Calculate the real net profit from any wholesale order — after deducting freight, packaging, credit period cost, GST impact, and return allowance. Know your actual take-home, not just the gross margin.
Why Gross Margin Isn't Enough
Most wholesale traders focus on gross margin (selling price minus buying price). But the real profit is significantly lower once you account for all trade costs:
Gross Profit = (Sell Price − Buy Price) × Quantity
Freight Cost = Order Value × Freight % (typically 1–4%)
Packaging = Per-unit packing cost × Quantity
Credit Cost = Order Value × (Credit Days / 365) × Interest Rate
Return Allowance = Order Value × Return Rate %
Net Profit = Gross Profit − Freight − Packaging − Credit Cost − Returns
Example: A ₹5L order at 20% gross margin yields ₹1L gross profit. After ₹8,000 freight, ₹3,000 packaging, ₹5,000 credit cost, and ₹5,000 return allowance, net profit is just ₹79,000 (15.8% net) — not 20%.
Wholesale Profit FAQs
When you give buyers 30–60 days credit, you're essentially lending them money. The cost is the interest you'd earn (or pay on working capital loans) for that period. At 18% p.a., 30-day credit on ₹1L = ₹1,500 cost. On ₹50L/month with 45-day credit, the annual credit cost can exceed ₹3–4L. Many wholesale traders overlook this until cash flow becomes tight.
For GST-registered traders, GST is generally neutral — you claim ITC on purchases and collect GST on sales. The net impact is near zero if your buy-sell GST slabs match. However: (1) If buyers are unregistered/composition dealers, they can't claim your output GST as ITC, making your price uncompetitive. (2) If you have exempt sales mixed with taxable, partial ITC reversal applies. (3) Refund delays on exports tie up cash.
Typical B2B return rates in India: FMCG/Foods 1–3% (damage, expiry), Apparel/Textiles 3–8% (quality disputes, size issues), Electronics 2–5% (DOA, damage in transit), Industrial goods 1–2%, Seasonal products 5–15% (unsold stock return clauses). Always negotiate return terms clearly in the supply agreement — open return policies can significantly erode margins.