Retail vs. Direct Business Models
Cost to company of owner's time, hourly
RETAIL
Price to Customer $200
Owner Tasks
Fixed Costs
Procurement
(Overseas Manufacturing)
Retailer
Retailer's Margin @52.5%$105/unit
Warehousing$10/unit
Shipping$2/unit
COGS$40/unit
Website$3,000
Personal Investment$10,000
PR Campaign$4,000
Trade Show$2,000
Contracts3 hours
Bookkeeping3 hours
DIRECT
Price to Customer $200
Owner Tasks
Fixed Costs
Procurement
(Overseas Manufacturing)
Fulfillment from Garage
Postage$4/unit
Warehousing$20/unit
Shipping$10/unit
COGS$40/unit
Website$3,000
Personal Investment$10,000
PR Campaign$4,000
Trade Show$2,000
A/P & A/R4 hours
Packaging & Shipping10 hours
Take Order15 hours
"Last Mile" Tracking2 hours
Track Shipments2 hours
Contracts3 hours
Bookkeeping3 hours
$43
Profit per unit
(Revenue minus variable costs)
$19,000
Total fixed costs
6 hours, $600
Owner's hours per week spent on operations
$19,000 / ($43-($600/1000)) = 449
BREAKEVEN Number of Units sold required to cover costs
$126
Profit per unit
(Revenue minus variable costs)
$19,000
Total fixed costs
39 hours, $3,900
Owner's hours per week spent on operations
$19,000 / ($126-($3,900/50)) = 396
BREAKEVEN Number of Units sold required to cover costs