Trade Margins

Trade Margins

Trade Margins

In addition to setting his recommended resale price to the consumer, the ONLINE MARKETING Manager must decide, also, the margin he is going to offer to the wholesaler and the retailer. Here again there is a tendency to follow the market leader. However, the nature both of the product and of the market will affect one's ONLINE MARKETING policy in this respect. Products which require some element of personal selling on the part of the shopkeeper will necessitate a higher margin than those which are 'demand goods' whose sale is largely promoted by heavy advertising campaigns. The more assistance which the manufacturer needs from the stockist the more he must enlist that support by offering an attractive margin of profit.

Some producers offer quantity discounts to their distributors, others do not. Market tradition is often the major factor. A discount for quantity ordered is usually justifiable from a cost point of view because a large order can generally be handled more cheaply than a small one. There is an obvious advantage in using a discount as an incentive to the stockist to place his order on a regular basis and in economical units. To use quantity discounts as a competitive weapon, however, is self-defeating because, as in the case of price-cutting generally one manufacturer's offer will quickly be countered by a similar offer from another.

One of the problems which may arise when a manufacturer is selling both to wholesalers and also direct to certain retail outlets is that a wholesaler will often seek some special allowance as an inducement to carry the producer's brand. Providing the wholesaler's purchases are sufficiently large, the operation of a quantity discount scheme may be the answer. On the other hand, it is not uncommon to find some large retail establishments ordering quantities in excess of those placed by small wholesale firms. The dilemma, very often, is that one may wish to use the services of the wholesaler to distribute to small retail outlets and yet preclude him from offering one's merchandise to the large retailers with whom it is considered both necessary and desirable to deal direct. Some producers overcome this problem by issuing two price lists, one for wholesalers and the large retailers with a stated order size, and another for smaller retail outlets.

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