[Market-farming] Typical retail markup

Willie McKemie mf at austinfarm.org
Wed Apr 4 09:32:10 EDT 2007


On Wed, Apr 04, 2007 at 06:59:46AM -0400, maury sheets wrote:
> 
> Rachel,
> 
> It varies.  Talking to Whole Foods about their markup and they said 30 to 50
> percent.  If they think they can sell more at a lower price point, they will

Grocery stores like to think in terms of "gross margin", which is, I 
believe, is their markup amount divided by their retail selling price.  
I think of a mark-up percentage as the markup amount divided by the 
cost.  Grocery stores seem to be happy with a 100% markup, which is 
a 50% gross margin, which is price=2xcost.  If you sell something for 
$1 and the grocery store sells it for $2, that is 100% markup or 
(($2-$1)/$2)= 50% gross margin.  Please correct me if I've screwed this 
up.

This, of course, varies WIDELY.  I have seen grocery stores sell my 
product for less than their cost.  Typically, loss-leader, high volume, 
highly advertised sale items are sold near cost.  For your "run of the 
mill" item, I would expect around 100% markup.

Grocery stores are, and must be, wary of "shrink".  Essentially, the 
fractional amount not sold.  50% shrink wipes out a normal markup.  Two 
marketing ploys a local grower might use:
1) my fresh product has a longer shelf life, thus, less shrink
2) my fresh product is in higher demand and will sell faster, thus, 
less shrink

-- 
Willie, ONWARD!  Through the fog!
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