Dealer in our Team contacts us about a question on frieght only to answer the question himself.
Local new installer/retailer of AMSOIL in Kansas had some questions on the AMSOIL freight charges.
I wanted to ask a question. I was so busy yesterday I did not realize that these products would require freight charges. If I was to regularly order these products for stock, how would you suggest getting around that? Me driving to Wichita on a regular basis is not viable, so the only thing I can think of is to incorporate that into the cost.
If I consider what I spent on this invoice, I counted 40 items. If I go by the book, unless becoming a dealer/distributor there is a different price guide, I would take the $32.32 and divide it among-st the 40 items and I come up with an .81 cent markup above the suggested retail to cover that. With the very expensive products, doing this same calculation, or buying less, the shipping does not really change due to weight. so buying less product would be a substantial price increase for the customer.
After some discussion on the phone with myself and said dealer we came up with a gameplan to explain how this retailer can still profit with AMSOIL and include the shipping charges with the pricing. AMSOIL lists the freight charges separately on their invoices because all products are shipped by weight according to a freight schedule. Order more products and your costs per quart goes down.
Here is the dealers reply:
So good to hear from you & I completely understand where you are coming from. I’ll do my best to address each point:
AMSOIL Profit Margins & General Rule of Thumb
The suggested retail price is the published price in AMSOIL’s Retail Catalog. Anyone ordering from that will be paying retail + Shipping + Tax. For example, Robert orders 6qts of Signature Series and an Ea filter and he’ll pay 63.30 for the oil, 14.95 for the filter, 9.85 shipping & 7.53 tax – total = 95.63.
- Dealer/Retail/Commercial Account pricing is the same – Wholesale Price List
Our cost on that order would be – 48.90 for the oil, 11.35 for the filter, 5.15 tax (shipping is going to vary depending on what else you order. (In the packet I left you, and attached to this email, is the breakdown on freight) That totals 65.40. Add 9.85 for shipping to that (if it was a single ticket order) and it comes to 75.25. The profit margin on that is $20.38.
The greater the order weight, the lower the shipping charge. Shipping can be as low as .22 per pound or FREE if the invoice is over $11,000. So if that order was placed with additional items, my shipping cost is lower & the profit margin is even higher.
Retail prices are 25%-30% over wholesale. If shipping is 10% of the order (can be less of course), there is still 10%-15% profit margin available. Rather than adjust your pricing per invoice, I’d recommend dealing with a flat rate Percent above wholesale as much as 30% or more. If you did that flat rate, the math is easy and you still beat the published retail price because Robert (ordering via the retail catalog) is always going to pay more for shipping – he’s ordering for one vehicle.
ABOUT YOUR AMSOIL INVOICE
There are 42 items total. Suggested retail total is $387.15 + Tax $31.55 = $418.70 (no shipping charges included). Subtract your cost $358.07, and your profit per this invoice is $60.63 or $1.44 per item. That is based on Suggested Retail (20-25% over wholesale and varies by product) + tax only.
You are free to charge what you want, so the above scenario demonstrates profit and would be true each order. If you wanted to increase your profit margin:
1) Consolidate your orders as much as possible – the heavier the load, the lower the shipping
2) Calculate cost to customer a flat rate anywhere between 25-30% mark up on wholesale. The market does and will bear this as customers understand the history and quality of AMSOIL.
This dealer did an excellent job explaining shipping and profits for retail sales of AMSOIL products.
Myself, I use the KISS method. By understand the simple way to price your AMSOIL products you can quickly mark up your products for retail sale.
The Michael Sparks method for Retail Mark-up
What I recommend for marking up AMSOIL products for retail sale is to take your cost based on one case shipping. Lets say the case of oil is $60 and the shipping on that one case cost $11.75 shipped.
I take those two and add them together which would be $71.75 and multiply it by 1.30. This would give you a retail mark-up of $21.53 a case or $1.79 a quart. So a case of oil that costs $60 you would earn a minimum up 30%. You can adjust your percentage to whatever you want. We feel that 30% is a fair mark-up.
Now when you order multiple cases of oil you are reducing your cost per case. So you are increasing your profit margin. Order 10 cases of oil and your profits can go as high as 45%.
As this dealer stated, there are no minimum required prices for AMSOIL products. While our recommendation of 30% is fair, you will need to determine for your self what the “going rate” should be. We feel now more than ever, AMSOIL is an excellent value for the money when you consider the cost to performance on the products.
You can also use the “Retail Account Ordering Sheet” for more information on shipping charges
Michael Sparks, AMSOIL Regency Silver Direct Jobber