Originally Posted by Andrew R Stewart

The recent thread, Side-Job??, touches on a subject I've lived and worked with for 45 years, How much margin, no I mean how much profit is enough for a transaction to be acceptable? When a reseller decides what price they will set for their product at what point is the buyer agreeable to/willing to, or not, pay. Be it new or used product the equation and valuation perceptions are the same.Every person survives by taking in more then they give out. Somehow someway the person must come away from their interactions, often enough, to not wither away. (Dieters know this even if they can't/won't put it into words).There are a few ways to determine what a product must sell for so the seller keeps their head above water, as there are ways that the buyer decides whether the value of said product is valid enough to agree to pay what's being asked.

The most common method talked about for the seller goes something like this- The seller's initial cost of the product plus the overheads to bring that product to the buyer plus any profit that the seller deems needed. (Note I separate the profit from the cost of doing business, their combined amount is what we call margin). At your typical LBS the cost of doing business is around 40% of the retail price. Add in the needed profit and you see why retailers margin is what it is.

Another method is to determine what the market will bare and subtract the profit and the cost of doing business to end up with what the reseller has to pay for the product to, again, stay afloat. This method is what's going on when some say "I make my money when I buy" (a backwards view in some peoples' minds but perfectly valid a method). I think this method is what many non taxed resellers (non retailers rarely claim their businesses on their taxes) use.

For the buyer it's a bit less formulaic. Here emotion/ego can enter in a greater degree and these aspects are very hard to quantify buy do affect the buyer's views just the same. Can the buyer pay the reseller the price and feel they got fair value for their money? So in the end the buyer's process is much the same as the sellers, perhaps less structurally considered but it's still an assessment of cost VS value.

For as long as humans worked in social communities these issues have existed in one form or another.

My 45 years, the different shops I've worked in or owned (Bike One in Cleveland for 15 years), have given me quite the opportunity to watch how these competing groups (resellers and buyers) work together (or not). I feel that the perception of value has shifted a bit over these years, certainly the advent of international communication and distribution (first it was mail order and now on line) has added to the mix to a degree that wasn't present when I started this work back in 1973. I find vastly more reseller/buyer situations these days where the value/price is questioned then was the case back then. This isn't right or wrong, just what we have "evolved" to. So the question as to how much cost is too much is one we, as resellers, deal with daily.

So I put this out here. How much profit is acceptable to agree to? As buyers we make this judgement all the time. Is that mocha, egg mic whatever, micro brew. What's your idea of what profit (not margin) that's Ok to you for your reseller to earn when dealing with you? Andy

I might have titled this thread as "How Much is Enough" or "Will You Let Me Eat".