True costs?...a specific case, but a general curiosity about pricing
September 17, 2015 4:23 AM   Subscribe

What do things really cost before retail profits are added and has anyplace taken this question on in a comprehensive way?

I'm currently in the market for a number of typical consumer goods. I have enough of a background in economics to know that the pricing for these items will vary greatly both by the item itself, the brand and its place in the spectrum of (perceived) quality and the vendor and what his inventorying is like.

However, given THE INTERNET, I would think by now there would be a more central place to get a sense of what the wholesale price/cost is for some of these goods. Anyone?

My current quest is mattresses. It's clear that the market is intentionally opaque and I have first hand evidence that negotiating even to approximately 50% of list is possible. But how to do this with live information? Eg, where can I go to find out wholesale costs for Serta Pillowtop X?...etc
posted by Reasonably Everything Happens to Work & Money (8 answers total) 1 user marked this as a favorite
 
Are you assuming that the wholesale price of a given product is the same for all vendors? Or are you looking for a way to know what ABC Furniture, Inc. pays for a Serta Pillowtop X?
posted by jon1270 at 4:35 AM on September 17, 2015


The answer to your question will vary widely from product to product. For many the answer is not simple.

For example, car manufacturers give auto dealerships monthly sales targets, and give them large bonuses if they make or exceed those sales numbers. The effective wholesale price of the care will vary widely depending on whether the dealership receives this bonus. At the end of the month, a dealership may even sell a car "at a loss" (for less money than they paid for that specific car) in order to meet their sales target for the month. From one perspective they are losing money on that individual car sale, but they are effectively making many times the sales price by receiving the bonus.

The car manufacturers do this on purpose to motivate the dealerships, and it has the side benefit of making the pricing more opaque for consumers.

In grocery stores the effective wholesale price can also vary for a number of reasons: volume discounts, delivery charges, sale prices, price schedules negotiated with certain retailers, and payments by manufacturers for prominent shelf placement.

Online shopping increases transparency by offering consumers more choices: by looking at a large number of retailers, you can get a sense of how much you are paying for the product itself and how much you are paying for related things like good customer service and a good return policy. But I'm not familiar with any web site that claims to index the wholesale cost of a large number of consumer items; it would be hard to do that, because the wholesale cost isn't a single number.
posted by alms at 6:10 AM on September 17, 2015 [1 favorite]


For information specifically about the mattress industry, manufacturing, sales, and advice for consumers, you could start at The Mattress Underground. I don't think it will give you specific wholesale prices, but it will give you information on the sales channel and how pricing works in general.
posted by alms at 6:12 AM on September 17, 2015


You can check out Old Bed Guy as well. He has a lot of interesting information. He doesn't answer specific questions anymore but he's put everything he knows on the website.
posted by TWinbrook8 at 6:47 AM on September 17, 2015


it's a very rough proxy for actual unit cost, but you could look at the gross margin of public mattress companies.

Tempur Pedic (TPX), which sells high-end mattresses, acquired value-oriented Seally a couple years ago. TPX breaks out its legacy Tempur Pedic and Sealy as segments now. Gross margin for the higher-end Tempur was 42% last year, which is down from nearly 47% three years ago. Sealy did 30% last year and almost 32% last year.

From TPX's 10-K, gross margin reflects: the cost of raw materials; operational efficiency; product, channel and geographic mix; volume incentives offered to certain retail accounts; and costs associated with new product introductions.

Notably, that excludes retail sales commissions. That would be in the sales & marketing line, which includes: advertising and media production associated with the promotion of our brands, other marketing materials such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials, and sales force compensation.

If you want to dig further into the supply chain, take a look at LEG (leading maker of bedsprings) and CFI (leading maker of upholstery fabric for mattresses).
posted by mullacc at 6:49 AM on September 17, 2015 [1 favorite]


You are asking a question that is perhaps more complicated than you realize. You seem to be equating markup (the difference between cost of goods sold and sales) with profit. Retail businesses that require a large area to hold their product and who have a slow turnover (a measure of how quickly they sell goods) require higher markup because their other costs are very high relative to their cost of goods. Furnature stores are probably the stores with the highest markups in the retail sector. On the opposite end of the spectrum are stores with a very high sales velocity who sell items that are relatively small. They will have the lowest markup in retail. The classic example is the grocery business, who have miniscule markup. If you wanted to analyze a particular industry, the easiest way for an outsider would be to find a publicly traded company in that market segment and to look at their financials. I think you will find more manufacturers than retailers in certain business sectors, but in home furnishings I think Ethan Allen is public as well as Haverty, so their detailed financials are readily available.

I can tell you that in the retail world mattress stores are thought of in the way that regular people think of "used car sales." I don't actually know much about the business, but I've always heard people talk about them like they invented scamming.
posted by Lame_username at 7:21 AM on September 17, 2015 [4 favorites]


tagging onto what Lame_username said -- furniture in general, mattresses being kinda/sorta in that industry, and cars share that in common - it's a low-volume business relative to a Wal-Mart, markups are pretty high, and there's a high enough ticket price that it's negotiation-oriented.

My uncle and my dad were in furniture and bedding manufacturing about 40 years ago, and I just asked my dad on your behalf -- industry standard was in fact about 50% gross profit, i.e. if they're listing the set for $800, they probably paid about $400 plus freight for it.

Which makes people feel like this is a scam, but if your alternative is to take a road trip to a bedding factory (many will sell direct to the public), it's not necessarily all that bad.

The key to negotiation on the price is being willing to call, email, and/or drive all over the place looking for the company that's willing to go the lowest. Unfortunately, this may also be the company that wants to deliver it at 9 pm in the evening, or requires that you pick it up and take it back home with you, which may or may not be easy depending on your vehicle. Along those lines, be sure to ask for the price quote to include the delivery fee.
posted by randomkeystrike at 7:33 AM on September 17, 2015 [2 favorites]


Costco pricing is helpful. On average, Costco makes no money from its merchandise sales -- deriving all profits from membership fees. A diverse shopping basket should just about cost the sum of Costco's costs (wholesale merchandise and operations).
posted by MattD at 8:25 AM on September 17, 2015


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