Profit Margins and Competition in Fashion Industry

1. Profit Margins and Competition in Fashion Industry

2. Profit Margin • Profit: money left after expenses are deducted from sales • Sales-Expenses= Profit • Gross Margin: profitability after the cost of making or buying the product is subtracted from the sales • Profit Margin: ratio of profitability calculated as net income divided by revenues or net profits divided by sales

3. Profit Margin • How much a company actually KEEPS in its earnings • Useful to compare companies in similar industries • Shows the health of a company • Also called Return on Sales • Markup vs. Profit Margin • Profit margins and markup calculators

4. Markup and Profit Margins • Same figures, different terms • Markup: (also Markup on Cost) • (Retail price-wholesale price)/wholesale price • Profit Margin: (also markup on retail) • (Retail price-wholesale price)/retail price • (Retail sales-cost of goods sold)/retail sales

5. Profit Margin • Gross Profit Margin: • What remains from sales after a company pays out the cost of goods sold • Net Profit Margin: • What remains from sales after paying taxes and cost of goods sold

6. Calculating Profit Margin • Gross Profit Margin • Gross Profit / Total Revenue • Net Profit Margin • Net income / net revenue

7. Typical Profit Margins in Retail • Higher Volume Stores = Lower Profit Margins • Lower Volume Stores = Higher Profit Margins • Typical Markup: 40% or more in retail • Typical Profit Margin: 2% +

8. Controlling Expenses to Increase Profit Margin • Employee productivity • Utilities • Loss Prevention

9. Typical Profit Margins in Wholesale • Vary greatly from business to business • Factors Affecting Profit Margins: • Labor • Materials • Overhead • Risk

10. Overall Tips to Increase Profit Margin • Computerized systems to manage inventory • Effective positioning • Effective pricing strategies • Accurate buying decisions • Following a budget with a specific open-to-buy • Analyze vendor performance • Consider adding private label brands • Effective visual merchandising

11. Competition in Fashion Industry • Heavy competition to get into the industry • Competition in designs • Competition in brands and brand awareness • Competition in wholesalers • Competition in retailers • Competition for market share • Competition with internet