Comparing Profit Margins Between Brick-and-Mortar Shops and Selling on Reverb

Selling in a brick and mortar location and selling in an online marketplace are two distinctly different experiences for retailers.

One of the biggest differences lies within a seller’s profit margins. A robust marketplace like Reverb, which reaches a global audience and cultivates over 12 million unique visitors each month, is one that exchanges margins for increased turns. It’s the concept of prioritizing the volume of your sales over the margin of those sales.

For example, it’s more advantageous for a retailer to sell five items at 20 points of margin than it is to sell one item at 40 points. Reverb’s healthy marketplace provides a resource to do exactly that. Here’s how it breaks down.

In a traditional retail market, you’ll typically see margins of 35 to 40 percent on used gear, with brick and mortar shops usually reporting that used gear takes about three to four months to sell on average.

In terms of annual inventory turnovers—a measure of the number of times inventory is sold, or turns over—this comes out to about two or three per year. The retailer’s gross margin on $100,000 of inventory then, for example, is $120,000 ($100,000 x 40% x 3 = $120,000).

But when you look at the same numbers selling on an online marketplace with a reach like Reverb’s, the margins look more enticing.

Selling online, shops’ traditional margins on used gear fall around 10 to 20 percent, with a much faster average sell time at under three weeks. This results in more like 10 to 12 inventory turns per year, which means that gross margins on $100,000 of inventory is $200,000 ($100,000 x 20% x 10 = $200,000).

Not only is selling online convenient and a way to get your gear in front of more potential buyers, it actually results in meaningful improvement to your shop’s margins.

It should be noted, of course, that the above figures are based on averages and so might not be reflective of your individual selling experience. There are many unique factors that can affect the time it takes a shop to sell inventory, so if that feels like an issue you’re having, you can check out tools like Reverb Bump or even reach out directly to the Seller Engagement team at [email protected].