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Know how much you’re actually paying, and for what you’re actually paying !!!

How can some companies sell products that are much cheaper on Ebay and other websites?

Clearly, some websites and some companies selling on auction sites such as Ebay, appear to offer very low pricing. How are these companies able to offer these low prices?

Generally, there are 3 or 4 main categories of ‘sellers’, selling products on Ebay

1)    Manufacturer supported dealers – these often use Ebay as an additional marketplace for their goods and services.

2)    Clearance specialist, these companies often buy end-of-line or liquidated stock from various none-specialist suppliers.

3)    Small independent or start-up businesses.

4)    The general public, buying and selling unwanted goods.

So, does it matter who you’re buying from?

If you’re buying an item for yourself, unless you’re registered for VAT and the item you’re buying relates to your business, it’s unlikely that you’d be bothered if a ‘seller’ was VAT registered. However, if you’re VAT registered and you’re buying a business related product, then you need to know if a seller is VAT registered, as of course they will be able to furnish you with a VAT invoice. Without the VAT invoice, then of course you couldn’t claim back the VAT. As an example, if you’re able to claim-back the VAT, £100 less VAT is actually cheaper than the same product being sold for £85 from a none-VAT registered supplier.

If you’re not VAT registered, then does it matter if a supplier is VAT registered? Surely, if the price is lower then you’re onto a winner. Well, if you have more concerns, other than just pricing, then not necessarily.

There is only one certain thing that can be deduced about a company that is not VAT registered. As per HM Revenue & Customs, the company’s turnover over the proceeding 12 months must have been below the VAT threshold, this is currently £77,000. That’s not the profit, that’s the total value of all hardware sales.

If a company is not supplying goods but is offering labour or consultancy services, then realistically, other than a few business expenses, the amount charged up to £77,000 can pretty-much all be used to pay wages. That’s pretty decent money.

However, if the ‘seller’ is primarily selling hardware, then these goods are almost all liable for VAT. Being optimistic, if a company can make a gross profit of 30% on the goods that are sold, then the Gross Profit on sales that could be expected, would be around £23,000. That £23,000 Gross Profit on sales has to cover wages, rent, business rates and all other business expenses, it does not go very far!!

To put is simply, if a hardware selling company is not VAT registered, then you’re more than likely dealing with a start-up business or someone who is effectively a ‘sole-trader’. That’s not necessarily a bad thing however, smaller businesses or new-start businesses often work harder than larger businesses to win your custom and then retain your business. After all, Sir Alan Sugar started trading from a van, Apple Computers started in a garage and even our very own B-Tech was established 40 years ago as a ‘man in a van’.

Your purchase represents a larger percentage of a small turnover business than a larger turnover business. So effectively, a small business has more to lose than a larger turnover business, if you take your business elsewhere.

All we’re suggesting is this, please check pricing carefully. Please take the time to understand the amount you’re actually paying and for what you’re actually paying.

If a company is charging £279 including VAT + £10 for deliver, is this really more expensive than a company charging a flat £245 for the same product, including delivery?

For more information, please contact 0845 835 0266

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This entry was posted on April 26, 2012 by in AV News and tagged , , , , , .

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