Average markup in a showroom?

[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