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Old 03-14-2018, 04:39 PM   #132
twistedtree
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Quote:
Originally Posted by BandB View Post
The problem is there are no other large marine retailers, which is why they're in the automotive segment. However, you can put them in any retail segment outside of mass merchandisers, groceries and internet, and their margins are inadequate.

I don't know what you mean about "when there is over 50% on the table." There is no evidence that they have over 50% available to them. I doubt they can ever get to 50% but they need to increase rather than decrease margins and the ways of doing so are better buying and better product mix. The other approach is the larger stores doing more volume per store and therefore reducing expenses as a percentage of revenue. If they were able to increase gross margins to 31% and to decrease expenses from from 27% to 25%, then they end up with a 6% pre-tax profit and that would be ok for their industry.

They face a real challenge.

The larger stores might work as an approach as they could provide service on the main products they sell, but still have room to add some additional sales and margins on other items they haven't been stocking adequately.

Here's a bit of an odd type rule of thumb. The smaller the store, the higher the gross margin must be. So, take a 10,000 sq ft West Marine store and 29% is deadly, but increase that store to 27,000 sq ft and it's not as bad. Then utilize the extra space to increase gross margin slightly and you have a workable solution. In my opinion, their smaller stores can't work. They remind me somewhat of the old Sears Mail Order stores that carried a few products but everything else had to be ordered. Those stores lost so much money.
What I meant by "50% GM on the table" is with respect to Automotive parts stores. I agree it's unlikely 50% is available in marine, hence the not-so-great comparison to automotive where there apparently is.

I guess what I don't understand is how other retail marine outfits can operate on the margins that remain after selling somewhat below MSRP, where West needs MSRP+30% and still isn't as successful as they want/need to be. Any business that sells at MSRP+30% seems to be broken to me.
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