Hello all,
I'm starting a new venture to design and sell Arduino shield boards. You can see what I'm working on here:
I'm getting quotes to have the boards built now and I'm trying to figure out pricing. The part that I'm unsure of is what to expect that a distributor would want for markup? Most places sell the Arduino Duemilanove for around $30 to $35, so I'm guessing they pay a wholesale price that something below that. I also expect that some products may have a smaller markup depending on how popular they are.
The typical number thrown around is about 40% at each level of distribution. So your $30 arduino should be costing about $11 to manufacture (which sounds "about right.") The other number I see a lot is that retail prices is about 5x the "parts cost" (where "parts cost" is something like "major chips + pcb" rather than a detailed summation.)
There was a Panel at Maker Fair (featuring Limor and others), and it was pretty good. All panelists were pretty big on "DON'T set your price too low" (and the mark-up IS bigger than you'd like.)
You can probably go lower than 40% if your whole distribution network is "open source aware" and wants to discourage people from just going off and making their own. You probably need to go higher if you want your product to show up at Radio Shack or Fry's. (I've seen some interesting articles on sales strategies at such stores - you don't push sales of the "expensive" items, you push sales of items where the retail markup is large...)
I sell some electronics kits on my blog (for my personal satisfaction only, not to make a living) and doing the math so I won't end up with a loss was quite unpleasant. I didn't use the flat 1.66 factor, but tried to account for every possible thing (shipping, ebay/paypal/etsy fees ...) only to find out that this is a royal pain in the a... To get a competitive price (there's a similar and cheaper product made in china), my calculation was pretty tight. Some weeks later I had a lost shipment to Italy. To recover from that, I need to sell quite a lot of kits.
So if you're serious about this, you need to put some thought/effort into price/service/documentation. If you have competition, having other products in your store that people might find useful is a good thing too.
The typical number thrown around is about 40% at each level of distribution
That's the markup we used for high-end software. It seems to be a very common number going from wholesale to retail.
All panelists were pretty big on "DON'T set your price too low"
No doubt! You can always temporarily lower your price with a sale or promotion but, once a baseline price is established, it is very difficult to raise it. Our customers threw fits when we'd raise our price by even tiny amounts.
I don't know, but it sucks. The 1st parcel was lost. The 2nd one I sent down there using registered mail and never got the delivery confirmation sent back to me either. A lost shipment inquiry finally said something like this: "... Italian mail confirms delivery, but the return receipt got lost". Go figure!
Here's an interesting forum post about this topic. Quite horrible too.
Thanks everyone for your great replies, this forum is one of the best.
I can live with a 40% markup, 66% seemed high. I've worked at places before where we had to scrap entire batches of boards because of a PCB mistake or a manufacturing error. So I've been trying to think about that when accounting for costs. But I can't say I've had lost shipments problems, sorry to hear about that.
Keep in mind that a lot of the time people mention 40%, they mean margin, not markup. A 40% margin is equal to a 66% markup. (If I buy something for $6 and sell it for $10, my margin - $4 - is 40%, but the markup is 66%.)
Keep in mind that a lot of the time people mention 40%, they mean margin, not markup. A 40% margin is equal to a 66% markup. (If I buy something for $6 and sell it for $10, my margin - $4 - is 40%, but the markup is 66%.)
Thanks for the explanation that makes much more sense now. These terms are all new to me.
