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Average markup on telescopes

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8 replies to this topic

#1 Steve C.

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Posted 16 January 2020 - 05:52 PM

I'm curious about the average markup on telescopes that resellers add. Back a couple of months ago, when Amazon had a deal on NexStar 8SE for $799, someone on Astronomics remarked that the price Amazon had it was below their cost. 

 

I think I read somewhere that 30% is the average reseller markup for a low margin reseller - i.e. things like electronics.  It amazes me that they can stay in business with the costs of labor and everything else.  I suppose they have to make it by higher markups on other items, and the ever popular service contracts.

 

While we're on the subject, when Celestron has a deal like they do a few times a year, do they then rebate to the reseller for stock on hand that was purchased earlier?

 

Just curious about it - before i retired I worked on a lot of financial software. It's in my blood. :)

 



#2 sunnyday

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Posted 16 January 2020 - 06:13 PM

I have a friend who has an astronomy store, and he tells me that it varies between 10 and 30 percent,
sometimes more if the supplier makes a sale on these products.
but it's rather rare he tells me
the question I ask myself, how do he survive. with fixed costs, telephone, rent, wages, etc ...


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#3 StarWolf57

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Posted 17 January 2020 - 11:43 AM

I have a friend who has an astronomy store, and he tells me that it varies between 10 and 30 percent,
sometimes more if the supplier makes a sale on these products.
but it's rather rare he tells me
the question I ask myself, how do he survive. with fixed costs, telephone, rent, wages, etc ...

It would be very tough for a small operator to make much (if any) money at those margins, especially when they don't have the volume discounts of merchandise and shipping that the big guys get like BH Photo and Adorama.

 

I've often toyed with the idea of opening a small on-line store when I retire. It would be mostly for fun and I wouldn't expect to make a lot of money, but if it was enough to pay my way to visit various star parties around the country, it would be worth it. Problem is, making a profit at all is somewhat dubious. It would simply be a lot of work with little, if any return.


Edited by StarWolf57, 17 January 2020 - 11:44 AM.


#4 junomike

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Posted 17 January 2020 - 07:36 PM

IME on "most" goods (whether Astro-related or not) the Vendor makes more on the accessories than the main Item.


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#5 Keith Rivich

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Posted 17 January 2020 - 08:28 PM

My business uses "loss-leader" strategy quite often. As others have stated its the accessories that really make the money. Along with cultivating brand loyalty. 


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#6 Geo.

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Posted 20 January 2020 - 10:13 AM

IME on "most" goods (whether Astro-related or not) the Vendor makes more on the accessories than the main Item.

Yes, astro accessories are in the 30% range. Systems are 5-10%. Most Online sellers are drop shippers. Make the sale and have the manufacturer/importer ship it. 

 

Friend I worked for was a Tier 1 Meade seller. He dropped his astro lines. Just wasn't worth the floor space in his hobby shop. RC cars had a 30% margin and parts were 50%. He had a full time guy just fixing them. Even built a scale dirt and road racing tracks in the shop so the customers could have more smash ups.



#7 Starman1

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Posted 20 January 2020 - 07:08 PM

Markup:  an item costing $75 and selling for $100 has a 33% markup (the $25 added is 33% of the cost to the dealer)

Profit margin:  the same item has $25 of its $100 selling price as profit = 25% profit margin (25/100).

 

The average brick and mortar retail store has an overhead of 30% of sales, i.e. needs at least a 30% profit margin.  The item above would be a "loss leader" and make the dealer no money at all.

 

Telescopes usually don't have as large a margin as the example above.  In fact, most of the time it's about half of that.

But, dealers may earn a rebate at the end of the year, which might pull the effective margin up to just below the break even.

An astronomy dealer who just sold scopes would go out of business, which is why many if not most of them sell a lot of accessories (a tad higher margin)

or cameras, or posters, or something else to make an overall margin above the break-even point.  And why most business is done on-line.

A store retailer may average $100 per square foot on display.  A warehouse may have upwards of $1000 per square foot on the shelves.

Sales per square foot need to be higher for the retailer to stay in business.  Of course, a warehouse operation has different expenses, and often spends more on advertising.

 

Most of the astronomy business owners I know and have met live very frugally.  Even Al Nagler drives a Prius.grin.gif

 

When I was in the bicycle business, bicycles averaged 30-38% margins and accessories 40-50% margins and dealers complained all the time that they made no money.

They would have laughed at the astronomy market.

I think we're all in it for the love of the hobby.  If we wanted to make real money, we'd drive delivery trucks.


Edited by Starman1, 20 January 2020 - 07:09 PM.

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#8 SonnyE

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Posted 20 January 2020 - 08:13 PM

Sheesh, when I was in Business in the 1980's, my supplier told me the difference between Wholesale and Retail was just double the wholesale price.

Part is $25, charge $50.

 

If I want something, I will buy it. I don't care what the seller is asking, I've got the Internet for reference. And I usually shop for the best shipping price, like FREE shipping.

They gotta eat, too.



#9 SeattleScott

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Posted 20 January 2020 - 08:21 PM

I suspect half of Cloudbreak Optics sales are online to Californians who would rather pay shipping than sales tax.


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