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Profit margin

Understanding profit and getting the product mix right are key aspects of financial success, says Stuart Jackson.

The natural health industry has numerous shop styles with a diversity of product mixes and therefore varying national Gross Profit (GP) averages.

There are, however, some fairly easily applied guidelines. Shops tend to fall into three broad retail categories: 1. All fresh and ambient food 2. A mix where food is dominant to around 70% or 80% of product lines stocked, or 3. The opposite where non-food lines such as supplements and body care dominate the food selection to a similar degree.

Shops that fall broadly into mix 1 commonly achieve an annual GP of around 30%, those in mix 2 around 35% while mix 3 can reach 40%. These are sweeping but valid generalities though I have come across margins as low as 17% (in a food store) and some higher than 40%.

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