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"Unpacking the Factors Behind High Cost of Goods in Trinidad and Tobago: Insights from a Business Owner"

It’s often debated that the cost of goods is very high in Trinidad and Tobago versus the cost of similar or even the same goods online. One might ask, "how can the same item I saw on Amazon for USD$17 be selling for almost TT$400 in a local store?"

 


We would like to take the time to point out a few costs from the POV of the business owners that you might not be considering. . . Hopefully it's easy to follow.

 

We have a sample business called Business X. In this example, Business X is a clothing store.

  • Business X has a physical location in an area with heavy foot traffic - Not a mall location

  • Business X has 3 employees

  • Business X only sells that item that you saw being sold on amazon for US$17

 

Because Business X buys from a similar supplier to Amazon and buys in bulk, it gets the item for US$13, Which is approximately TT$92.30, depending on the source of your USD - which is another topic altogether!

 

In this example, Business X ships 3600 units of this item totalling $332,280 to be shipped on two pallets.

 

The approximate cost of the item Landed in Trinidad and arriving at business X's facility


CIF – Cost Insurance and Freight

·      Total cost of items……………………………………………..……….. $332,280

·      Plus cost of crating/packaging at origin………………….…… $1500

·      Plus Cost of Transportation to origin shipping port ……. $2500

·      Plus cost of Shipping/freight LCL …………………………………… $3905

CIF = $340,180

 

Customs Duties and Vat

·      Duties would be calculated at 20% of CIF ………………………. $68,036

·      VAT is 12.5% of CIF+Duties …………………………………………….. $51,027

Customs Duties and VAT = $119,063

 

Cost of clearing the items

·      Rent

·      TTBS Inspection

·      Documentation

·      Brokerage

·      Transportation from port to your storage

Estimated = $3500

 

Total cost of items landed = $462,743

Cost of 1 item ($462,743/3600 items) - $128.53

 




Let's now look at consumer perceptions VS the reality of business operations.


Remember you would have seen this item on Amazon for US$17/TT120.7? . . .Now you see Business X with the same item on sale for three (3) times that amount (TT$362.1) and you are outraged! “They trying to dig out people eye down here!”

 

Let's say Business X has a very good year and is able to sell 200 units of this item every month consistently.

·      Monthly revenue from this would be $72,420 (selling price x 200 units).

·      Monthly gross profit from this would be $46,714 (revenue – number of items sold x Cost of item)

·      Gross profit after VAT deductions is $40,875. VAT deduction is paid every two months and has stiff penalties if payment is delayed.

 

Now let's look at some general monthly operational costs. . . These costs are estimated. some of these costs might also fluctuate, but let's keep them fixed for this exercise.

 

·      Rent for a commercial property - $8,000

·      Salary for three staff for 6 days a week @ $4000 per staff - $12000

·      Salary for the owner - $10,000

·      Marketing (social media boosting etc) - $2000

·      Utilities (Phone, Internet, electricity) – $1500

·      Accounting fees - $1500

·      Assuming the company took out a loan for this venture as most of us would. Loan fees - $4000

·      Stationery, printing, office expenses and general operational costs - $1000

 

Net Profit for 1 month would be $875 (Goss profit afer VAT deductions - operational costs)

 

Total Profit for the year is $10,500 before tax

 

Now lets look at our other taxes and deductions


  • Business levy of 0.6% of gross revenue $5,215 (paid quarterly but we just calculated for the year)

  • Green Fund Levy of 0.3% of gross revenue $2607.5 (paid quarterly but we just calculated for the year)

  • Corporation tax is $2,625 (25% of Total profit)

 




Total profit after tax for the entire year is $7,875



Conclusion


Businesses in Trinidad and Tobago are heavily taxed:

  • Import Duties

  • VAT on imports

  • VAT on sales

  • Green Fund Levy

  • Business Levy

  • Corporation Tax


Even in the business example above where the item was sold for 3 times the amount, the business would still not be profitable. Also bear in mind that in the example, that store would have to consistently sell 200 of this item per month to even make a profit of $7,875 per year. We also did not include any banking fees.


As a private customer, while you will not incur all of these costs when you shop online, you DO pay some of these costs - but! because you don't pay them at the time of purchasing the item, it does not hit as hard. For example, when you pay the US$17 online, you might pay another $200 to your skybox upon collecting the item, but you don't necessarily process the two costs together.


While there are several arguments that can be made for the profit of the business in the example above to be less or more, this is just a basic example as an operating business would be MUCH more dynamic .


We also fail to acknowledge the numerous benefits of shopping locally:

  • Local businesses not only pay their employees, they also spend money at other local businesses. That means by buying local, you help create jobs for your friends and neighbours, contribute to improved public infrastructure, and invest in your community both socially and economically.

  • You also get to interact with the product

  • Ease of return

  • in person Customer support

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While your observation about Amazon incurring taxes etc is accurate, let’s consider the distributor’s perspective. As a distributor, you benefit from discounted pricing and improved payment terms, such as Net 30 days. This extended payment window allows you to generate revenue without immediately depleting your company’s funds.

Additionally, shipping in bulk significantly reduces costs. Unlike distributing expenses across all items, the customer still pays the ocean freight for each individual item. If your company remains at a loss even after covering expenses, explore revenue-enhancing avenues and consider expanding your existing operations. Remember that Amazon’s model doesn’t directly align with that of a distributor.

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Hey Anon,


Thank you for Joining the conversation and giving your valued input. This blog was not geared to us as a dealership specifically. It was mostly based on online shopping vs local shopping in general and trying to state a few costs that drive up final selling prices that many would not consider from a consumer stand point.


You are correct in saying that as a distributor, we do benefit from discounted distributor pricing. However, not all of us benefit from payment terms as some of us have to pay 100% upfront before shipping. However, as a distributor, we are able to sell the item for cheaper than if you were to buy online and ship it in yourself.…

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