Monday, 8 November 2010

Buy One Get Two Free, serious?

Running the numbers on a BOGTF suggests that if the initiative becomes as 'popular' as a BOGOF, the supplier will end up providing the two free units per deal...
...suppliers should possibly be grateful that they are not also invited to maintain retailer margins, given that the retailer will still lose approx 50% on each deal...!


Anonymous said...

Your maths are wrong!

Cost = 5.25
Handling = £1.05
Overheads = £0.525

Total costs = £6.82

Income = £3.50
Net = -£3.325
x 10,000 = £33,300
NOT £59K

Brian Moore (NamNews) said...

Thanks for your comment, Anonymous. All comments always very welcome, thanks for the oportunity to clarify the BOGTF issue: This relates to the first slide above. When a retailer sells the deal for £3.50, they make a gross margin of 25% i.e. their income is £0.875 per deal, in that they have to pay the balance of £2.625 to the supplier. They also have to pay for aditional two free units + handling, and overheads on all three items. Thus a total loss of £5.95 per deal, or £59.5k loss on 10,000 deals.
Hope this helps,