Retail profit margins and MSRP

[TheGiver]

Thank you all for the replies. Good stuff and question answered.

Have you ever heard of this "I made/signed an agreement with the manufacturer that we would not sell "X" cigar for less than MSRP." "Therefore "X" should never be discounted anywhere". Is this true?

FWIW I actually have seen it the same price at multiple places.

[scottdurand]

Just for clarification, if cost is 125 and it sells for 250, that's 100% not 50%.  And 100 percent mark up is not unusual in most business models.  And honestly it's MUCH MUCH higher in many markets.  For example, do you have any idea what the kiosks selling cell phone cases in the mall's mark up is?  How about those cell phone batteries for $40-$50 dollars at the phone stores?  And don't even get me started about fountain drinks?  You don't thing the scores of Mercedes, Porsches etc etc driving around all our cities are owned by losing money do you?  On that note I will say there is not many things more dickhead than someone sitting down in a B&M shop in a cozy 1500 dollar chair and then talking about how the shop charges too much but yet they want to come and smoke there. 

[mc808]

In the example it is a 100% mark up which is the same as a 50% margin.

Some manufacturers do make retailers sign agreements to sell at a certain price.

Other manufacturers cut off retailers that deep discount their products.

Fuente does have the lowest suggested mark up in the industry.

[polarbear]

[quote author=mc808 link=topic=17642.msg84549#msg84549 date=1360822954]

Some manufacturers do make retailers sign agreements to sell at a certain price.

[/quote]

Apple, Melie and Dyson are examples of this outside of cigars

[SRQCigarman]

Padron, tatuaje, davidoff, and illusione do not allow you to sell cigars for more than a 10 percent discount off marque pricing. Many of the price sheets from these companies state what the suggested retail price will be and then depending on state add tax.

[Paulie Walnuts]

I can give you three examples as I moonlight at a B&M 3-4 days a month.

Fuente Queen B - We pay $3.79 per stick and sell them for $6.79 a stick.
Liga Privada Feral Flying Pig - We pay $8.89 per stick and sell them for $15.99 a stick.
Padron Serie 1926 80th Anniversary - We pay $21.80 per stick and sell them for $36.59 a stick.

[Carp69]

[quote author=mc808 link=topic=17642.msg84549#msg84549 date=1360822954]
In the example it is a 100% mark up which is the same as a 50% margin.

Some manufacturers do make retailers sign agreements to sell at a certain price.

Other manufacturers cut off retailers that deep discount their products.

Fuente does have the lowest suggested mark up in the industry.
[/quote]

Marvin knows his shit. If he's telling you something about cigar sales, you can pretty much consider it gospel.

[TheGipper]

But net margin is what really matters.  Cost of goods sold margin is not very informative, especially in a relatively low volume business like retail cigars.

I am sure all the other costs associated with having a cigar retail business (rent, employees, etc) bring that net margin down well below 50%.

[Ryan]

You also have to consider that your money is tied up in inventory a d it has to be moving to allow for growth.  The increasingly strict regulations coming out make it a tough business IMHO even for established families I think. We are all basically trying to be phased out of society (all smokers).  Can be a tough biz environment.  Also customers ask for things (PG cigars come to mind), and once they are ordered all of a sudden the custers interest disappears for whatever reason. 

[cmitch]

As most have said, it's 100% mark up. But, that's on paper. Got to leave room for taxes that B&M's have to pay, overhead, etc. Business would be lucky to break 20% when all is said and done.