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revenue != profit. take the Fiero guy...sure 2 mil is impressive...but car parts are expensive...and his profit margin is most likely only 7%(seems to be the a

by vaksel 16y ago

revenue != profit. take the Fiero guy...sure 2 mil is impressive...but car parts are expensive...and his profit margin is most likely only 7%(seems to be the average for car parts)...which turns his 2 mil into $140K.

patio11 16y ago
Prior to quitting my day job, I was propositioned by an Englishman living in my town to improve his website, which he had hand-coded in PHP. There are several million owners of vintage Japanese cars in the world, there are several thousand places locally you can find a carburetor for a '82 Camry (I have no clue if that actually makes sense -- work with me here), and there is precisely one man in town who can match up "Customer in England with '82 Camry" and "72 year old owner of used auto store in central Japan." Which is a long way of saying that I have exactly one data point for the profit margin of a particular niche auto parts business. Suffice it to say that -- after you deduct shipping, duties, and cost of goods -- it is still higher than mine, and all I do for order fulfillment is a SQL call. (Quote: "If they don't like my prices, then they can either learn to speak Japanese or sod off.")
- vaksel 16y ago
  yes when you have a monopoly you can charge anything you want and people will pay it. The Fiero example is different, since it's an "iconic" car, which means there are plenty of aftermarket suppliers/vendors who sell this stuff(usually other enthusiasts), so he can't really gouge. Plus, since its a GM product from the 80s/90s..everything is interchangeable...which means he can't really charge a premium for Fiero stuff, since those exact parts can be found in any number of other Chevy, Pontiac products. For example the 4 cylinder that came in the Fiero, also came in Chevy Astro, Camaro, Citation, Lumina, S10 and Pontiac 6000, Phoenix, Celebrity, Grand Am, Firebird, as well as Buick Century, Somerset, Skylark and Oldsmobile Cutlass and Omega.
- replicatorblog 16y ago
  Great story Patrick. I think a lot of people equate physical products with low margins, but often that is not the case. Music and media focused startups are a great example of this. After license payments the profits of even a successful company like Pandora are tiny. Compared to a number of physical products/ecommerce companies where margins can be 30-50%.
SHOwnsYou 16y ago
Agree that profit margins can be very thin, but in this case the Fiero guy is probably doing pretty well. If the Fiero parts guy is primarily selling to end users (which it looks like he does), his profit is probably closer to 33% per item. Standard markup for auto parts to private customer is 1.5x Source: Family run auto repair shop for 20+ years.

by vaksel 16y ago

patio11 16y ago

Prior to quitting my day job, I was propositioned by an Englishman living in my town to improve his website, which he had hand-coded in PHP. There are several million owners of vintage Japanese cars in the world, there are several thousand places locally you can find a carburetor for a '82 Camry (I have no clue if that actually makes sense -- work with me here), and there is precisely one man in town who can match up "Customer in England with '82 Camry" and "72 year old owner of used auto store in central Japan." Which is a long way of saying that I have exactly one data point for the profit margin of a particular niche auto parts business. Suffice it to say that -- after you deduct shipping, duties, and cost of goods -- it is still higher than mine, and all I do for order fulfillment is a SQL call. (Quote: "If they don't like my prices, then they can either learn to speak Japanese or sod off.")

vaksel 16y ago
yes when you have a monopoly you can charge anything you want and people will pay it. The Fiero example is different, since it's an "iconic" car, which means there are plenty of aftermarket suppliers/vendors who sell this stuff(usually other enthusiasts), so he can't really gouge. Plus, since its a GM product from the 80s/90s..everything is interchangeable...which means he can't really charge a premium for Fiero stuff, since those exact parts can be found in any number of other Chevy, Pontiac products. For example the 4 cylinder that came in the Fiero, also came in Chevy Astro, Camaro, Citation, Lumina, S10 and Pontiac 6000, Phoenix, Celebrity, Grand Am, Firebird, as well as Buick Century, Somerset, Skylark and Oldsmobile Cutlass and Omega.
replicatorblog 16y ago
Great story Patrick. I think a lot of people equate physical products with low margins, but often that is not the case. Music and media focused startups are a great example of this. After license payments the profits of even a successful company like Pandora are tiny. Compared to a number of physical products/ecommerce companies where margins can be 30-50%.

SHOwnsYou 16y ago

Agree that profit margins can be very thin, but in this case the Fiero guy is probably doing pretty well. If the Fiero parts guy is primarily selling to end users (which it looks like he does), his profit is probably closer to 33% per item. Standard markup for auto parts to private customer is 1.5x Source: Family run auto repair shop for 20+ years.