I would love to find out the profit on a ton of pellets!!
Does Anny one know??
The dealers must make some good $$$$ :bug: LOL
Does Anny one know??
The dealers must make some good $$$$ :bug: LOL
What the dealers make on a ton of pellets??
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rona
Minister of Fire
It might surprise you how little the profit margin is.Gabe said:
Call a major pellet producing company and ask to buy a semi load. Then pay the trucker to deliver to your address. Then you have to take time when someone wants 3 or 4 bags to try them out and your time is worth something.
The dealer I worked with ordered probably two semi-loads a season which is hardly worth mentioning but we live in corn country and back then most of the stoves burned corn.
He had mentioned .50 a bag would be nice but the competition from the box stores was tough as they could buy in large volumes.
I know there is areas where price is really high but suspect other fuels set the price and companies see that price level and follow it.
smoke show said:
Yep. Well stated Smoke....Not cheap to run your own outfit. If they made .50¢ or $1.00 per bag I would be shocked. I was calling on a Semi load (22 ton) last year. It was in the neighborhood of $150 ton without shipping/freight charges. Granted the dealers around here are not at $250-$300 either. For the most part its $200-$225. Box stores can be had much cheaper ($175-$197).
But a Box Store doesnt rely on selling just to a certain "spectrum" of people. With more products being sold, you can sell the products for a cheaper price.
If it were you running the business side of the pellets. I am sure you would look at it different. Because if its .50¢ a bag and you only had 2 customers come in all day, for a total sale of 30 bags..... $15 dont buy much groceries. Im not a dealer, but in these trying times of our economy, we must try and look at it from the "other side". Buy local and Support a dealer you like.
Remember, there are dealers on here too................
save$
Minister of Fire
The outfit I buy from charges $199 and about $25 a ton to deliver. Last year, he didn't charge delivery. He would drive an hour to deliver a ton or two. I can't see how he made a penny. At $25 each ton, I still don't see how he covers his cost. He does pellets and bottle returns. He stays in business and employees a couple of people. I always give a good tip. Can't even imagine how he keeps up. Those guys are few and far between.
jtakeman
Minister of Fire
I believe the box stores use the pellet as a draw for other items, Can't expect that at the pellet house. A common retail mark up would be somewhere around 50% for most things. But I doubt thats the case with pellets. To much compation. So probably something close to 20% or so?? You may pay more at a pellet house, But you will get the exact pellet you looking for and they will be treated/handled better IMHO. Along with some other reasons I alway try to get some fuel from my local pellet dealers!
Try getting fuel at the boxstore come late April?
Try getting fuel at the boxstore come late April?
whit
Member
In retailing, what's called a "50% markup" is figured backwards - it means that 50% of the final price is markup from wholesale. Or 100% over the wholesale price. At an old-line department store that's the standard. And at your local hardware store, for everything that's not a loss leader to pull you into the store, that's the standard. That's why deep discounters of, say, musical instruments will give about 40% off - because that still leaves them what we'd call a 20% markup from wholesale, although a retailer would call it 10%.j-takeman said:
Now, I have no idea how the big box stores are pricing pellets. In part it may be as loss leaders. In part it may be to keep their delivery trucks busy. HD is $60 to roll a truck. A lumber store I'm buying a couple of tons of Barefoot from at $289 a ton rolls the truck for $18. The lumber store is losing money on the truck. For HD, that truck is a profit center. And if their driver's on salary when the truck's not rolling he's not doing much. The lumber store's drivers also do other jobs around the store.
HD has a fleet of trucks constantly on the road picking up the wholesale merchandise. The lumber store on the other hand makes a deal with Barefoot for a load, and then puts the load out to bid by local independent truckers. There may be economy of scale there for HD too. Plus it keeps its trucks busy at an end of the season when there are fewer building materials moving. HD also makes the pellet manufacturers bid to sell it pellets the cheapest. They absolutely don't care what they get, if it's pellets. The local lumber yard only carries a few brands, and it cares. So the lumber store bids to buy the pellets. HD has the manufacturers bid to sell them. Drives the price down, but also the quality.
I'd guess when you see pellets in your local hardware store at $7.50 a bag - which I see around here - that's a full "50%" (i.e. 100%) markup from their wholesale price. So $3.75 would be wholesale. Which would mean when the big box store are selling them at around $4 early in the season they aren't making much, but when they jack it up to $5 as the weather gets chilly there's real money in that - it's out of loss leader territory. But it requires big-box volumes to make sense. So getting a higher-quality pellet for $1 a bag more, and keeping the money in the local community, is worth it to me.
Although if I had my own truck to haul the $197-a-ton garbage Wal-Mart features, I'd be tempted. $2 a bag smells like real money.
krooser
Minister of Fire
whit said:
A 100% mark-up was called "keystoneing"... not sure where that term originated but we used it when I did some retail work 40 years ago.
HD, Lowe's, Wally World etc. have large distribution centers that handle most of the merchandise going to the stores but most pellets are hauled direct from the mill to the stores. It's "truckload" freight while the other stuff is LTL.."less than truckload"...
Sometimes the shipper pays the freight and the selling dealer pays one price delivered.... others pay the trucking separately.
My Peterbilt costs me just under $1.00 per mile for fuel @$4.00 per gallon. Add in maintenance, license, insurance, yada yada yada I have to get at least $1.75 to $2.00 per mile to break even without figuring any wages to me. If I buy SIH hardwoods for $150.00/ton like I did last year I would need to figure my cost to deliver to my home to be $700.00. That's $32.00/ton for transportation. Now I have them at home for $182.00/ton.
If I was a pellet dealer I'd have to pay insurance, utilities, rent/mortgage/interest on the load to buy the pellets, labor, benefits (if any), FICA, cost of s forklift, taxes etc before I make a profit.
That's a pretty slim margin. Perhaps I could commit to buying more pellets from the same manufacturer to get a better price.... as a trucker I can haul more pellets per load to save more $$$ per ton...at the risk of getting caught and getting a big fine (actually I kinda like THAT part... the backroads are much better than they used to be!)....
Those dealers in the "far east" have even more expenses since the cost of doing business in New England is historically high....
Makes a $250.00/ton pellet a pretty good deal...
Freddels
Member
My dealer delivers for $54 flat fee. I have 4 ton coming this week. He also has a Moffett so he'll put them anywhere you want them. If you want them in your garage it's only $5 more on the delivery charge. It's a damn bargain. I wish I could have found a truck to get one of those pellet jacks but no luck. It would have been nice to line everything up neatly in the garage. Maybe next time.
kykel
Feeling the Heat
I buy from pellets now in vermont. I get turmans for 240 a ton. I assume the dealers would pay the same if buying from them. They only sell full truckloads 22 tons. Here on long island those pellets are $320 a ton. So if there paying 240 and selling for 320 thats an 80 dollar profit per ton. 80 x22 =1760. Not bad IMHO.
SXIPro
Minister of Fire
I'd bet pellet dealers are making 20 points GP. Box stores, I'd venture to say are using them as loss leaders or just breaking even.
whit
Member
When you get to Wal-Mart there's another motive too. They're very aware that high prices for fuel take money out of pockets that would otherwise be spent on all the other stuff Wal-Mart sells. So it may well be true that the $197-a-ton pallets lined up in front of the local Wal-Mart are at their cost.SXIPro said:
Then there's the aggressive price war between HD and Lowe's. In Claremont, NH HD just put the neighboring, newer Lowe's store out of business. No mercy was shown. HD is quite willing to lose money short-term to own a local market long-term. Wal-Mart is famous for that too. Which means that if we all shop for the absolute lowest prices short-term, longer-term whoever survives the local price war will have a much easier time raising them.
76brian
Feeling the Heat
My local guy sells Cubex for $265/ton. He says there's not much profit in the pellets, maybe 5% or so.
For a purchase of 3 tons or more, he'll deliver, anything under that he charges $30 for delivery. He covers a pretty large area too, pretty much all of Eastern Ontario. I don't even know how he recovers his fuel expenses. He moves well over 20,000 tons a year though, so he's probably doing alright just by the pure volume...not sure how much of that is picked up vs him delivering it, but I think he has as many pickups as he does deliveries, so that helps keep his expenses down I guess.
He's also a Harman dealer, but his price on my P43 was over $200 less than anyone else around. He probably didn't make much on it either. He's also a farmer, and has been selling pellets and Harman for over 20 years, so even if he was a bit more expensive, I'd rather support a local guy with a good reputation than make a bigbox outfit even richer.
For a purchase of 3 tons or more, he'll deliver, anything under that he charges $30 for delivery. He covers a pretty large area too, pretty much all of Eastern Ontario. I don't even know how he recovers his fuel expenses. He moves well over 20,000 tons a year though, so he's probably doing alright just by the pure volume...not sure how much of that is picked up vs him delivering it, but I think he has as many pickups as he does deliveries, so that helps keep his expenses down I guess.
He's also a Harman dealer, but his price on my P43 was over $200 less than anyone else around. He probably didn't make much on it either. He's also a farmer, and has been selling pellets and Harman for over 20 years, so even if he was a bit more expensive, I'd rather support a local guy with a good reputation than make a bigbox outfit even richer.
Oh yes, trucking cost can add a lot to a ton of pellets if they have to go very far. 
PJPellet
Minister of Fire
My dealer is selling a certain brand pellet for 250.00. 12 miles away a different dealer is selling the same exact pellets for 195.00. That's a BIG difference to me.
whit said:
And not getting that through their heads bankrupts thousands of new small businesses every year.
Eatonpcat
Minister of Fire
PJPellet said:
Same here...I bought a ton for $275.00 and a dealer near my work has them at $229.00!! I will stick with Menard's at $180.00 from here on out!
kinsmanstoves
Minister of Fire
Not much after you figure warehouse, insurance, fork lifts (x2), propane, employee payroll, workers comp, taxes.
Yes there are some nice sales when a customer rolls in here once a year with a 5th wheel and takes 5 tons. Then I have customers that do not have a garage or a truck and get 7-10 bags a week. I am not complaining on either customer but there is good with bad.
Just remember the average gas station owner makes over $1.00 a gallon profit on unleaded.
A retail business will not make it or struggle like heck on 30% profit. The standard is a minimum of 50% profit or do not sell it.
Eric
Yes there are some nice sales when a customer rolls in here once a year with a 5th wheel and takes 5 tons. Then I have customers that do not have a garage or a truck and get 7-10 bags a week. I am not complaining on either customer but there is good with bad.
Just remember the average gas station owner makes over $1.00 a gallon profit on unleaded.
A retail business will not make it or struggle like heck on 30% profit. The standard is a minimum of 50% profit or do not sell it.
Eric
VTrider
Member
kinsman stoves [email said:
I find this hard to believe, I've always 'heard' that it's just a few cents - can you reference this?
Freddels
Member
I'd much rather pay a little more to my local dealer than support the big box stores. My local dealer knows pellets and stoves and that expertise is worth something to me. Put that with a great delivery service and I would much rather pay the extra.
VTrider said:
The average gross profit for a gasoline retailer is 14 cents a gallon. Before the 3% credit card fees they pay.
kinsmanstoves
Minister of Fire
I did have access to a site that listed the average wholesale and retail pricing in an area. I can no longer get access to the site. I will have to bow down on this, at this time. The last time I was on the site it was slightly over a $1.00 to $1.14 in my area. That might not be taking delivery cost but I know what it cost to run 45,000 lbs of steel on my flatbed so it has to be in the same ballpark. I would disagree on $.14 a gallon because that is less than 5%. No one would sell gas for a 5% profit.
Eric
Eric
save$
Minister of Fire
My parents and my brother ran a Mom and Pop convenience store for a number of years. That 14 cent mark up was about right. It has been about 8 years now out of the business. But yes, that was about the mark up on gasoline. One of the reasons they are quick to put up the prices for gas already in the tank, and to be so slow to lower it when prices go down. You get a fill up load, then the price goes down. Lucky if you get a nickle on a gallon.
How do they make it? Unless their volume is huge, they make it on the fast food, coffee, soda, milk and bread you pick up when you buy your gas. So many of the Mom and Pop stores are gone now, Replaced by chain outlets.
How do they make it? Unless their volume is huge, they make it on the fast food, coffee, soda, milk and bread you pick up when you buy your gas. So many of the Mom and Pop stores are gone now, Replaced by chain outlets.
The profit in running a service station is so low that all of the major oil companies are selling/have sold their stations in the U.S. The name of their brand is still on them but they don't own them anymore.
Pellet prices will get real interesting when the Gov. realizes they are "fuel" and starts tacking on taxes like they do for all other forms of energy.
Pellet prices will get real interesting when the Gov. realizes they are "fuel" and starts tacking on taxes like they do for all other forms of energy.
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