Reply by Madmark2

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Posted on Fair price for a table?

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2673 posts in 1675 days

#1 posted 03-08-2021 07:04 PM

Its not markup. Its markup in place of labor.

As a general rule the price doubles at each stage of production and distribution. Say you make widgets that have $5 in materials and 15 minutes of labor. At $15/hr minimum wage that 15 minutes is $3.75. So now your COGS (cost of goods sold) is $8.75. But you can’t sell it at that price because there is no profit to pay the taxes, rent, electricity, water, equipment, etc.

To survive you have to make a profit by selling at $17.50 to a wholesaler. The wholesaler then ships it around the country (burning lots of fuel and more labor) to retailers at $35 each. The retailer needs to pay store rent and sales staff, etc. so the price doubles again to $70 for the consumer.

Consumers scream that its gouging or a rip off to sell something that only has $5 of materials for $70 retail, but thats just how it is. Even if you eliminate the wholesaler and deal directly with the retailer (as I do with my pipes & the smoke shop) it’s still retailing for 4x your direct costs just for everyone to break even.

All of these costs have to be covered if you want to stay in business. Because if you don’t, you won’t be in business.

Now if I’m making for friends then I only charge 1x materials and write the rest off to charity.

-- The hump with the stump and the pump!

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