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Average markup in a showroom?

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08 Oct 2013 09:27 #1 by arsarca
Hiya Mattress Underground!

I know that mattress showrooms have extraordinary markups, but I'm wondering how much these markups are. Are there former (or current) employees that know? I'm trying to argue my mother into *not* buying a showroom mattress (that these aren't really "deals" because of their constant sales &c.) and, well, yes, I'm trying to make a point about how corrupt these places are.

And what's the commission typically? It just seems to me that, well, my guess is that 75% of the price of the average showroom mattress (we'll say that it's MSRP for the sake of argument) actually goes to overhead and commission. I guess commission is probably part of overhead. But what's a typical commission? Do these guys get minimum wage otherwise?

Anyway, your collective wisdom much appreciated.

Thanks!
Margie

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08 Oct 2013 09:46 #2 by budgy
Replied by budgy on topic Average markup in a showroom?
This markup can vary quite a lot, typically in big box stores that carry 'unidentifiable' product the mark up is much higher. So big brand mattresses that are basically the same every where you go but use different names, different fabrics that are nigh impossible to cross shop. Those are the worst offenders in terms of profit %.

Typically more transparent companies that put all the info out in the open and the names are easier to find and compare will not have the same markup. Although granted you are not also likely to find the product @ 40~50% off because that would be all or almost all of the profit gone for the retailer.

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08 Oct 2013 09:58 #3 by arsarca
But say, for sake of argument, a Tempurpedic mattress that is at MSRP.

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08 Oct 2013 10:18 - 08 Oct 2013 10:19 #4 by budgy
Replied by budgy on topic Average markup in a showroom?
Tempur-Pedic specifically I know is different in the US and Canada. I am actually a retailer in Canada that carries Tempur-Pedic and I can tell you at MSRP the margins vary from high 40's to mid 50's. (48~55%) depending on the product which is certainly healthy markup however I am a small family business, I would suspect that the big national chains that carry the product probably do pay less for it but that is my own personal assertion. I have heard that in the US the margin's are significantly higher but I have no way to independently verify this. Typically the margins are higher in the US market.
Last edit: 08 Oct 2013 10:19 by budgy. Reason: Spelling mistake

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08 Oct 2013 13:44 - 03 Dec 2018 19:59 #5 by Phoenix
Hi arsacara,

I know that mattress showrooms have extraordinary markups, but I'm wondering how much these markups are. Are there former (or current) employees that know? I'm trying to argue my mother into *not* buying a showroom mattress (that these aren't really "deals" because of their constant sales &c.) and, well, yes, I'm trying to make a point about how corrupt these places are.


You can see a few examples of some of the gross margins for a few companies at the end of post #2 here . There are also margins along every step of the supply chain from the production of raw materials to the final sale to a consumer so the more steps there are in the chain the more the margins will compound.

And what's the commission typically? It just seems to me that, well, my guess is that 75% of the price of the average showroom mattress (we'll say that it's MSRP for the sake of argument) actually goes to overhead and commission. I guess commission is probably part of overhead. But what's a typical commission? Do these guys get minimum wage otherwise?


MSRP is usually a fake price that has been artificially marked up (say double) for the sake of making mattress sales look good and has little to do with the price the mattress is ever sold at but you would probably find that 75% of the MSRP would be profit if it actually sold for that much. You will also find MAP pricing (minimum advertised prices) and also MSP (minimum selling prices) with some manufacturers. Based on actual average selling price though a reasonable example may be a company like Mattress Firm which has a gross margin of about 40% based on their actual sales.

Most retailers will have margins in the range of 40% - 50% at the end of the day (after returns and exchanges etc).

There is a wide range of sales commissions depending on the retailer or whether they are on straight commission or a combination of base wage and commission but they are usually on a sliding scale up to about 20% or so calculated as a percentage of the gross profit of the mattress. If the salesperson gives a bigger discount their percentage commission can also go down. In some cases they also receive a SPIF (or SPIFF) which is a Sales Performance Incentive Fund from the manufacturer which "encourages" them to sell certain mattresses. At some times of the year some stores will also have contests where employees are more willing to reduce their commissions in order to win cash prizes.

Phoenix

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Last edit: 03 Dec 2018 19:59 by Administrator TMU. Reason: Updating link to https: status

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08 Oct 2013 16:16 #6 by MattressToGo
MSP of the Tempurpedic line in the US is well north of 50% MU (double cost). Not taking returns/cost of doing business into account. Without naming brands, some of the "lower-end" brands that visit my store - brands that talk about being "just as good as" premium products and rely upon look instead of substance - tend to run at a 50% MU. The whole sales pitch is, "You can run this bed in a queen at a cost of 150 for 299 all day long." They never talk quality - only margin. Those beds aren't MMAP or MSP constrained. Throwing an example of some of the major brands in the top 10 of sales, margins in stores for entry adult support in the 40-43% range completely normal. As you go up the line suggested/common selling prices 50%+ very common. 60% more common than you might think with some MSP items. Also, margin varies by store of course. Some stores, like a large NE sleep chain one of my reps visited, showed a $300 cost pillowtop at $999 - a 70% MU! It was that way with most beds. Idea is that salesperson negotiates with consumer and tries to keep as much profit as possible while consumer thinks they're getting great discount. And hey, that's retail and if you're ill-informed you'll never know if the price you're paying is fair. Underscores the need for people to be informed.

Full faith disclosure - I'm not talking about brands I currently offer in my stores.

Hope this helps answer your question.

-Jeff Scheuer
Mattress To Go

Jeff Scheuer, The Beducator™ Owner of Mattress To Go
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08 Oct 2013 19:41 #7 by dn
Replied by dn on topic Average markup in a showroom?
This, of course, isn't by any means custom to the mattress (or even bedding) industry. Interesting for the business types out there, but some people get 'upset' when they see someone else making money. 50% gross profit (sell price - cost of goods sold) / sell price isn't outrageous by any means, especially with brick and mortar stores that have rent and staff.

Some folks shopping here will pay more for an iPhone / iPad than a bed...Apple didn't get a multimillion dollar war chest trying to sell for cheap. The iPad cover is my favorite, commanding hundreds of percentage points. So, if there are folks out there 'upset' at the margins in mattresses, check out your other household products before getting too upset ;)

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12 May 2016 21:07 #8 by Mattress Ex
The mark up depends on the type of store and where it is in the country. The more expensive the product is, the more margin there is for the retailer. There are big retailers that sell things across the board for 30 margins but you will not find a lot of MAPP product in their stores. MAPP means they are price regulated. Tempurpedic have the highest margins (57 to 72)for the retailer and are highest margins for the manufacturer as well. Commissions range from 2% to 10% for the sales person. A high volume store pays 2-4% but the sales person writes 100-400K where sleep shops pay around 2K a month plus bonuses for meeting budget requirements.

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12 May 2016 22:03 - 13 May 2016 13:08 #9 by Phoenix
Hi Mattress Ex,

Thanks for adding your experience and insights to the topic ... I appreciate it :)

There are big retailers that sell things across the board for 30 margins but you will not find a lot of MAPP product in their stores.


30% is very low and outside of some "lost leader" mattresses is a significantly lower margin than I've seen in any retail stores I know of.

Phoenix

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Last edit: 13 May 2016 13:08 by Phoenix.

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27 Jun 2016 13:48 #10 by MattMark
Well said.

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