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I don't actually know if Tesco or any supermarket chain is "on the edge." The inventory-turns thing is relevant because if you have $1M in capital but you gross
by AlbertCory 4y ago
I don't actually know if Tesco or any supermarket chain is "on the edge." The inventory-turns thing is relevant because if you have $1M in capital but you gross 1% on it every week, that can still be pretty good annually. If you're an appliance dealer that turns over its inventory once a month, a 1% gross margin would mean you're out of business.
- lotsofpulp 4y agoBy definition, I would think 1% to 2% profit (net) margin is doing business on the edge, regardless of gross figures. 0% is a charity. The slightest changes in your costs or revenue can be devastating if not immediately made up for with price increases and cost cutting. Grocery stores can usually do this, which is why they continue to survive at single low digit profit margins. Are there businesses that reliably operate on less than that?