BOGOF losers?

A BOGOF sold for £10, with a supplier Gross Margin of 50% and Net Margin of 10%, refunding the retailer's margin, can lose the supplier £5.50 per BOGOF !

See example above, where the supplier has agreed to replace the retailer’s margin on the free item in a BOGOF.

Here it can be seen that the retailer continues to make his normal margin (say 25% Gross, 5% Net) on the free item.
However, because the supplier has to refund the retail margin, it can be seen that the supplier loses £2.75 on every item, or £5.50 on every BOGOF sold on promotion.
Sure, the promotion will create excitement in store, but will not only damage brand equity, it will also lose money…

P.S. If you want to discuss the BOGOF application to your trading termstion, drop me a line on bmoore@namnews.com