Mark up on skis?

[Ilivetoski]

What do you guys think the general mark up on skis is? My collegiate team just got a deal with Radar for their equipment at cost and I was wondering what you all think the normal mark up is. I could see an argument for 30-40% on the other hand I could see an argument for 50-60%. Thoughts?

[gregy]

It a low volume industry with lots of R&D. Paying pros. Ski lakes on site or near. Considering of the overhead. Who's cost. Lots of overhead, Manufacture's cost or wholesale cost. There would have to be ton of markup to make money. I had a simillar business, retail was 300 to 400% over manufacturing cost.

[Ilivetoski]

@gregy that's exactly what I am thinking. Basic Microeconomics says that when you sell a low volume you have to have a high profit margin. When you sell a high volume, you can achieve that same number of total profit with a low profit margin per item.

[SkiJay]

Selling to a bunch of Type AAA slalom skiers must be a nightmare. That alone justifies as much margin as this obsessive compulsive market will bare.

[ral]

Usually, a deal at cost in this industry is at Distributor cost, which would be in the 30-40% range.

[Horton]

@ral 30-40%? you mean that much off?

[ral]

Manufacturing cost (i.e. direct cost of materials/components/work/energy), as well as Marginal Cost (cost or producing an additional unit) means nothing depending on the industry you are in. In software, or electronic publishing, marginal cost is almost zero.

[ral]

Yep. Out of MSRP.

[Ilivetoski]

@ral I am taking microeconomics now and the only time marginal cost is going to apply is when the cost of creating 1 more unit is greater than the benefit of producing the item. This wont apply until overstock (when they have to sell the skis at very low prices because there is one very last unit they sell at full price, everything after that has a higher marginal cost than the previous units). Anyway, I feel like these skis have to marked up more than 40%. A buddy of mine told me today (he works at a MC dealer) that they have very good margins on their wakeboards. Acutally, an average of 40%. Now, would it not make sense that the margins have to be higher on skis because they sell so many less of them? To keep these companies in business I feel like they need to have mark ups of 50-60% possibly even more than that to keep up with costs of having a production plant, owning a lake, travel expenses, the HUGE cost of R&D, molds for the skis, not to mention what it costs to get the carbon fiber, cores, metal for the fin and fin box, paint, any other materials. There is too much to just be making a few hundred dollars off of each unit is what I am thinking.

[ral]

@Ilivetoski, sorry mate, if you were in my Micro class, you would be compelled to study more. Marginal cost is the change in total cost when additional unit is produced. You are kind of talking about Marginal Analysis in your reply, which is not what I was refering to in my post. I was strictly talking about cost.

 

The cost of making extra skis for your collegiate team by Radar is very low, because as @Gregy mentioned, most of the costs in this industry are R&D, marketing and overhead., not direct production cost. You guys are most likely getting dealer cost, which is much larger, and is 60-70% of MSRP.

[skibug]

I think if you get a deal at any discount from the ski companies or reps; you should keep the savings % on the down low, give credit to the rep or company in general terms, and be happy you got it. Don't look a gift horse in the mouth....so to say...an don't compromise th position of that source...IMHO. FYI, I am not rep or a company.

[ejj]

I worked in the alpine industry for years. I imagine the cost paradigm is similar. The retail margins werenot that great on skis--30-40 depending on the model. The dealers made their real profit on the extra garbage. Softgoods, bindings, etc. The dealer cost on that stuff was 50% or better.

 

The companies offered employee purchase deals. These deals were well below dealer cost. These were typically @35% of MSRP.

 

Last thought, the ski companies biggest cost was marketing... Popping skis out of the press is pretty cheap.