How should the profit of entrepot trade be calculated? Come and give me some ideas!
Solved#Entrepot trade#
I've just entered the field of entrepot trade and don't quite understand the profit calculation in this area. For example, I purchase goods from a supplier in Country A at a price of $100 per piece and then resell them to a customer in Country B at a price of $150 per piece. The intermediate costs such as transportation and warehousing total $20 per piece. Is my profit directly calculated as $150 - $100 - $20 to get $30 per piece? Do I need to consider other factors? Are there more comprehensive calculation methods? I hope experienced seniors can give me some guidance.
Professional consultant answers
Sarah ZhangYears of service：8Customer Rating：5.0
Document expertConsult
For the profit calculation of entrepot trade, your initial calculation idea is correct, but it can be more comprehensive. The basic formula is: Entrepot trade profit = Reselling revenue - Purchase cost - Intermediate cost - Taxes and other costs. In your example, $150 per piece is the reselling revenue, $100 per piece is the purchase cost, and $20 per piece is the intermediate cost, with an initial profit of $30 per piece.
However, taxes cannot be ignored, such as tariffs, value-added taxes, etc. The tax rates vary for different goods and different countries and regions. Assuming a tariff rate of 5%, calculated based on the purchase price of $100, the tariff is $5 per piece, and the profit then becomes $30 - $5 = $25 per piece.
In addition, capital costs also need to be considered. If there is a payment term for the purchase, there may be a discount for early payment, or if you purchase with a loan, you need to calculate the interest. At the same time, exchange rate fluctuations will also affect the profit. If the exchange rate changes from the time of purchase to the time of resale, it will cause a change in the amount of local currency converted, affecting the final profit.
Amanda YangYears of service：3Customer Rating：5.0
Cost control consultantConsult
In addition to what was mentioned above, don't forget some hidden costs, such as travel expenses for communicating with suppliers and customers, and the costs of participating in exhibitions to facilitate transactions. These all need to be included in the costs and will affect the profit.
Robert ChenYears of service：6Customer Rating：5.0
Customer service consultantConsult
If there are costs for commodity inspection and quarantine, they should also be included in the costs. Sometimes, in order to meet the standards of Country B, additional processing of the goods may be required, and this part of the cost cannot be left out.
David LiYears of service：6Customer Rating：5.0
Senior customs declaration consultantConsult
Pay attention to market fluctuations. If the price of similar products drops significantly during the period from purchase to resale, you may have to lower the selling price, and the profit will be affected. So when calculating the profit, market risks should be estimated.
Joseph ZhouYears of service：10Customer Rating：5.0
Senior foreign trade managerConsult
There are also document processing fees. The handling of documents such as customs declarations and bills of lading may incur costs. In addition, in case of any loss or damage to the goods during transportation and warehousing, this part of the loss also needs to be included in the costs.
Emily LiuYears of service：10Customer Rating：5.0
Settlement and payment expertConsult
Don't forget the insurance cost. Buying insurance for the goods during transportation is also one of the costs. And different insurance plans have different costs, which will affect the final profit calculation.
Michelle ChenYears of service：3Customer Rating：5.0
Business coordination consultantConsult
If you operate the entrepot trade through an agency company like Zhongshitong, you also have to pay the agency service fee, which is also part of the cost and should be considered when calculating the profit.
Andrew HuangYears of service：7Customer Rating：5.0
Supply chain optimization expertConsult
Office costs also need to be considered, such as company site rental and employee salaries. Although they are not directly related to this business, the operating costs need to be allocated to each business when calculating the profit.
William YangYears of service：5Customer Rating：5.0
International logistics consultantConsult
Don't forget the bank handling fees. Whether it's paying the purchase price or receiving the reselling payment, the bank may charge certain handling fees, which will also reduce the profit.