Markets/Margins

Every market is a whole new world, and in each of them there are some rules, a way to do things, and some limits to do business. Depending on the product and the market in particular, the profit margins can vary a lot. For example, the profit margins of the clothes have nothing to do with those of high end components. Consumables base their margins on volume of sales, while high end bicycle frames are sold with another kind of margins. Which of these products gives you better profit margins? Is it better to go for the products that sell in larger quantities? There are many answers to these questions, and some are quite the opposite of what one would expect. It is assumed that a product that sells by thousands will have a tighter margin, and that the profits are made thanks to the volume, but it isn’t always this way. It can be surprising how margins can vary in every situation.

Does it affect the final price of the product? Isn’t it normal that the lower priced products will sell more? Many answers don’t respond to rational logic, they are completely irrational but it is how margins work in the markets, and there are certain rules that one does not have the power to change or avoid.

It can be very beneficial for you company to know the margins in every sector, but especially what margins are normally used in each country, because if your company plans to do business abroad, you need to know their numbers.
This way you will know the real possibilities of entering that market and if your products will be successful, if it will be easy to find distributors or if they won’t be able to work with the margins you offer.

It is all a matter of balance but in every market there are some minimums, if one is not able to comply with them, it won’t be possible to stay afloat and there will be no other option but to be smarter and consider other business models which are less traditional, and to a certain extent, imply more risk. However, these might be more appropriate for your products and the size and shape of your company. Having in advance the information about the necessary margins to deploy in each market you will know where you are, what possibilities you have and confirm if everything is like you ‘expected’ from the beginning.