B&M Pricing

[Silound]

B&M shops are a strange beast. I know, I ran one for several years. Pricing is 100% undeniably at the sole discretion of the owner or manager. At the very least, as Peter said, the prices will reflect what it costs him to stay in business. At the most, whatever wild hairs or whims he has can be reflected in the price as well.

I will say this about discounts though...

To a buyer, a 10% discount may seem kind of weak, I agree. I used to think 10% was a joke, I mean it barely covered sales tax, right? But then I did the math, and suddenly realized I was VERY wrong.

To give an example:

In LA, cigars are taxed at 20% of invoice cost. So take the invoice cost per stick (minus SCHIP) and multiply it by 2.20 (known as keystone markup, or 100% markup), then re-add the SCHIP tax to find out the final price. So if the invoice cost is $4.90 per cigar (SCHIP included):

4.90 - 0.40 = 4.50/cigar
(4.50 cost x 2.20) + 0.40 = $10.30/cigar before sales tax and discount
10.30 * 0.90 = $9.27/cigar after discount before sales tax

Now considering the owner paid 4.50 for the cigar, and 1.30 in combined taxes:

9.27 - 4.50 - 0.90 - 0.40 = $3.47

The owner has taken a staggering 23% reduction in his or her profit BEFORE even paying any bills.


So yes, a 10% discount is a LOT of discount for a B&M to give out. If everyone got that 10% on everything, the shop would only be pulling in 77% of the total gross profit available, which is a huge loss for any business. And remember that the government isn't going to give the owner a 10% discount on taxes. The landlord and utility companies aren't going to give 10% off rent and power. That 10% comes entirely out of his profit margin.