Running head: Profit Margin Expectations for Jewels of Mohave 1

Group 7A: Donna Hooks, Kimberly Kendrick, Katlyn Knotts, Mason Love,
Anh Nguyen, Catherine Siggers, Jennifer West

Introduction

Native Americans have been handcrafting jewelry since they first drew inspiration from

their natural surroundings and transformed shell and stone into wearable jewelry. Some of the

oldest discovered pieces date from over 10,000 years ago. The skilled artisans at Jewels of

Mohave continue the age-old tradition and create captivating works of art that will surpass

expectations! Jewels of Mohave is a superior jeweler with an exclusive line of Southwestern

Native Indian jewelry. Jewels of Mohave provides exceptionally authentic and high-quality

products at an affordable cost while maximizing company profits through a robust online sales

operation. In an effort to ensure these goals are being met, Jewels of Mohave has leveraged a

network of logistical partnerships in order to inventory, market, ship and deliver exquisite jewels

at a competitive price among industry competitors. The jewelry industry is very sensitive to

fluctuation in the price of precious and semi-precious metals and stones which have a direct

impact on profit margins. Jewels of Mohave operations ensure a stable profit margin by the

direct sourcing of precious and semiprecious metals and stones from partnering tribes. To protect

the company’s advantage in the market, an in-depth understanding of profit margins must be

obtained while also reviewing the level of profits acquired from domestic and foreign sales.

Background

The profit margin can be determined to meet the needs of a business after the business

has established a cost for an item, determined the value for a customer, and determined a price

for the item. The formula for calculating profit margin is: (total sales -total expenses)/total sales.
Profit Margin Expectations for Jewels of Mohave 2

For example, if a product sells for $50, and the cost of material and labor to produce it is $25, the

profit margin is 50%. Determining a profit margin is important because it can identify problems

in a business, help increase revenue, and is necessary for financing. Identifying overspending and

products that are not selling are two things that are revealed when a profit margin is in place.

Profit margins are also helpful in the growth and expansion of a business and may also reveal

opportunities to increase revenue from certain products that have increasing consumer demand.

The profitability of a business is extremely important when it comes to securing financing. A

business can make millions of dollars, and if lenders do not have an assurance that the business is

profitable, they may be reluctant to invest or provide funding.

The Variance in Ideal Profit Margins by Industry

Profit margins vary between different industries and packages. In regards to online

jewelry sales, ideal profits margins are expected to be near 11%. In understanding why variance

exists, it is critical to note that it all depends on the size of an entity. Larger retail enterprises can

operate successfully at lower margins because they have stronger financial muscles following

from their massive sales volume, and the smaller businesses need higher profit margin levels to

be in the best position of offsetting their costs while they still retain some profit. An entity that is

bold enough to compete in the international market is arguably not small; therefore, Jewels of

Mohave should seek a profit margin of about 10% on sales of their exclusive line of

Southwestern Native Indian jewelry.

Profit Margin Expectations for Jewels of Mohave 3

Analysis

Figure 1. Profit Margin Calculation Figure 2

To determine the firm’s profit margin for an international transaction, a $350 sale to a

customer in France was examined. Of the $350 revenue, only $156 accounts for product plus

cost and $182.58 for shipping, leaving only $11.42 of actual profit. As seen by the calculations in

Figure 1, this transaction only produced a gross profit margin of 3.26 %, well below the industry

average. Figure 2 provides a different view of the total breakdown of revenue. The shipping

costs average about 52%, roughly 7.5% higher than the cost for the product plus packaging

alone. When there are shipping costs of this magnitude, they not only cut into company profits,

but they can also discourage potential customers from purchasing.

Conclusion

With an average domestic profit margin in online jewelry sales at 11%, it is easily

concluded that a 3.26% profit margin for a French sale is not reasonable. As international

purchases do cost more in shipping than domestic, an international profit margin equal to the

domestic rate is not expected but should be no more than 2% less to account for the additional
Profit Margin Expectations for Jewels of Mohave 4

shipping costs incurred. To increase profit margins to the French and other international markets,

a variety of solutions can be implemented. Marketing techniques and advertising strategies can

be implemented on the company’s website persuading the consumer to purchase additional items

that would compliment the customers' purchase, resulting in increased sales on the same

shipment. Current shipping and product supplies can be reviewed to determine if materials can

be purchased at a lower rate while still maintaining high quality. Most importantly, other

shipping carriers should be surveyed to see if lower shipping costs can be obtained.

References

​Markgraf, B. Profit Margins for the Evaluation of Marketing Plans. Retrieved from February 25,

2019, from ​https://smallbusiness.chron.com/profit-margins-evaluation-marketing-plans-44845

McDonald, M., & Wilson, H. (2016). Marketing Plans: How to prepare them, how to profit
from them. John Wiley & Sons