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> if they are earning 2%-4% profit margins They're not (depending on the product). My wife used to work in Halloween costume design for a wholesaler (and some
by danaris 4y ago
> if they are earning 2%-4% profit margins
They're not (depending on the product).
My wife used to work in Halloween costume design for a wholesaler (and some of her costumes did end up in Target and Walmart, which was cool to see), and the retailers' margins on those were at least 50%.
As I said, the margin does depend heavily on the product, but do not assume that across-the-board average margins are anywhere near that razor-thin.
- lotsofpulp 4y agoThat is irrelevant because the entire organization’s profit margins are where increased wages would come from.
- danaris 4y agoMy point is that the entire organization's profit margins are not likely to be anywhere near 2-4%.
- lotsofpulp 4y agoThat is what their 10-K filings say.
- Retric 4y agoThey are incentivized to hide investments as operating expenses for tax reasons, which muddles the picture.
- lotsofpulp 4y agoSource? What are the incentives? Why do the most highly valued companies in the world report much higher profit margins? I would need a good reason to believe the executives and owners of retail businesses do not want to report higher profit margins.
- Retric 4y agoThe incentives are simple, profits are taxed. To simplify, if you want to say develop new software you can call it a capital investment and pay for it with after tax money or call it operating expense and pay for it in pretax money. Guess which one is a better deal.
- lotsofpulp 4y agoRegardless of how the expense is classified, the amount of additional money available for wages is still the net income figure. The owners will still want as much net income as possible. They are not going to want to waste money just so they do not have to pay 20% of it to taxes.
- Retric 4y agoThe trick means real net income is larger than what’s on the books/10-K filings. Misclassified investments are not wasted money, simply hiding how much money is available for other expenses. It’s like the old trick of paying an offshore subsidiary in a tax heaven licensing fees to use your own IP with the added advantage of being able to directly profit from the use of these investments. Nobody looking at the books would think such things are actual expenses, but companies must pretend they are.
- lozenge 4y agoThat's a markup, not a profit margin. A profit margin is after all expenses, which a wholesaler doesn't know about.
- makomk 4y agoYeah, and I don't think it would be terribly unusual for 50% markups to translate to low-single-digit profit margins in cost-competitive retail sectors - those both seem like about the right ballpark overall. Retail has a lot of costs and wages are one of the big ones.