DarkRange55
Enlightened
- Oct 15, 2023
- 1,785
(This is for the US market)
Basic economics of oligopoly power (volume and discounts) and segmented markets -- convenience stores can charge more in neighborhoods with fewer options.
Convenience stores are usually more expensive for most items and 2 for one deals are to get more traffic in the store to buy other(greater Margin) items. For example, Minnesota's Quick Trip gas station convenience stores are really cheap on banana's and pizza (loss leaders) to get you in to buy more expensive gas and other items that are expensive. (Gas stations usually don't make a huge profit on gas, its really the F&B, air compressor, car wash, ect).
Shipping in volume to sell more product is cost effective if you also prevent sales to competitors. The sales discount given is a form of more advertising by selling more at a discount.
Retailers get paid about the same, but will give more shelf space to those products that are selling, so the more shelf space used in the store, the more noticeable(advertising) the brand is and the better showing space the retailer will give the product.
So it's a combination of Advertising, Product Bragging rights, Prime shelf space that pays for the price reduction.
If they dispose of the item, or they use a lower of cost or market valuation, it can be written off.
Inventory is an asset that is expensed when it is sold. If it is not sold, it is considered an asset on the balance sheet in most cases when you use the accrual method of account. If you use the cash basis of accounting, you can possibly expense the inventory before it is sold. There are rules on expensing these costs based on average 3 years of sales thresholds and types of industries the company is in.
For example, a wine distributor with over 3 million in sales is must use the accrual method to keep inventory and costs on their books, so assets on wine inventory are not expensed until sold, broken, or spoiled (and discarded).
Fuel stations are the least profitable segment in the oil distribution supply chain. About half of them in the US are corporate owned and the other half are franchised or independently owned.
Basic economics of oligopoly power (volume and discounts) and segmented markets -- convenience stores can charge more in neighborhoods with fewer options.
Convenience stores are usually more expensive for most items and 2 for one deals are to get more traffic in the store to buy other(greater Margin) items. For example, Minnesota's Quick Trip gas station convenience stores are really cheap on banana's and pizza (loss leaders) to get you in to buy more expensive gas and other items that are expensive. (Gas stations usually don't make a huge profit on gas, its really the F&B, air compressor, car wash, ect).
Shipping in volume to sell more product is cost effective if you also prevent sales to competitors. The sales discount given is a form of more advertising by selling more at a discount.
Retailers get paid about the same, but will give more shelf space to those products that are selling, so the more shelf space used in the store, the more noticeable(advertising) the brand is and the better showing space the retailer will give the product.
So it's a combination of Advertising, Product Bragging rights, Prime shelf space that pays for the price reduction.
If they dispose of the item, or they use a lower of cost or market valuation, it can be written off.
Inventory is an asset that is expensed when it is sold. If it is not sold, it is considered an asset on the balance sheet in most cases when you use the accrual method of account. If you use the cash basis of accounting, you can possibly expense the inventory before it is sold. There are rules on expensing these costs based on average 3 years of sales thresholds and types of industries the company is in.
For example, a wine distributor with over 3 million in sales is must use the accrual method to keep inventory and costs on their books, so assets on wine inventory are not expensed until sold, broken, or spoiled (and discarded).
Fuel stations are the least profitable segment in the oil distribution supply chain. About half of them in the US are corporate owned and the other half are franchised or independently owned.
