invest in itself....keep *quality/skilled/motivated* employees....and.....
...survive on a keystone (2x) profit margin?
IMHO, I think not! So why do Maui Jim,Oakley, et.al., think that they'll have a "good" dealer body, interested in sellin'/promotin' their products, on the same margin?
My two cents...what's yours?
Barry
Barry
From my management consulting experience in retail, considering the cost of rent and advertising to prosper you need a markup of about 2.35%
This assumes rent and advertising are a total of 11% which is the norm from IRS statistics
Rent 7% of sale Very good location and natural traffic
Advertising 4% of sales media costs etc
If poor location rent 4% of sales little natural traffic
Advertising 7% of sale to generate traffic
It is a balance of traffic vs advertising adjust accordingly
Great observation! I couldn't agree more!Originally Posted by Barry Santini
I'd love to go to them and open their books and say that they have to adjust THEIR margins to accomodate us being able to adjust ours!
A lot of the sunglass companies set the prices, and then think we should thank them for it!
Don't laugh but do you mean: costs of goods times 2.35 or cost of goods +2.35? Ie: $1.00 cost = resale @ $2.35 or cost $1:00 resale@ $3.35?
No. He means
$1.00 X 0.0235 = 0.0235 Add this to your cost
$1.00 + 0.0235 = $1.02
An item that cost $100.00 sells for $235.00 on the average which means lost leader sell for a smaller markup and high profit sell for a larger markup. You need to average a markup of 235%
Barry's keystone term means an item cost $100 sells for $200. This term originated in the jewelry industry. A long time ago before licensure eyeglasses were sold by jewelers. As a kid I grew up in the jewelry industry.
The world watches this thread, boys.
You'd never know it!:hammer:
(I thought it was just me...)
Good point! (let's whisper!)
Barry
IMHO, there is "keystone", but I believe in "keystone" plus professional fee.
"Keystone" means the customer serves themselves, and there is little/no dispensing or aftercare. "Keystone" is what you pay the dude at SGH who hands the sunwear OTC.
Professional services ain't free, bro. Expescially on Rx sun...yikes!
Having said that, though, I've been doing a little analysis:
Results:
When using MJ or Oakley Rx program, if you "break down" the MSRP this way:
MSRP Rx pair - MSRP plano pair = "putative" MSRP Rx sunlens price
and analyze the separate frame and lens components, you can notice two things:
1.) Really, the patient is getting no credit for the unused plano sunwear lenses. This is somewhat of a penalty in MJ, and lesser so in, say Rayban. Is the patient getting full value for the sunframe that they are using? No, not full value. Those sunwear frames wouldn't sell "alone" at those prices without the sunlens. So, they pay a slight premium, there.
2.) The putative MSRP for Rx sunlenses is the other way: undervalued, if you compare it to what you'd normally charge for a similar quality product (polarized polycarb Image with, say, Zeiss Carat Cool Mirrors.)
Bottom line: it kind of balances out. Rx sunwear programs are not bad deals to the consumer with the MSRP. We get kind of hurt.
What really hurts is offering a MP discount on top of a somewhat discounted-already product. What hurts more is to run these Rx programs through VSP post-authorization. That really stinks.
In big cities the rents are likely much higher for very good locations. Typically the only costs you can control are:
1) Salaries (have less employees and you work harder, longer hours)
2) Lower your cost of goods
3) Raise your prices
4) Do all of the above
Not to reminisce, but what brought me to Asia in the first place was to lower my cost of goods and to import unique product that was not able to be price shopped. The first product I imported was 1.67 from Japan complete with Japanese envelopes. We made a point of letting our customers know what we imported and what no other optical had in our region (or likely in the US).
Later we added Japanese brand name eyewear, Hong Kong eyewear and Singapore eyewear. The product was great looking, well made and improved our bottom line. Before we started to import we were loaded with Safilo, Marchon, and a number of boutique lines. Sales were great but not profitable enough. You were pretty much limited to charge what your nearest competition was charging for the same product.
Doc
Good analysis. 200% is the retail side (i.e. pay the rent). There are professional fees also (i.e. pay the salaries).
I don't use MJ or Oakley for that (and a couple of other) reasons. Wiley X is different. They "suggest" a similiar keystone, but leave you to charge whatever you can. More importantly, I can order a frame w/o lenses at a significant discount. So I price them as a "walk-out" price. The money I save by buying a frame only, goes toward the edging of the lenses. The patient doesn't pay for the plano lenses, if they bought Rx lenses. All the frames are safety. Safety wrap specs that don't need sideshields. Now that gets them to upgrade from what their employer will cover. Wal-Mart and SHG don't have that (they may next year, though). BTW, I buy lenses direct from my wholesale lab; I don't use their network labs.
I know that Wiley X doesn't fill the same niche as MJ and Oakley, but I like doing business with them. And I make a decent profit.
Ironically, I had a conversation today concerning margins. Our local WM fabric department is closing. A lady that used to work there said, "how can they not make money, they mark up the fabric over 300%?" Sometimes even 300% doesn't pay the rent and salaries. No rumors yet that WM is opening a 5,000 sf optical boutique complete with Chanel and D&G in the former fabric department.
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