My first job was working for a large retailer in Johannesburg, South Africa. Did you know that retailers make money not just from the difference between the cost and selling price? Here are couple of ways:
INTEREST
You can sell products even before you technically pay for the stock. How does that work?
Well, your payment terms with your suppliers may be 30 days or 60 days. You therefore only paid them for their products a month or two after having had it delivered to your stores. So if you sell something quickly, like within 5 days for instance, you could put that money in the bank the same day.
That money would then earn interest for a number of weeks before you actually have to pay your supplier. This can be a huge source of income if your country has high interest rates.
FOREIGN EXCHANGE FLUCTUATIONS
Let's say you buy 1000 laptops at $1000 each from someone in the USA when the exchange rate is 1.00 USD to 0.90 EUR. So you paid 900 EUR each right? Now lets say you sell them for 1500 EUR each.
Your profit is 600 EUR per laptop right? Now what if during that time the EUR increases in value. For simplicity, lets say you sell all of them on the same day when the exchange rate is 1.00 USD to 0.70 EUR.
So now you are still getting 1500 EUR for each laptop you sell, but your cost has dropped so you make more profit. That's because you are paying your supplier in dollars (he is in the USA remember).
By the time you have to pay your supplier, each laptop effectively costs you not 900 EUR anymore, but only 700 EUR (0.70 EUR per USD times 1000 USD) So now your profit per laptop has gone up from 600 EUR to 800 EUR. For the 1 000 laptops that you bought in America and sold in Germany, your total profit has therefore gone up by 200 000 EUR.
LOCATION, LOCATION, LOCATION...
One of my MBA professors or lecturers said that McDonald’s is not really in the fast food business. They are actually in the real estate business. They look for properties at strategic locations all over the world and then put up their restaurants there. So, even if they break even in the actual selling of burgers and fries, they still make money from buying and selling properties.
INFLATION
This one is a bit sneaky. When their cost prices (the prices they pay their suppliers for the stuff they buy from them) fall) they keep their prices to the customer the same. In other words they don't pass on the savings. So more profit for them. There are a number of reasons why the prices they pay for the stuff they sell to you may fall:
1. Deflation in the economy.
2. Fuel prices fall.
3. Exchange rate - when your currency is strong, everything gets a little or a lot cheaper especially when you are importing (see FOREIGN EXCHANGE FLUCTUATIONS above)
Another MBA on steemit...will follow just for that!
It's scary how much non core business transactions grocery stores handle these days. I used to work in finance where I worked w a guy who handled exactly what you describe on the FX fluctuations. He did that as a very minor part of his job and had almost no training. Apparently that's how many small companies handle it. So I can see why companies can go bankrupt for all sort of things...since they are doing 20 things besides their core business.
Yeah good point. Thanks for following and commenting. With FX you have to be lucky I think. Better to hedge and buy cheap dumped products and then sell them before you buy them.
Thanks for your upvote it is worth a lot WOW! Where did you do your MBA?
UNC Chapel Hill. You?
WOW they have a really good basketball team if I remember correctly. I lived in the USA for a total of 8 years. Part of it in DC and Florida. My MBA was a one-year full time programme in Hamburg, Germany.
What was your specialization? Mine was maritime logistics.
Yeah, our basketball team is impressive.
Maritime logistics sounds really interesting. We only had 5-6 choices, I did Finance.
Good choice what do you do know?
Very true about locale. As a consumer, I'm more likely to go to something strategically located along my commuter route if it's on the right side of the road. Lazy american driving i know lol. But I have a long commute. Nice article. Found bevause of Steemit Dreamit facebook group!
Thanks
This post has been ranked within the top 50 most undervalued posts in the second half of Jul 17. We estimate that this post is undervalued by $20.10 as compared to a scenario in which every voter had an equal say.
See the full rankings and details in The Daily Tribune: Jul 17 - Part II. You can also read about some of our methodology, data analysis and technical details in our initial post.
If you are the author and would prefer not to receive these comments, simply reply "Stop" to this comment.