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The Real Cost?

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    The Real Cost?

    Do you ever wonder what consumer goods including holidays/cruises really cost, before the profit margin is applied?

    I don't claim to know the answer, but I know that most things cost a hell of a lot less than we pay!

    I was on a train talking to a guy who I vaguely know. He works for a small clothing factory in Stratford, London. Probably a 'sweat shop'? He showed me an advert in the paper for a dress at Top Shop. it said £29.99p

    He asked me what I though of the price. OK, I am no women's clothing expert, but I said it seems pretty cheap.

    He said his factory made those. He said they sold them to Top shop for £1.36p each. They make one every few minutes.

    I have heard from a senior crew member on-board a cruise ship than the spend per-person, on-board megaships, is so high that they could give the cabins away for free and still make a small profit!
    See my cruise blog: HERE

    #2
    unfortunately this question, however interesting, is a bit like "How long is a piece of string?".

    It needs a bit more qualification to give meaningful costs and whether they are reasonable or not. As an example the material cost of an item may be a fraction of a penny (a plastic gizmo) but the labour to manufacture, the cost of packaging, distribution, storage, administration, retailer stock costs, manufacturer profit, retailer costs and profit could easily raise it to £2.99.

    It never fails to amaze me for example that a restaurant meal can contain less than £1 of materials and sell out at over £20, a £6 bottle of wine (at retail) can appear at £25 etc.

    So I suppose the answer is simply that you look at the selling price and decide if it is for you or not.

    Cheers

    Tony B

    Comment


      #3
      It wouldn't surprise me. I once worked in a lighting shop that basically doubled the cost price and then added VAT to it to get their price. If the item didn't sell then they started reducing it after a very long time on the shop floor. There were never any real bargain s in that shop.

      Take care, Helen

      Comment


        #4
        I often wonder this too Malcolm. I recently purchased new trainers from an outlet of a large trainer manufacturer. I had tried to buy them online and the best price I could find was £122. I drove twenty miles to their outlet and purchased them for £85. I looked at the box and they were made in Vietnam probably for a few pounds. I also purchased a designer outfit for a wedding priced at £685. Looking at the label it is made in China. Can only imagine how much it cost to make!

        Comment


          #5
          Originally posted by cruiser, Larne View Post
          I I looked at the box and they were made in Vietnam probably for a few pounds.
          probably under £1!

          I believe an I-Pad cost £1.50 to make and an I-phone £1.00.
          See my cruise blog: HERE

          Comment


            #6
            Originally posted by Malcolm, Essex View Post
            probably under £1!

            I believe an I-Pad cost £1.50 to make and an I-phone £1.00.

            If we are daft enough to buy these goods at a hugely inflated price, who is to blame??

            Annie

            Comment


              #7
              Originally posted by Malcolm, Essex View Post
              probably under £1!

              I believe an I-Pad cost £1.50 to make and an I-phone £1.00.
              Once manufctured the goods need to be packaged, transported, import duty paid, transported locally, stored in a shop where the costs of stock need to be added and the staff paid and finally vat and credit card charges added.

              Annie and Tosh are also correct, if it is not the right price don't buy it.

              Comment


                #8
                Originally posted by Malcolm, Essex View Post
                I have heard from a senior crew member on-board a cruise ship than the spend per-person, on-board megaships, is so high that they could give the cabins away for free and still make a small profit!
                Conveniently the publicly owned cruise lines publish the data and it very much depends on what you include.

                The profile of revenue/costs across the industry is broadly similar

                take NCL holdings the smaller fleet of the major 3 their 2015 data
                in your opinion the leaders in on board spend acquisition.

                72% ticker revenue
                28% on board revenue.

                if you just take the cruise operating costs they are 43.5% if you add in the cruise related operating costs of commissions included flight/transfer etc, that jumps up to 61.1%

                The rest goes on overheads& marketing(12.8%), depreciation of assets(9.9%), interest&other non operating costs(6.2%) leaving 10%

                The one some may find interesting is the food bill(includes the crew food).
                2013 $12pppd
                2015 $11pppd
                They added Regent and Oceania to the fleet over that time.

                Comment


                  #9
                  Originally posted by Malcolm, Essex View Post
                  probably under £1!

                  I believe an I-Pad cost £1.50 to make and an I-phone £1.00.
                  Third party estimates of the BOM for an Ipad(depends on model) are over $250 up to over $400 for the high end 4g versions.
                  The cost of the retina display alone will be in excess of $50 to make.

                  Comment


                    #10
                    I've worked in the energy industry for the last ten years, consumers hear the wholesale cost of gas/electricity but then seem to disregard the cost of distribution, government levvies, maintenance, account servicing etc needs to be factored in to the bill, as well as a profit for the supplier. It's not a case that your bill is the wholesale price of say 3p and the other 8p of your unit rate is profit for the supplier.

                    Comment


                      #11
                      Originally posted by Malcolm, Essex View Post
                      Do you ever wonder what consumer goods including holidays/cruises really cost, before the profit margin is applied?

                      I don't claim to know the answer, but I know that most things cost a hell of a lot less than we pay!
                      In the case of holidays, if you can take them in the low season then you may well be paying less than they cost! Companies like TUI routinely report losses for half the year.

                      Many consumers seem to have concept of the value of what they are buying. They think things are in the shops are overpriced, yet many will happily pay a ridiculous amount of money for coffee in a cardboard cup.

                      Comment


                        #12
                        I should have used a cup of tea as my example - not a plastic gizmo.

                        Tea bag - Trade price about 0.5 p each
                        Hot water - 0.1 p a pot
                        Milk - 1p per 20ml jug
                        Sugar - 0.5p a sachet

                        So total 2.1 p a pot - typical selling price £1.00 to £2.00 a pot.

                        At least they only add a service charge in up market restaurants and PAYG cruises.

                        Cheers

                        Tony B

                        Comment


                          #13
                          Originally posted by toshtosh, Guiseley View Post
                          I should have used a cup of tea as my example - not a plastic gizmo.

                          Tea bag - Trade price about 0.5 p each
                          Hot water - 0.1 p a pot
                          Milk - 1p per 20ml jug
                          Sugar - 0.5p a sachet

                          So total 2.1 p a pot - typical selling price £1.00 to £2.00 a pot.

                          At least they only add a service charge in up market restaurants and PAYG cruises.

                          Cheers

                          Tony B
                          Tony, it's a variation of the same argument, you are sat in a cafe/restaurant with all the associated costs, served at a tale etc, etc.

                          The owners need to cover their fixed costs and then add on a profit margin.

                          John

                          Comment


                            #14
                            Originally posted by toshtosh, Guiseley View Post
                            So total 2.1 p a pot - typical selling price £1.00 to £2.00 a pot.
                            In London you can pay £5.00 per pot of tea, or more.
                            See my cruise blog: HERE

                            Comment


                              #15
                              Originally posted by Malcolm, Essex View Post
                              In London you can pay £5.00 per pot of tea, or more.
                              If you are daft enough

                              Annie

                              Comment


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