Margins need to be applied to Events when analyzing purchases made from a retail or wholesale Industry or the specific Commodities sold through them. When an item is purchased via a retailer or wholesaler, the price that is paid (Purchaser Price) differs from the actual Producer Price of the good. Margins allow for consumer expenditures to be traced through retail, wholesale, and transportation Industries back to the industries who manufactured the product, allowing the appropriate allocation to the producing Industries.
IMPLAN will automatically apply the default Margins to the specified Industry or Commodity based on the Data Year. However, users have the option to modify or edit the default Margins on any Marginable Industry or Commodity Event.
Margins are the value of the retail, wholesale, and transportation services provided in delivering Commodities from producers’ establishments to purchasers. The proper application of Margins allows for splitting of the Value-Chain to show the impacts to all related local Industries. This keeps us from over-impacting the producing Industry or over-impacting the retail Industry.
Most Input-Output models, including IMPLAN, record expenditures in Producer Prices. This allocates expenditures to the Industries that produce the goods or services. Any Output or sales value that is in Purchaser Price (prices paid by final consumers) need to be converted to Producer Prices or allocated to the producing Industries. Margins enable the move from producer to purchaser prices or vice-versa.
Note that not all Industries and Commodities have margins. Margins are only applicable in Industry Events when a retail or wholesale Industry has been specified. Margins are only applicable in Commodity Output Events when analyzing a Commodity that can be sold via a retailer or wholesaler, also known as Marginable Commodities.
The default Margins that IMPLAN applies for each Industry and Marginable Commodity change annually. These can be found in the Download section for each Industry Set.
Below is an example of default Margins for Commodity 3017 - Fish in 2019 Data Year. If a Commodity Event for Fish was set to Purchaser Price, IMPLAN would allocate 79% of the Event Value to Fish Producers, 3.1% to Wholesalers, 14.6% to Retailers, and 3.3% to the various Transportation providers.
In some projects a user may want to apply Margins that differ from the defaults built into IMPLAN. To accomplish this, use the Edit Margins feature within the event set up on the Impact screen.
There is a difference between applying Margins in Industry Events versus Commodity Output Events. However, making adjustments to IMPLAN’s default Margin allocations in either event type will alter the impact results, so make sure to document any changes.
When analyzing an Industry Output Event for one of the retail or wholesale Industries, IMPLAN will automatically assume the Event Value is in Purchaser Price. To view the default Margin for one of these Industry Events, click on the gear icon to open the Advanced Fields menu as shown below. Before making any adjustments, make sure to select the appropriate Data Year from the drop down menu to match the Group Data Year in which the Event will be analyzed.
To adjust the Margin for the Industry simply overwrite the default value by typing in the new percentage. In this example, the Margin was reduced from the default 33.21% to 25%.
Selecting the Reset button will restore the default Margin value for that Data Year. If a user does not want to apply any Margins to the Retail or Wholesale Industry Event Value, selecting ‘Producer Price’ will allocate the entire Event Value to the specified Industry.
Margins are only applicable in Commodity Output Events when analyzing a Commodity that can be sold via a retailer or wholesaler. Margins are applied to Commodity Output Events when 'Purchaser Price' is selected in the Advanced Fields of the Event, which is the default setting for a marginable Commodity. Purchaser Price in a Commodity Output Event indicates to the software that the Event Value is a retail or wholesale sales price that includes Margin Costs for transportation, wholesaling services, and retailing services in addition to the Producer Price of the goods sold.
To view the default Margin for one of these Commodity Events, click on the gear icon to open the Advanced Fields and select Edit. This will display the default Margins in a pop-up modal as shown below. Before making any adjustments, make sure to select the appropriate Data Year from the drop down menu to match the Group Data Year in which the event will be analyzed. Use the scroll bar to locate each Margin in the Commodity’s Value Chain (producer, wholesale, retail, and transportation Commodities).
To adjust any Margin for the Commodity, simply overwrite the default value by typing in a new percentage. To modify the Margin distribution to remove a particular Commodity, enter 0%. In this example, the Margin for the Producer was decreased from the default 55.47% to 50%.
Users also have the option to change the Local Purchase Percentage (LPP) from the default SAM setting to a user defined LPP for any Commodity. Use the checkbox to unselect SAM, then enter a percentage value in the set to column. In the example below, the LPP was changed from SAM to 100% for the Producer Margin.
The last step is to click Normalize. This process rebalances the Margins so the total Sum of Margins equals 100%. In this example, the 5.47% that was taken from the Producers was redistributed to all of the Commodities within the Value Chain based on their percentages. Notice that the Wholesale Services - Grocery increased from 15.85% to 17.80%. If the Producer Margin had increased from 54.24% to 60%, then the remaining portions of the Value Chain would be reduced to balance out to 100%. Selecting the Reset button will restore the default Margin value and LPP for that Data Year.
Once complete, select Save to confirm the edits.
If a user does not want to apply Margins for the Commodity Event, selecting ‘Producer Price’ will allocate the entire Event Value to the Producing Industries or Institutions in the Region. This option will cause the Edit button to be un-selectable for this Event, as there are no default Margins to Edit.
Written August 30, 2023