Margin targets by department
A premium store does not take one margin; it takes a target by department role, and that target sets your wholesale price, not the other way round. These are modeled ranges from The Truth Behind Premium Grocery (Fig. 6.2), not any one retailer's numbers.
| Department | Target gross margin | Role in the store | $6 landed cost sells at |
|---|---|---|---|
| Center-store grocery | 34–38% | Traffic, basket building, price image | $9.09–$9.68 |
| Organic produce | 36–42% | Trust and quality signal | $9.38–$10.34 |
| Wellness & supplements | 46–52% | Premium differentiation; education, not discounting | $11.11–$12.50 |
| Owned beverages / private label | 46–54% | Margin and brand equity | $11.11–$13.04 |
| Prepared foods | 48–54% | The largest mix lever; recipe-costed | $11.54–$13.04 |
| Specialty departments | 40–62% | Sushi, pizza, breakfast and the like | $10.00–$15.79 |
How to use this
Retail = landed cost ÷ (1 − target margin). Margin is on retail; markup is on cost. A 48% margin is a 92% markup, and a buyer who hears you quote markup as margin stops listening.
Work backward from the price the product has to sell at. If your item needs to be $12 on shelf in a 48% department, the store can pay about $6.25 landed. If your wholesale is $8, the store prices you at $15.40 or passes.
Know which department you will land in before the meeting; a functional beverage in wellness carries a different target from the same bottle in center-store.