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Thread: If gasoline has such a low profit margin, then why the huge difference in prices?

  1. #61
    Quote Originally Posted by Art Mann View Post
    The oil industry does not set prices at local stations. Also, 11% is a tiny markup compared to many things you buy without giving it a secon thought.. I would not be surprised to find that tool stores mark up their products 40% or more. Caskets are often marked up 300% or more as your punishment for dying.



    I worked for a Home Center. Black & Decker, Makita, etc...make the bulk of the profit. A 14.4V DeWalt drill was sold for $221 around the year 2000. The store itself, Builder's Square, paid $207 making a profit of $14. I know this for a fact because I worked there and could actually see the store's cost on the computer for each and every item in the store. Tool stores don't mark up their products 40% or more.

    Now, in 2014, the profit isn't much better, but the volume of drills that they sell is more, a lot more.

    For what it's worth Art, I used to think the same thing, until I had a short stint there 15 years ago.

    Another example: Costco had a pair of Calvin Klein jeans that they bought for about $22 (it may have been $24) and sold each one for a $1 profit. How could they do that?

    They sold over 20 million pairs of those jeans in their many stores throughout the world, making a very good profit on the sheer volume of their sales. I got that directly from a Costco employee while we discussed their store policy of no more than a 15% mark-up on everything sold in their stores (there were 2 or 3 exceptions with jewelry being one of them). A tv that they sell for $400 has a maximum profit of $60 (15%) that Costco makes, but it's usually less. The volume that they sell is huge.

    We buy their gas and save 4% at the pump every time that we use it. Every February we get a check of about $250 back ($265 last year). Their price is already lower than any gas station around, and then with an additional 4% more off for our business membership, we can't beat it...even though gas is still toooooo high, in my humble opinion.

    Sorry, I know my post wasn't mainly about gas, but I just thought it was worth pointing out.
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  2. #62
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    Small world...
    I too worked at Builder's Square back in the mid 1980's.

    Horrible place to work.
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  3. #63
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    Deleted. Posted to wrong thread.
    Last edited by Brian Elfert; 08-27-2014 at 1:13 PM.

  4. #64
    Quote Originally Posted by David Cramer View Post
    I worked for a Home Center. Black & Decker, Makita, etc...make the bulk of the profit. A 14.4V DeWalt drill was sold for $221 around the year 2000. The store itself, Builder's Square, paid $207 making a profit of $14. I know this for a fact because I worked there and could actually see the store's cost on the computer for each and every item in the store. Tool stores don't mark up their products 40% or more.

    Now, in 2014, the profit isn't much better, but the volume of drills that they sell is more, a lot more.

    For what it's worth Art, I used to think the same thing, until I had a short stint there 15 years ago.

    Another example: Costco had a pair of Calvin Klein jeans that they bought for about $22 (it may have been $24) and sold each one for a $1 profit. How could they do that?

    They sold over 20 million pairs of those jeans in their many stores throughout the world, making a very good profit on the sheer volume of their sales. I got that directly from a Costco employee while we discussed their store policy of no more than a 15% mark-up on everything sold in their stores (there were 2 or 3 exceptions with jewelry being one of them). A tv that they sell for $400 has a maximum profit of $60 (15%) that Costco makes, but it's usually less. The volume that they sell is huge.

    We buy their gas and save 4% at the pump every time that we use it. Every February we get a check of about $250 back ($265 last year). Their price is already lower than any gas station around, and then with an additional 4% more off for our business membership, we can't beat it...even though gas is still toooooo high, in my humble opinion.

    Sorry, I know my post wasn't mainly about gas, but I just thought it was worth pointing out.
    Costco is a different model, though. The last time I heard a description of their cost structure, they said they set the prices on the goods to cover their expenses, and rely on the membership fees for profit.

    Hartville tool used to run a cost+10% summer sale each year, which really gave you an idea of what things cost them. The few things I ordered from the US barely changed in price - maybe 10% on average. The import accessory stuff cost about a quarter to a third of what it cost at their regular catalog prices (some far east lumber rack kits, etc).

    It's not hard to figure out why all of the home centers want to take away legitimate tools and fill the racks with garbage accessories from china, and then play goofy games with coupons while jacking up the remaining legitimate tools.

  5. #65
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    Quote Originally Posted by David Cramer View Post
    I worked for a Home Center. Black & Decker, Makita, etc...make the bulk of the profit. A 14.4V DeWalt drill was sold for $221 around the year 2000. The store itself, Builder's Square, paid $207 making a profit of $14. I know this for a fact because I worked there and could actually see the store's cost on the computer for each and every item in the store. Tool stores don't mark up their products 40% or more.

    Now, in 2014, the profit isn't much better, but the volume of drills that they sell is more, a lot more.

    For what it's worth Art, I used to think the same thing, until I had a short stint there 15 years ago.

    Another example: Costco had a pair of Calvin Klein jeans that they bought for about $22 (it may have been $24) and sold each one for a $1 profit. How could they do that?

    They sold over 20 million pairs of those jeans in their many stores throughout the world, making a very good profit on the sheer volume of their sales. I got that directly from a Costco employee while we discussed their store policy of no more than a 15% mark-up on everything sold in their stores (there were 2 or 3 exceptions with jewelry being one of them). A tv that they sell for $400 has a maximum profit of $60 (15%) that Costco makes, but it's usually less. The volume that they sell is huge.

    We buy their gas and save 4% at the pump every time that we use it. Every February we get a check of about $250 back ($265 last year). Their price is already lower than any gas station around, and then with an additional 4% more off for our business membership, we can't beat it...even though gas is still toooooo high, in my humble opinion.

    Sorry, I know my post wasn't mainly about gas, but I just thought it was worth pointing out.
    Big box stores and Costco are not what I would call tool stores. The kinds of places I am referring to are Woodcraft, Rockler, Highland Hardware and similar and the products I am referring to are table saws, jointers and other similar stationary equipment.

  6. #66
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    Quote Originally Posted by Kent A Bathurst View Post
    However, off Peachtree, 4 - 5 miles away, are 3 stations staring at each other across an intersection. Their prices are a penny or so different, and all are 25 cents less - maybe more - than the 2 on Peachtree Street.

    Rent on Peachtree is probably staggering. There are no other stations nearby. Gonna run 5 miles for 10 - 15 gallons cheaper? Many of us would. Many people are in a rush and don't.
    Wow! We often see the price difference between places in high-rent areas, or busy or convenient places on main thoroughfares or interstate exits and places a bit further out, but around here, I don't remember ever seeing it 25 cents cheaper!

    If I'm buying 10 gallons of gas, 25 cents cheaper saves me two and a half bucks. 5 miles probably costs me 70 or 75 cents depending on how much the fuel in my tank cost me, but I get about 26 MPG. Depending on other factors then, that extra time might be worth it. Certainly for 25 cents cheaper, it could be, especially if I was driving that way anyway, but the savings goes down if I'm not buying a full tank. If I was getting considerably less MPG, it might be less appealing - if I was running a less fuel-efficient car that got, say, 14 MPG, and that 5 miles costs me $1.30, it changes the price saved, but of course, it depends on how much fuel I'm buying.

    I get a feeling, though, that I'm probably an out-lier here, as I have a relatively small tank. If you're putting 25 gallons in a big truck tank, the math changes.

    I used to have a coworker that would drive way out of her way to save 2 cents on gas - that I always found ridiculous, especially since she was only putting 7 or 8 gallons in at a time.

    It made me think of this comic:

    http://xkcd.com/951/

    The roll-over text on that alludes to it - on a lot of cars and situations, you can actually spend more getting to the cheaper gas than you save on it. But man, 25 cents throws that out the window.

    I just find this silly math stuff fun - there's actually a website here:

    http://www.bankrate.com/calculators/...alculator.aspx

    That helps you calculate the actual savings (or cost penalty) of hunting for cheaper gas. It assumes that you're putting in a full tank (or whatever amount you're punching into the "capacity of your cars gas tank" field.) Playing around with it is neat, to see how different things change the savings.
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  7. #67
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    I used to drive the 16 miles round trip to a station that sold diesel for something like 20 cents a gallon less. It saved me money even with the cost of driving the round trip. Their diesel also wasn't blended in the winter and used an additive instead so I got better MPG from their diesel.

  8. #68
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    Don't forget the extra wear and tear on your car... oil, transmission, brakes/rotors, tire wear, etc. Doesn't seem like a whole lot, but those pennies can add up quickly, and that $0.20/gallon savings starts to dip a little lower.
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  9. #69
    Quote Originally Posted by Art Mann View Post
    Big box stores and Costco are not what I would call tool stores. The kinds of places I am referring to are Woodcraft, Rockler, Highland Hardware and similar and the products I am referring to are table saws, jointers and other similar stationary equipment.

    Sorry Art, my bad. I totally misunderstood.

    As for Woodcraft, I truly don't know but I'd be surprised if it was anywhere near 40% for the big tools. But...I may be all wet as I've never worked there and am only guessing.

    Respectfully,

    David
    Life is a gift, not a guarantee.

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