living.

BTW, if you're shopping online, beware the delivery charge, because that could provide the retailer more profit than the whole machine.

  The Regster 18:31 24 Jun 2007

Have just seen the thread on Evesham click here

That 10% figure may now be too generous...

I sincerely hope that they can adapt however. They have rolled with the punches far, far better than most and they have built up a lot of support in the forums through seemingly good product and good service.

  Gaz W 18:55 29 Jul 2007

A month late, but I work for PC World and the average margin on most PCs is around 6%. On some sale items around bank holidays/christmas it's more like 1 or 2%, or a negative margin.

All money is made on the extras sold with each PC and this is more important to PC World than selling the PC itself.

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