I was looking at the aluminum foil turkey roasting pans at Walmart. The big ones are about 6 bucks and the cost of the aluminum foil sheet they are made from is nearly negligible. So 1/10 of a cent to 6 bucks is 6000 to one. I really don’t know what the aluminum costs so it could be higher then that.
I’m not interested in things with subjective value like art or designer goods (like a Cartier foil pan for 20 dollars) - just commodities.
That pan has a manufacturing and labor cost and then shipping.
The company has cost centers like sales, IT, Finance, etc.
There are probably some taxes involved also along the way and possibly tariffs.
You cannot calculate profit as Net Price - Material Cost.
Yeah, this, very much so. Think of electrical batteries, or light bulbs, that have the same materials when they’re spent and have zero (or negative) value. Think of high purity water, to which you can add a little dirt (that is, contribute more material) and make the product worthless. Think more generally about new versus used items, which often contain exactly the same material.
Or think of things that don’t have material costs, like electronic books or movies.
I’ve always understood fountain soda has a pretty high profit margin (from the perspective of the restaurant / convenience store selling them, maybe not for the soda company). They buy syrup in bulk, which gets mixed with water and carbonation in the fountain. If they put the soda fountain in the dining room and allow customers to serve themselves, the labor is probably pretty minimal. From what I understand the cost to the restaurant is a few pennies per cup, which they sell for a dollar or two. Which is why the vast majority of places allow free refills; it only costs the restaurant a few cents to let you refill your cup. I’ve heard the paper cup actually costs the restaurant more than the actual soda.
Where do you draw the lines in terms of counting profits for any one particular entity in a long supply chain? Even in the case of a “simple” aluminum pan, it’s probably not a single company that mines the aluminum, refines it, makes the sheets, manufactures the pans from the sheets, distributes the pans, stores the pans, sells the pans, etc. It’s not like Walmart is a vertically-integrated aluminum pan company (even though they probably exert a lot of pressure on their overseas suppliers to bring down costs to try to maximize their share of the profits).
Probably similar situations exist for coffee, diamonds, salt, spices, chocolate… all the way up to complex electronics. Wouldn’t each stage of the supply chain have different margins?
Even for something relatively direct-from-the-ground like bottled drinking water, some megaconglomerate still had to invest hundreds of millions into the economies of scale that made it viable, ranging from permitting costs / bribes, developing pumping and filter systems, plastics logistics and bottling factories, distribution networks…
Is there anything in the modern world that’s still just a single producer making a finished good directly from a raw input? Community farms come to mind, but they’re not exactly striking it rich. Vineyards or distilleries? Those still require a lot of labor and materials input though, and the output profit can vary dramatically between companies and products.
OP asks about simple one piece items.
Using the metric of sale price divided by material cost, I propose medical devices such as a stent, that consists of pennies worth of metal and “sells” for many thousands of dollars.
Aluminum is currently at about $1.60 per kilogram. I’m not sure how much that pan weighs, but I’d guess maybe around 50 grams? That’d put it at 8 cents, almost two orders of magnitude above the OP’s estimate.
And even if there’s not MUCH labor in one of those, it still costs something to roll it out into a sheet and then stamp it into shape.
Yup. I had friends who worked in convenience stores for many years. The owners conducted inventory on the soda machines by counting how many cups had been used, because that was where most of the cost originated. The workers were allowed to drink as much as they wanted during a shift, so long as they either paid for a cup at the start of the shift, or brought their own reusable cup.
One tank of syrup makes far more drinks than you could ever drink in one shift, so the added costs were negligible.
What exactly are those, anymore? It’s not like some dude with a pick and hammer can just mine aluminum on their own and make a roasting pan out of it, certainly not to the quality of a modern, mass-produced one.
That’s… just sad. They charge their own workers for the cups?
A quick search for wholesale aluminum roasting pans brings me to wholesalefoilpans.com. If buying in bulk, 12 packs of 50 roasting pans are $77 each, which works out to $0.65/each for 22 by 14 inch pans.
If you want a few more, as I’m sure Walmart does, then you can by 10,000 50 pack containers for $16 per pack, or $0.32 each for about 20 by 12 inch pans.
So Walmarts markup is easily in the 9-19 times range from the manufacturer or wholesaler. I am confident I cannot do better at pricing something in a 2 minute web search than Walmart’s buyers can.
And it is more than that. The item needs to be shipped to a wholesaler (probably) then shipped again to a store. Add in things like advertising. It all adds up so that $0.08 pan costs $6 at the end.
Some things like heart stents are molded out of plastic, not unlike a water bottle cap. I wouldn’t doubt they’re thousands of dollars.
Well, that was the theory, but most of them just brought their own reusable ones. But does it really surprise you that guys who run convenience stores using minimum wage labor are going to nickel and dime such things?
Profits on pet rocks has to be pretty good, though let’s not forget how this industry was almost wiped out during the pandemic due to supply chain issues.
Brand name vitamins have enormous markups over generics. Yesterday my wife and I went shopping. She had an $8 coupon for some vitamins and it was still cheaper to buy the generics.
Loctite’s Superglue (crazy-glue?) 2 or 3 ml tube?
… has pretty abhorent liter prices … def. a lot of margin
When I used to go to Barbados every year (pre-pandemic), one of the first things I did was buy one of those foil bread pans to make bread for the three weeks we spent there. My memory is that it cost B$1.50, or US$.75. Granted it was smaller than a roasting pan, it still shows what a reasonable price was.