Kim I understand your point. I feel it is only a minority who believe it and from the post you read you will see that they might have a lack of understanding on how a business operates and may not understand the difference between gross profit and net profit.
In theory this might sound ok, but if it was so simply then why do all the shops not do this then??
The reason it that you need purchase very large volumes to do this and if you did you would use up your working capital.
Every business has an operating cycle and a capital investment cycle.
The cycles in some businesses are longer than others and some cycles require more cash.
WHOLESALERS-wholesalers buy from the manufacturers and sell to the retailers. The operating cycle is the most important cycle in wholesaling companies. Fixed assets are not a major part of the business.
RETAILERS- Retailers sell products directly to the customer. The length of the operating cycle ranges from a few days and as long as a year.
The length of the operating cycle will also affect profitability.
For example
A wholesaler may carry several different types or brands , but should be focusing attention on the fastest moving items. good wholsalers will not carry a heavy or broad inventory,,instead they move inventory quickly from the manufactures to the retailer.
BY comparison a retail has to take inventory risk. Customers want choices and selection. This means the retailer must carry a relatively broad inventory.In thoery therefore ,the retailer should be compensated with higher profits for taking a higher risk associated with a longer operating cycle.
Even the Warehouse(red shed) buys from wholesalers and not direct from the manufactures,
I am sure after posting this Pies ,all wholesalers will put a stop to this , so i quess it wont be a problem for Retailers and your deliema in the future.
I understand that wholesalers are reviewing this anyway as trademe is a classic example of this.