Markup on goods in the online store
The term "sales margin" is used not only in the field of Internet business, but also in any other areas directly or indirectly related to trade. As a rule, a markup is the amount that is added to the price of a product before it is put up for sale. What is the reason for this action? Suppose you are in the business of selling certain products that some other firm produces. Before you put a product on sale, you need to buy it from this company. And if you sell products at their original (purchase) price, then your profit will be equal to zero (or even go to the “minus”).
In the case of an online store, the situation is similar. If you sell the products at the purchase price, then you will not be able to cover your overhead costs (pay for the domain with hosting, labor of workers, your own labor, etc. ). There is a term "minimum trade margin". As a rule, this is the amount that must be added to the cost of the products in order to reach self-sufficiency. In other words, the minimum margin will only allow you not to go into the "minus", to stay afloat. To make a profit, it is necessary that the size of the real markup exceed the size of the minimum markup.
A logical question arises - how to calculate the minimum trading margin of an online store? When calculating, many different factors must be taken into account. Below we list the most important of them.
- Store setup costs. This includes a verst of the layout, the development of unique software modules, the preparation of the basic part of the content, and primary search engine optimization. As you understand, this factor is the most significant (after all, it is the creation of the store that takes most of the money).
- Store support costs. It is not enough to create an online store, you need to constantly maintain it in working condition (repair software modules, modify functionality), monitor the relevance of the information posted here, periodically update it and do much more.
- Personnel costs. Very rarely, an online store rests only on the shoulders of its creator. In most cases, you need to attract additional workers, for example, loaders, consultants, content managers, copywriters, etc. And the larger the store, the more employees are required to ensure its smooth operation.
- Target audience size. In most cases, the target audience is determined by the region and theme (although the influence of the region for an online store is not so great). The more people who can be interested in your store and buy something in it, the lower the margin you need to make to get the same profit.
- Delivery of goods. This expense item is taken into account only when the delivery is free for the buyer (that is, you pay for it by hiring couriers, using postal services, etc. ). The delivery time of the products also matters (the faster, the more expensive).
- The number of rejections and returns. Not always the buyer accepts the products and pays for it. In some cases, a person tries to return the product, for example, after discovering flaws, due to a discrepancy between the declared characteristics and real characteristics, etc. The more returns, the more money will be wasted.
- Taxes. The total amount of taxes levied on the entrepreneur, for obvious reasons, also affects the value of the trade margin.
A highly simplified scheme for calculating the minimum trade margin usually looks like this - all items of expenditure for an online store are added up and divided by the number of products available. Next, the purchase price of the products is deducted from the resulting value. However, it should be borne in mind that items of expenditure can be one-time and regular. For example, you pay only once for creating a website, but for a domain, hosting, content, search engine optimization - at least several times.