- Joined
- Jun 16, 2000

- Posts
- 16,698

There are not many people that are "better friends" to our industry than Jim, so this really is a "gentleman's disagreement"

I think sliding scale markups are really "de facto discounts" designed to get you to lower your retail prices to make that "high end" product more attractive to your clients so that you might sell more so that you can buy more from the vendor

All at a lower margin to you, but they will tell you will make more gross profit dollars

And, I cannot argue the basic premise except that it is really putting something "on sale at a discount" but without the benefit of a "savings story"

And, worse, it is a margin robber

Let me share a real world example

We track CoG pretty seriously. Whenever a workorder doesn't meet our acceptable margin it's flagged for investigation. Lot's of legitimate reasons, but is easy and important

A recurring culprit recently has been receiveing more footage than needed, you know you ordered 11ft but received 19ft?

So, we did a quick review and found we had 27 orders in which 23 had overages of 5ft or more

Let's plug some numbers into this bad boy

If we use the "published" sliding scale markups in Larson for a $2, a $3 and a $5 wholesale cost/ft and you establish a retail selling price based on those multiplier, you start out with a spread of five points in margin

Now, use the 11ft as what you will charge your retail client, but factor in the fact that you received 19ft (This is exactly what happened on one of ours) and now your " base" CoG on this moulding i 40%, 42% and 48% respectively.

No one can tell me that is healthy

But suppose we use the $2 rate (4.3 times) as a uniform multiplier, we now have a uniform rate of margin that on the $5/ft that is 8 points higher

And, if you do the math, you will find that you also have $38.50 additional dollars of gross profit

The fact is that we all get shipped more length than ordered and the lower the multiplier, the greater the damage

Now if you feel that you need a lower "retail" to sell this "high end" product, isn't that "discounting"? But if you use a more "standard" multiplier and feel that retail is too high, then at least get the benefit of a "Sale Price"