Payment Settlement Methods

An Expert's View about Business Practices in China

Last updated: 22 Feb 2011

10.2 Entry Fee, Profit-Sharing and Payment Settlement Methods

Department Store

1. Major fees include sale guarantee and profit-sharing. Sale guarantee fee is generally required by stores with better conditions. About half of all department stores require a sale guarantee, with the highest amount going up to Rmb1.8 million a year and the average is Rmb30,000-80,000 a year.

2. Profit-sharing: Department stores use varying profit-sharing ratios for different products. For clothes, shoes and leather goods, the ratio is generally 30:70; for jewellery, 15:85 (the ratio is higher for domestic products and lower for well-known brands); for gold, 8:92. In the case of cosmetics, the ratio for domestic products is 25:75, while the ratio for imported products varies, with the highest being not more than 25%. Apart from the type of products, the profit-sharing ratio also varies depending on the floor, area and location of the counter.

3. Other miscellaneous fees include entry fee, advertising fee, promotion fee and management fee. Some department stores do not charge entry fee while others charge a few thousand to ten thousand yuan, depending on the type of products. Some department stores charge advertising fee or anniversary celebration sponsorship fee, and certain department stores charge promotion fee which is about 1% of sales.

4. The salary of special counter sales attendants is paid by the supplier generally in the form of "basic salary + commission".

5. Payment settlement: the settlement period of most department stores is 45-60 days, while the settlement period of a few department stores may be as long as 90 days.

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Posted: 21 February 2011, last updated 22 February 2011

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