question on profit margins

Do you think a 57percent profit margin for a Dive shop is reasonable???

"Profit-margin" or "markup"? Two VERY different things. If you're talking about the difference between wholesale and retail prices, that is "markup" and NOT a profit-margin. A 57% markup for a retail store might result in a 5% profit or less. PM MikeFerrara about dive shop markups - he just closed his store.

FACT: The average dive shop in the USA today needs to make a 57% profit margin. Any business of diving seminar will tell you this.


This was posted on another thread by a shop owner and from what else I've heard it is probably true. I had a shop for over 5 years but back in the late 60's. Then the discounts from list were about 48 percent but you also discounted about 20-25percent. I personally believe the present profit margin "as above" is out of line and a product of poor industry management. But I really just wanted to know what others think.
Yes and if Mike is around I would like to know his thoughts also.

Hey buddy, things have changed ALOT since the 60's...

Maybe you dropped one too many tabs???

The "markup" of 57% is to help pay for rent, lights, heat, salary, healthcare for employees, replacing inventory, and lots of other things....

When you get down to profit, its not 57%....

Its more like 2 or 3 %....

SOmetimes, its negative...

This is a new industry, changed many times over since New England DIvers was around... Maybe you should leave the dive shops to the younger generation, we seem to be handling it well, and not whining about something we dont know about...

The question is pretty vague.....(not meant as a personal criticism), for someone trying to start out a shop then 56% might not be enough when you factor in carrying a debt load. From what I'm hearing in my area business is way down for all the clubs......so a 56% mark-up on an item still doesn't keep the doors open at the end of the day. Of course the 'consumer' side of me always wants to pay as little as possible, but there is a cost to supporting a good club and I don't mind paying a little more if it means keeping a good shop open.

IMHO

I recon you're talking markup as opposed to profit, right?
I've had a business that managed to rake in over 20% & thought it was outrageously outstanding, a 5% is usually considered tops.
Markups differ widely depending on the item, my firearm sales made next to nothing while the accessories paid the rent.

As a customer, who cares?? What I care about is VALUE. Best price / service/ quality / warantee, etc. I don't care if you mark it up 1% or 1000% if I am getin a good deal. In fact, as the customer, it's really none of my business what YOU paid for it. My business is what I pay for it.
The market determins markup, and if an LDS isn't a good business person, he/she will soon be history.
Before you bought the computer you're reading this on, did you think about the markup on it, or just the cost/value?

LUBOLD8431- Where do you get off making a comment like that? You sound like a 14 year old computer geek with no socialization skills. The fact that you're twice that age really astounds me. Your ageist comments are unwarranted and inexcusable IMHO. Be glad there were those of us in the 60's (and earlier) to pioneer SCUBA so folks like you could enjoy it. If you think I'm flaming now, wait til I turn on my afterburners!!!

I found quimby's comments, posted prior to yours, to make sense. I found yours in response did not make sense relative to what he said.

In case your "adolescent" mind (possible at any age) doesn't realize it... we had cost factors like rent, utilities, etc., back in the 60's too. They may have been lower absolutely than today's but so were sales prices. Those costs had to be paid for out of the gross profit from sales and services (revenue minus direct costs).

If you actually read what quimby said, he recognizes all of that... you're the one who seems to have jumped to conclusions.

Necessary gross profit to meet operating costs is highly dependent on sales volume. If a small LDS has a limited local market, they may need a higher profit margin on each product. If a big warehouse store does high volume, it needs much less (and therefore can discount if the manufacturer allows it). Look at the example of grocery stores which may have profits of 1-3% but achieve reasonable profitability through volume.

Dr. Bill

PS- If somehow I've misinterpreted your comments, I apologize, but I'm highly trained in the English language so I don't think that was the case.

quimby once bubbled... Do you think a 57percent profit margin for a Dive shop is reasonable???

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As others have said, a markup is quite a bit different from a profit margin. Buying something for 43 percent of what you sell it for means a 133 percent markup. Selling something for 157 percent of what you buy it for means a 57 percent markup.

Most retailers do a little better than break even on a 100 percent markup, depending on the item.

If you want to see sticker shock, check out the markups on auto parts. Welcome to the real world.

Before you bought the computer you're reading this on, did you think about the markup on it, or just the cost/value?

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Cost/value. I built my own PC. Didn't want to pay the outlandish prices at retail stores. At least I have that option with PC's (as with many other goods and services).