How exactly do shopowners profit? #289802 - Ask Extension


How exactly do shopowners profit? #289802

Asked November 11, 2015, 9:27 AM EST

Okay, so I've been thinking about this a lot for quite some time now. A shopowner spends x amount to buy his goods and stocks it up. Now, all his goods don't get sold, only a small portion may get sold and according to me, that may barely be enough to cover his original expenditure leaving him absolutely nothing. And then again he has to refill his stocks and he spends all his money again.and the cycle repeats. So where exactly does he profit? This is my question and this has been bugging me for quite some time. I would really appreciate a convincing answer. Thanks in advance?

Volusia County Outside United States

Expert Response

It appears that the shop owner is selling a perishable product.  The shop owner purchases the x units of a product and marks up each unit by a certain amount for a profit margin.  It appears that profits generated from the units sold are barely able to cover the total cost of all the units that were part of the initial purchase.  I agree that the shop keeper is not generating a profit because he is not selling a significant number of units purchased in the initial purchase.

I would ask why is the shop owner consistently placing large orders and only selling quantities that barely cover the cost of the order?  Why does not the shop keeper order quantities based on previous sale records. 

If the shop keeper is able to sell greater quantities or nearly all of the items that are part of each order, hopefully he would be able to generate a profit selling the items assuming that his profit margins cover all operating and overhead expenses.

Peter Callan Replied November 16, 2015, 4:24 PM EST
Thanks a lot for this answer

The Question Asker Replied November 24, 2015, 1:55 AM EST

Loading ...