Guy does $2 shops really makes profit? Where do they get products from? Whats their margin? Whats are their expenses? What are labour costs? Does not need exact figure, also please specify any assumptions. Thanks a lot in advance.
$2 Shops Profits
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Yep just look at the cost of things from china on eBay. If you factor in mass shipping they can make a huge profit.
Whats their margin? Whats are their expenses? What are labour costs?
How is anyone going to know?! Unless they run a store
@Spackbace- you are right, i'm just after a figure doesn't have to be accurate. All we can do is take some assumptions and calculate uniquely to come up with 1) no of sales on an average day 2) average sale dollar amount 3) Expense and then we can calculate profits roughly. Yes anyone doing that business will be more accurate.
1) no of sales on an average day 2) average sale dollar amount 3) Expense
1) Depends on the day, location, buying confidence, sales in surrounding stores, weather
2) $2
3) Well that depends on number of staff, store location (ie rent price), cost of insurance (varies between suburb)If you're looking to see if its worthwhile to buy into, or to see what sort of income it can provide you, noone here can provide that information, nor would I be basing even an estimated guess on whether or not you buy into a store.
Sure there's no doubt it turns a profit, but as to how much, it's anyone guess (and not an accurate guess!)
2) each customer doesn't necessarily buy only one item. Like i bought 4 items yesterday. If i have atlas 20 buying customers each day with 4 items per customer, making 160$ a day multiplied by 30 makes it $4800 per month. Could be more or less… without factoring expenses like rent, bills, labour cost, returns & handling etc…
Can i safely assume there will be more than 200 items *$2 = 400 per day * 20 days a month = 8000$ - $2500 rent - $2000 bills - $3500 labour = 0$ profit lolz…..:2000 in bills seems excessive, but sometimes they include it into your rent.
$1-$1.9 profit per item, is this what you want? I don't run a $2 shop, but I know you can get your trading stock very cheap in China.
Why I get neg votes for my comment? I think what I said was true and valid.
Maybe it was some offended Chinese people… I don't know, "we aren't that cheap, biggest GDP!" yadda yadda…
never heard of a chinese person being offended by that.
Obviously they run at a profit, otherwise they wouldn't be able to pay their expenses like bills, wages and rent.
Unless they're a front for laundering money…
A whole $2 at a time. Bloody genius!
Why would anyone open a $2 if it was going to run at a loss? (apart from possible tax break reasons)
Most $2 shops have access to large warehouses and run in chains so they can purchase cheap/rejected/low quality items in bulk and then redistribute them to the chains to sell for $2. Example would be like a dinner place, purchase is bulk for like 10c each, sell for $2. Margins or items would be surprisingly significant however brings it back in when you factor in shipping, labour, rent etc. Owning one $2 store probably isnt going to make you rich, but owning a chain would be rather decent
They wouldn't be in business if they didnt make a profit.
my take is, all business active including $2 shops runs on profit/loss in specific seasons. I know sales gets dropped in winter for $2 shops as less buyers. I was expecting some similar factors.
It depends on location- I used to work at a discount store located on the street, so we'd get less people in the morning and night, but we put all our winter stuff (scarfs, gloves, etc) out front and people would quickly pop in and buy them. If in a shopping centre, then business as usual.
Or it could be a front for money laundering … who knows bahahahaha (flies away)
Yep, probably better off opening a car wash.
I see what you did there
Most business's DO NOT make a profit.
4 out of 5 business's fail in the first 5 years.
Therefore, if we are to make blind assumptions… odds are it probably doesn't make a profit.
This is not possible, if 4/5 businesses failed every 5 years, the whole country would be bankrupt, where do you think all this money comes from ? then goes to.
This is just a stupid so called "fact" that uninformed people keep parroting around like they know what they are talking about.
it goes to the 20% of business that succeed
Agree. 80/20 rule says 80% of profit will go to the top 20% of performing businesses.
bikies!
Serious lack of maths and common sense here.
Some businesses stop trading in their first few years. Many are profitable, just the principal can do better elsewhere, or the circumstances change (rent rises etc.).
If you are making a loss, I doubt there would be many businesses left at 6 months!
And remember the "stat" is about new businesses. In my town, there are something like 75% old businesses that have traded for decades. The butcher, the baker, the book shop, the dress shop, the Chinese restaurant, the Take away, the bank etc. Sure, many of the new businesses don't have the same staying power (Frozen yoghurt, premium leather goods etc) but this doesn't mean 80% of businesses are making a loss.
Crikey!
A disproportionately large number of those failed businesses are restaurants and coffee shops. We all know how fickle the foodie scene is; as for coffee shops, a lot of people (mostly coffee lovers and uni students) have this notion that it's easy to open a cafe and ride the '$4 boiled flavoured water' money train.
Used to work at a discount store- owner would buy direct from the warehouses in China and they'd ship over massive amounts of stock that we'd keep out back and just fill the shelves when needed. Chips would be near expired so we'd get them cheap as and sell as a 2 for $1 deal. Always had people coming in for drinks and cheap snacks, as well as hair products (hairties and brushes sold really well).
Would get heaps of sales during back to school and Christmas time- would have an aisle just for these things near the front of the store and it would be a mad house.
I can't tell you any actually numbers but I remember looking at invoices a few times and seeing, let's say something like a box of 12 notepads costing about $4, we'd charge each individual notepad about $1-2 depending on the size. Cheapest stuff was the gift wrap, bags, cards and stickers- can charge each $2 and get money back just by selling a few of each item.thanks Enidan, that was helpful. Do you know how is the setup cost for a $2 shop? I'm gathering this information for a friend actually.
Wouldn't have a clue- I was a casual there while studying and the shop had been setup for about 5 years prior to that.
I dont own shops but to set up, i suppose you will need at least like 200k or more to start comfortably. 100k range is ok but probably will struggle a bit. This is because shelvings costs quite a bit. Then storage. Then deposits for rents. Rents. Marketings. Loss of first few months. Wages. Some suppliers will ship you the products you ordered at rubbish quality and you will have to discard or go through return plus arguments. I know that shipping a container will set you back around $5k-7k. And a container will probably not going to fill up a shop.
Be sure to pick a good location, opening at a suburb full of ozbargainers like me and you're screwed lol
Take a look through your local one.
You will notice many items have similar distributors.
Check out Gala Imports, for example. They can supply everything you need to set up such a store, and I reckon answer your questions.
http://www.galaimports.biz/
I have seen some for sale suggesting $50k-$60k in stock included, so that might be a reasonable guess at what kind of capital you would need.
Post back here if you find out more, I'd be interested.I used to work at the $2 stores during school holidays. The turnover then was usually around $1000 on Saturdays. Mind you this was over a decade ago and there weren't so many competitions then. Nowadays probably not as profitable though.
The also purchase deleted stock in bulk from suppliers/manufactures/retailers. Case in point- My mother uses a particular shower gel (Radox Muscle Soothe) for my disabled father which we would usually get from Coles. A couple of weeks ago Coles has removed that line and replaced it with a new product from Radox. However now I can find the old product, in quantity and cheap at a couple of the $1/$2 shops around.
Hire staff that are under 18.
My theory too is a lot of staff are family members that don't actaully get paid but are on the books.
Do you mean the other way around?
I was at the $2 store in my area and saw a Chinese student applying for a job there and I overheard the interview.
It didn't say the pay though, sorry.So they do hire third parties.
my first question is why the interest in this question, the OP doesn't lead the post in any specific direction.
would it help the OP if the answers to the question were,,,
- no they don't make a profit
- all their products are all air freighted from Europe or hand made locally by blonde virgins
- they have a negative margins
- their expenses include extremely high wages, pay an exuberant amount in rent, and have a board of directors that draw million dollar salaries
- they do it because they like giving away stuff at really low prices so that the customers keep coming back for quality products, exceptional service and knowing the gift boxes they bought were folded by naked virgins sitting in rooms filled with cash.
Why are these virgins… blonde? Are European wages determined by hair colour? /plzexplain
Most people are brunette in Europe…..
I remember seeing a ($2.00)shop in Richmond advertising stuff as $1.80, then across at South Yarra this sort of shop was a $5.00 shop.
pay an exuberant amount in rent
+1
Hardly any of the $2 shops I see these days have anything for $2…
Yeah the only one that comes close are the Japanese Daiso stores where everything really does cost $2.80.
It boggles the mind how they can charge the same price for everything - as if they make up or bring down the quality of a product to reach the perfect middle ground.
Iceland, a discount supermarket in the UK generally rounded everything up or down to the nearest 50p. Every other supermarket in the UK might charge around 85p for a can of sardines but they'd charge 1 pound because "that's the system".
actually some products aren't worth $2.80 while some are worth more than that. I think they even the differences. In any case, I don't think any of them would have been bought for more than 2.80 (ie: they'd be selling some items at a loss). On a side note, their casual rates are very good.
They recently raised their prices back in April. Some items, such as the larger plastic shelving units, have increased up to $5 dollars. Which puts it in the same pricing as Ikea's small cube storage units.
I recently went to Japan and stores like Daiso there are actually based around the 100 Yen price, which equals to about $1.20 or less depending on our dollar value. Mostly made in China also, so even factoring the small shipping cost, they would still be turning some profit there.
really cheap bulk rate. Then combine that with a 40ft container of well stacked junk, imported at cost price.
Most items in $2 stores can be stacked very close to eachother and take up a very small footprint, that way they can shove as many into a container as possible.
Great summary of business model of Dollar Store in the U.S.
http://www.referenceforbusiness.com/business-plans/Business-…
The last thing the world needs is another cheap $2 shop selling junk that will become landfill.
At least give a thought into investing your $ into a business that sells quality.
Most of the products are the same, whether you spend $2 or $5 on the item in a "quality" store. Plus, most products are made of recycled plastic.
you are not thinking real quality.
e.g. one could buy a kitchen knife and spend $2 on it, and it would be pure junk. And 100% go into the bin. Or, one could spend $200 and keep it for a lifetime. It will be treasured. Taken care of. It can actually be sharpened and safer and a pleasure to use. Some of the extra money involved has a chance of going back into R+D to make better knives. It will also have a resale value on the 2nd hand market. It will never go into the bin. Buyer + Seller will be happier with the transaction.
With real quality Win Win Win all round.
who buys a knife at a $2 shop?
Anyway, the cheapo knife in my drawer is damn sharp. and it's sitting next to the expensive wusthof knife set. They both have their uses.
imagine its real quality stuff for cheap prices.. Australian business would be going down the drain real quick.
The last thing the world needs is another
How about you don't invest where I say to instead?
I worked at a $2 shop about 15 years ago. We had visibility of the wholesale prices of the goods. The average mark-up on products in that shop was 60-100%. They're cheap because they're selling cheap things. Sometimes their goods are parallel imports - so they're good value - but the store is still making money.
I can't say how they faired after other costs of business, but the shop I worked at is still there.
How profitable are '$2' shops? Well, some of them may not be.
https://www.google.com/finance?q=ASX%3ATRS&ei=PHyUVdniG8mH0A…
The Reject Shop's share price was as high as $18 in recent years, now languishing under $6.
reject shop is worth $164M, last year they sold $712M worth of stuff and made $14.5M net profit.
ie. if they sell a $2 item, they make about 4 cents after everything is paid for (including shops, wages for everyone including directors and their $650k+ relatively cheap ceo)
it also means that if you bought the reject shop, you'd earn about 8.8% profit (versus around 3.5% in the bank)
if you look at an individual store, you'd get:
how much would it cost to buy a store: $600,000*
how much stuff you'd sell per day: $7,000
how much profit you'd make per day: $145* ($52,000 /year)*as a comparison, if you bought $600k worth of aussie real estate without a mortgage, you'd probably make less than $50 profit per day (with a mortgage, you'd be losing money)
@Cluster Using a company's share price performance to determine whether they are profitable is a grossly inaccurate measure.
Loads of companies that are profitable can still see their share price decline. The share price is influenced by market expectations and posting a profit figure that is below what the market is expecting would cause the share price to drop.
Conversely, a company that posts a loss that is not as bad as expected could see their share price increase.
In the Reject Shop's case, they have given profit warnings (i.e. indicated they were going to miss profit expectations) and that's hit their share price. But they still made $13m profit in the first half of FY15.
http://www.news.com.au/finance/business/reject-shop-flags-24…
See here: www.aliexpress.com
The more you buy from these Chinese suppliers the more you save. I would imagine the $2.00 shops would get HUGE discounts for buying in bulk!
Isn't that the retail search engine for alibaba.com so er … don't look there.
Good questions. Maybe ATO should be interested in those business. I dare to say some of the business are for money laundering so profitability is not a concern.
Government also needs to attend to the import of those crap products, which mostly contribute to our landfill in Australia. All Australian and the future generation will have to shoulder the costs of disposing them in addition to the direct damages such as health care costs (for example you may be enjoying the cheap cosmetic products which are contaminated by heavy metal) and manufacturing business competition (obviously you support the crap then OZ manufacturing industry is even doomed).
Good questions. Maybe ATO should be interested in those business. I dare to say some of the business are for money laundering so profitability is not a concern.
lol, it's a huge company listed on the ASX. Not some sketchy business operating out of a garage.
Yeah, some of the biggest banks on earth are little more than money laundering fronts too, and have actually been prosecuted and fined as such inside the last 12 months, too.
There are entire economies around the globe that produce a hefty chunk of GDP just off the profits of laundered money & associated money havens.
That's interesting. Which banks have been prosecuted as money laundering fronts? Can you name a few?
Can certainly think of major banks who have been prosecuted for breaching securities or listing rules (the LIBOR fixing in recent years, and fines for misleading actions during the sub-prime crisis come to mind).
But for actual mafia-style money-laundering? Which of the (say, top 30) banks in the world are you thinking of?
HSBC was the biggest bank to get hit for money laundering cartel drug money & mafia proceeds of crime…. just in Europe last month. $40mil (US) fine for also covering it up once busted - http://www.theguardian.com/business/2015/jun/04/hsbc-fined-2…
Just the US-arm of the HSBC bank was busted by the Feds a few months back for laundering over $9.4 billion. They got hit for a $1.9 BILLION settlement with the US Government and other criminal charges are still pending as well. - http://www.bloomberg.com/news/articles/2013-07-02/hsbc-judge…
This is just one bank. Germany's Commerzbank was fine $1.4 Billion last year for the same. UK based lender Standard Chartered was hit for $300mil not long ago. The list is virtually endless. Banks are just one of the biggest & worst offenders.
I suspect one of the hidden costs would be buying a whole lot of widgetx but not selling any of them.
This of course applies to all retail & is a hidden cost of stocking stuff vs just drop shipping direct from manufacturers as required.
I'm guessing that all the online sales via click & collect going on a Dick Smith recently is a way of them testing the waters to see how much they really sell from walk-ins & whether the cost of just giving free shipping would actually be cheaper than the overheads of having a store & waiting for people to show up.I heard from someone who used to work at one that they account for something like 10% of stock to be damaged or returned. Also, returned electrical items had to be destroyed for some safety reasons, so his favourite part of the job was swinging toasters, etc. by the cord and smashing them into a wall.
TO make money requires people to buy stuff - the ones down the road from me never seem to have anyone in them.
I often wonder how they make any money
Probably a write-off to reduce tax on another successful business
A while back a $2 shop gave me their eftpos settlement instead of my receipt.
http://postimg.org/image/55pwrdn7j/
Being a business owner myself I found it quite interesting.
I could do some rough figures.
1200 eft, 300 cash (estimate?) $1500 per day. X 300 days. = $450k takings
Rent in a strip mall, approx 100sqm @350sq+Outgoings and GST = ~$40k.
Other expenses (insurance, phone, internet, electricity etc) = ~$10k
Wages ? 50k- 100k. depends how much you are there.
Markup? No idea.how do you know it's an EFT settlement? and not just the till takings?
I think you're right Davo. Doesn't look like a settlement to me.
Looks like each sale is approx $10 too
Daiso seems to make a profit from selling in Australia considering theyre opening up stores all over australia now.
Daiso would be more competitive against indie shops mainly because they have their own supply chain (55% of their products are made in Japan) and their shops, most importantly, have a revolving inventory (new stuff comes in all the time), and their assortment of stuff is nicely packaged and colorful. So this pulls a lot of customers in.
The traditional $2 shop usually sells the same stuff, everyday, 365 days a year, meaning you probably won't visit it again after the first few visits.
Opening more stores has nothing to do with how much profit they are making.
Daiso is a massive company, so the few little stores in Australia would mean nothing to them yet. They would be in it for the long term. They would need many more stores to gauge how well they are doing and to have sufficient volume moving through to justify all the additional costs they have for operating in Australia.
I use to work in one of the companies who use to supply stock to $2 stores and they usually have 50% margin but not every shop makes a lot. It totally depends on where your shop is (like near woolies or coles) and how many people walk by and walk in your shop.
Honestly I haven't found a literal "$2 shop" anywhere.
No doubt it's all cheap imported stuff from China.I used to work in a warehouse that imported the crap from China and its all imported in big shopping containers, usually 5000 of each item. Sometimes if there was a popular item they would bring in 10's of thousands.
On average I would say there would be a shipping container at least once a week.
Surprisingly some of the stuff had quite high prices, $20 or so.
yes they does make profit
Yes I think so too. Trust me, I'm a Capricorn and the son of a noble librarian!
Look on eBay, you can get the same shit for $1 shipped from China. That's saying something.
What that says is that Auspost is extremely expensive.
That much is obvious! It's actually really interesting how cheap it is for companies to ship bulk rubbish to individual addresses from China.
$2 shop also paying their employees who are overseas students $2 an hour cash. All profit. Cha ching!
$2 shops operate on skeleton crew, they don't need salespersons roaming around.
They just need 1 person to man the store, and occassionally another person to just stock the shelves. Unless it's a bigger chain store like Daiso.
It's literally the kind of business that can be run by the store owner and a family member.
$2 a day? That's a ripoff wage. Gina Rinehart can get $2 a day African labour.
No, more like $10 to $12 per hour, Cash…
If they don't pay any taxes as they can simply say that person earns less than the threshold amount!
ATO can certainly find that lots of shop are doing this, but i guess they just don't bother to spend their wages, $50/h roughly?? to do the audit, not worth it.. :)
federal gov efficiency dividend, do more with less. In public service that equates to do less with less. policies are in place that need to be enforced and ATO, Centrelink, fed law enforcement etc know about shiz going down but do not have the capacity, funding or resources to deal with it.
In terms of funding, i have a solution to it, which is lowering their salary lol :)
Then they can certainly "do more with less", right?!
I've always heard that government staff are facing redundancy, why the government doesn't halve their staff's paycheque and keeps people working for our citizens. Isn't it the government is working for their country and people??
I think i said those simply because i cannot earn as much as they can, haha :) but trust me there are lots of people eager to get those jobs, including me :)
The Govt has already started to cut wages and lay off staff in public service, hence all the industrial action plaguing the country.
Honestly though, depending at what level in public service you're in, you'll probably find the wages are a lot more in a big multinational at that equivalent level.the only benefit of public service is the work life balance and conditions, otherwise it is far from spectacular.
Don't sell yourself short, anyone can be a public servant just have to go through he BS or writing up a meaningless selection criteria.
I seriously doubt that.
With the non mainstream companies, they might hire students on student visas and allow them to work more than 20hrs/week, pay cash obviously.
I think you'd be laughed at if you offered $2/hr wage to anyone
Easy child slavery just offered my nephew $2 to wash the dog. He didnt laugh. Even chucked in a free blow dry ;)
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Every product comes from China.