Retail :: How much is the money!

A lot of common people think that Retail brands make a killing in terms of profits ,however the truth is that retail is a very very thin margin business , lets c how !

A good brand typically has its set of retail stores which are its advertising medium , one might say , a store for a common man looks inviting , neatly laid , and sometimes gives good deals too , but lets try breaking the store into some numbers !

a typical P& L of a store starts with the Sales /turnover

Minus the Cost of good sold ( basically the cost of producing the goods ) typically varies 28 to 30 % of sales for mid segment brands and lower for premium brands as the MRP itself would be higher .

Sales - COGS ,would give the Gross margin of the store , which is around 70 % ( 100- 30 ) of the store

from the Gross Margin minus the COR, ie the Cost of retail .

The COR of retail includes the the rental as the major component , operating expenses of the store , like salaries , electricity , pilferage ,repairs and maintenance ,depreciation , typically the Cost of retail of a high traffic location store would be any where between 35 - 40 % % of sales , with the rental itself varying between 5 -- 10 % of sales !

So at the end of it all GM - COR you would be left with 70% -40% ie 30 % on your MRP , now comes the other costs that needs to be apportioned , cost of advertising & promotion , the Head office cost , etc which typically can go upto 15 % to 20 % so at the end of it all what a 100 rs MRP product delivers is close to 10 % or even lesser before tax !

So get the picture ,its not as lucrative as one thinks yes ,its a volume game for most brands ! with the past years of retail turmoil in India ,wonder whats the figure looking like currently ,hope its not negative ! ( the above data is for an apparel retailer , numbers may vary for other categories )