Setting Your Discount Margin

Topic: This document discusses how the profit margin is used to calculate the price of products at your web site.

Audience: All merchants in The Internet Retail Program.

Overview: Each merchant is able to set a single overall profit margin used for pricing all the products at the site. Therefore, once a merchant sets the margin, products presented to a guest will display a price based upon that margin. In the future, the system may be extended to accommodate multiple margins. Currently, this is not the case.

See Also:

• FAQs for Discount Margins

Terms:

• Retail Cost - The maximum suggested retail cost of a product as suggested by the distributor. This would be the maximum amount merchants could charge for a product.

• Wholesale Cost - The cost of a product sold from the distributor to a merchant (you).

• Net Profit - A number calculated by subtracting the wholesale cost from the retail cost. For example: a $20 retail cost - $10 wholesale cost = $10 net profit.

• Margin Discount - The percentage a merchant reduces his/her net profit. For example, if you set a 25% margin discount and the net profit on a product is $10.00, you discount $2.50 (25%) and you keep $7.50 (75%) of the net profit. By calculating the discount against your net profit, you do not run the risk of selling the product at a loss.

Discussion:

Before inetUSA may activate the catalog at your site, you must supply the margin discount. We will place this information into your catalog so that pricing is calculated based on this information. Send the desired margin discount to your inetUSA account representative via email.

What you determine to be an acceptable discount margin is up to you. For example, if you choose a 40% discount margin then you will receive 60% of the net profit on each item. If you choose a 20% discount margin, you will receive 80% of the net profits. Here is a graph with an example of various discount margins for the same product:

Here are more examples that are not based on the graph above.

1) 25% Margin Discount on Product A

• Product A has a retail price of $45.00. The wholesale cost is $35.00. A net profit of $10.00.
• Sold at a 25% margin discount, Product A sells on your site for $2.50 less (25% of $10.00).
• Retail price = $45.00
• Web price = $42.50
• Your profit on this Product A is $7.50 (75% of the potential $10.00 profit).

• Consider the same Product A.
• Sold at a 100% margin discount, you would be selling Product A at wholesale cost.
• You would not want to choose a 100% margin discount.

• Product B has a retail price of $75.00. The wholesale cost is $50.00. A net profit of $25.00.
• Sold at a 25% margin discount, Product B sells on your site for $6.25 less (25% of $25.00).
• Retail price = $75.00
• Web price = $68.75
• Your profit on Product B is $18.75 (75% of the potential $25.00 profit).

• Consider the same Product B.
• Sold at a 40% margin discount, Product B sells on your site for $10.00 less (40% of $25.00).
• Retail price = $75.00
• Web price = $65.00
• Your profit on Product B is $15.00 (60% of the potential $25.00 profit).