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Fixed profit margins

Definition updated on November 2023

What role do fixed profit margins play in determining product prices?

Fixed profit margins refer to setting a fixed percentage of profit over the cost of acquiring or producing a pair of sneakers. This fixed percentage remains constant regardless of the selling price or the market conditions. For example, if a sneaker reseller sets a fixed profit margin of 20%, then for a pair of sneakers acquired at $100, the selling price will be set at $120, ensuring a $20 profit. This approach simplifies pricing decisions by establishing a consistent profit margin across all products, regardless of their demand or value in the market. In the sneaker resell market, where prices can vary significantly based on factors such as brand, rarity, condition, and demand, setting fixed profit margins can help ensure a consistent level of profitability for the reseller. However, it also comes with the risk of setting prices too high or too low compared to the market value, which can result in lost sales or lower profits. For beginners in the sneaker resell market, setting fixed profit margins can be a useful starting point for establishing a pricing strategy. However, it is important to regularly review and adjust the profit margins based on market conditions, competitor prices, and customer feedback. Additionally, it is important to consider other factors such as shipping costs, fees, and taxes when calculating the total cost of acquiring and selling sneakers.

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