All: I want to share with you this email.
On Tue, 11 Jun 1996 19:16:23 -0400, Dave wrote:
>>Could you tell me the reason you think Iomega can only make 10% margin on sale of zip disks?
>>
>>You state that you think Iomega will receive $7-8 per disk gross, and $.7-.8 net. Where do you think the other $6-7 is going? Surely not to manufacture the diskette? Making the Zip drive may be expensive and time-consuming, but not the diskette.
>>
>>dgraja@earthlink.net (DGR) wrote:
>>
>
>A one word answer.... the retailer. Well, maybe more than one. You don't think retailers sell product for free, do you? Manufacturers like IOMG provide product typically at between 30-50% below retail price, the retailer get to mark it up to retail price to pay their expenses (rent, labor, etc.) and make a profit.
>
>I don't what the retail markup is. I took a guess. The rest of the analysis follows from this.
>
>Dave
This part is my reply:
I, myself, am a computer retailer. I buy Iomega Zip disks from Tech
Data. My last batch of Zip disks cost me $126.50 for a 10-pack (not
including shipping & handling).
If I sell this 10-pack for $149.95, I have a 19% markup, which is
good. If I break the pack up and sell them for $19.95 each, I have a
58% markup, which is better. You can find these retail prices in any
mail-order catalog.
I estimate that Tech data makes 10% on Zip disks. This means that
Iomega is getting around $11.40 per disk. Let me assure you that this
is a very strong estimate, as I have also been on the other end of
this deal -- selling product to Tech Data and seeing their markup to
the dealer. Even if Tech Data is marking them up 15%, Iomega gets
$11.00 per disk.
I do not know what it costs Iomega to make a Zip disk. Let us
estimate $2. You are welcome to argue this guess. Where does this
leave us?
$15.00 Retail in 10-packs
- 2.40 Dealer markup
- 1.60 Distributor markup
- 2.00 Cost of production
-------------------------------------
$ 9.00 Gross margin for Iomega
This is 60% of the sales price.
I just don't see much leeway in these numbers. (Unless you think it
costs Iomega some huge number to make a Zip disk.) I think my
estimate of $2 is very conservative. 1.44Mb Disks cost less than $.20
to make. Since they are making these by the tens of millions, I would
be very surprised if they cannot get the cost below $1.
Guy Gordon (gordon@atlanta.com) |
