Balancing sell through, cost and quality

[havending]

Three things that really affect us. We always try to balance the three but it's really tough at times. We try to balance cost at or below 20% but often that sticks with slow sell through on less desirable products. Quality will vary from suppliers also. We are taking a closer look at the three variations and willing to give on cost of goods in an effort to move more product.

We ordered the duck tags when they came out mid 30s a box. What we got was die cut flimsy stickers with a few inch chain. Low quality slow seller. From AA we order the DC dog tags super product. Full size metal tags long dog tag style chain fully licensed by AA for bulk vending. The other stickers were licensed by sandy lion. Better product was like 12 bucks more. Point being the 12 bucks was well worth the better product. Top notch has a few new products that are very good as well. Back in the toy n joy days they always cost a bit more but product sold great. We got in the donuts from AA great product we only got 2 bags to try it out but will order more.

[jmac]

I have found the same thing. I try to order half and half. Half nicer product that cost more, half lower cost product. Higher priced stuff always sells quicker for me. Lower priced stuff sells slower, but makes it a bit more affordable to fill my heads.

[Hillbilly]

Three things that really affect us. We always try to balance the three but it's really tough at times. We try to balance cost at or below 20% but often that sticks with slow sell through on less desirable products. Quality will vary from suppliers also. We are taking a closer look at the three variations and willing to give on cost of goods in an effort to move more product.

We ordered the duck tags when they came out mid 30s a box. What we got was die cut flimsy stickers with a few inch chain. Low quality slow seller. From AA we order the DC dog tags super product. Full size metal tags long dog tag style chain fully licensed by AA for bulk vending. The other stickers were licensed by sandy lion. Better product was like 12 bucks more. Point being the 12 bucks was well worth the better product. Top notch has a few new products that are very good as well. Back in the toy n joy days they always cost a bit more but product sold great. We got in the donuts from AA great product we only got 2 bags to try it out but will order more.

The way I read your post is that you are not mixing the product.  Is this correct? This is the same result of watering down a product. just done differently. I've noticed some of the suppliers are doing this with the better selling products.  Ducks with duck stickers, String dolls with zombies.

[Rick Falcon]

Three things that really affect us. We always try to balance the three but it's really tough at times. We try to balance cost at or below 20% but often that sticks with slow sell through on less desirable products. Quality will vary from suppliers also. We are taking a closer look at the three variations and willing to give on cost of goods in an effort to move more product.

We ordered the duck tags when they came out mid 30s a box. What we got was die cut flimsy stickers with a few inch chain. Low quality slow seller. From AA we order the DC dog tags super product. Full size metal tags long dog tag style chain fully licensed by AA for bulk vending. The other stickers were licensed by sandy lion. Better product was like 12 bucks more. Point being the 12 bucks was well worth the better product. Top notch has a few new products that are very good as well. Back in the toy n joy days they always cost a bit more but product sold great. We got in the donuts from AA great product we only got 2 bags to try it out but will order more.

By the look of things AA is no longer coming out with any new .25 1" toys I like the 1" doughnuts but at $33 a bag I'm going to have to pass

[havending]

The way I read your post is that you are not mixing the product. Is this correct? This is the same result of watering down a product. just done differently. I've noticed some of the suppliers are doing this with the better selling products. Ducks with duck stickers, String dolls with zombies.

Your right we don't water down product. Your right suppliers are doing it a lot.

By the look of things AA is no longer coming out with any new .25 1" toys I like the 1" doughnuts but at $33 a bag I'm going to have to pass

We got the black light rings at AA they were priced right. The donuts are large enough to fill the cap and have great detail. Also available in a two inch you can run at .75.

[BouncyBalls]

What are the prices on the neon rings?

[BouncyBalls]

You should be getting one inch for around 17 to 19 a bag and 13 to 14 for stickys. Do not fall into the supplier trap of them telling you that this one inch is 32 a bag and its a .50 vend. There is plenty of great product slated for a .25 vend that sells for.50. 

Three things that really affect us. We always try to balance the three but it's really tough at times. We try to balance cost at or below 20% but often that sticks with slow sell through on less desirable products. Quality will vary from suppliers also. We are taking a closer look at the three variations and willing to give on cost of goods in an effort to move more product.
We ordered the duck tags when they came out mid 30s a box. What we got was die cut flimsy stickers with a few inch chain. Low quality slow seller. From AA we order the DC dog tags super product. Full size metal tags long dog tag style chain fully licensed by AA for bulk vending. The other stickers were licensed by sandy lion. Better product was like 12 bucks more. Point being the 12 bucks was well worth the better product. Top notch has a few new products that are very good as well. Back in the toy n joy days they always cost a bit more but product sold great. We got in the donuts from AA great product we only got 2 bags to try it out but will order more.

Your paying way to much. You should be between 7 to 10 cent and closer to .07 on most of it. You want to be below 20%

[havending]

What are the prices on the neon rings?

Like 17

[BouncyBalls]

Like 17

Is "like 17" with price breaks or is that the price?

[BouncyBalls]

Three things that really affect us. We always try to balance the three but it's really tough at times. We try to balance cost at or below 20% but often that sticks with slow sell through on less desirable products. Quality will vary from suppliers also. We are taking a closer look at the three variations and willing to give on cost of goods in an effort to move more product.

We ordered the duck tags when they came out mid 30s a box. What we got was die cut flimsy stickers with a few inch chain. Low quality slow seller. From AA we order the DC dog tags super product. Full size metal tags long dog tag style chain fully licensed by AA for bulk vending. The other stickers were licensed by sandy lion. Better product was like 12 bucks more. Point being the 12 bucks was well worth the better product. Top notch has a few new products that are very good as well. Back in the toy n joy days they always cost a bit more but product sold great. We got in the donuts from AA great product we only got 2 bags to try it out but will order more.

I don't recommend selling higher cost items in one inch heads because your right back at 30 %. At the rate you might as well sell cheaper stuff at a quarter.

[rodney69]

I don't recommend selling higher cost items in one inch heads because your right back at 30 %. At the rate you might as well sell cheaper stuff at a quarter.

I think this is what HA is referring to, it would sell faster and potentially make more than selling a cheaper product at the same price point in a particular time frame.

 

Also, sticky from tnt is 15.50 a bag, but easily sells for .50. I do at almost all of my locations. The key though, is that it fills the cap. Their sticky is like everyone else's 2" sticky, or used to be last time I checked. I haven't used others sticky for awhile now.

[musser]

The "high perceived value" song was best sung by Peter Becker of Toy and Joy ( LM Becker Co). The idea is that you have a fixed cost of running a route, vehicle expense, labor, etc so if you can increase gross those fixed costs drop as a percent of gross. This is something that on the surface makes sense. There were some great Toy and Joy products at one time, Blinky rings were the most successful one inch toy I ever ran and will probably never see one like it again. This philosophy of price/value/sales was really a child of an over heated bubble macro economy. People had a LOT of disposable income, not much of it earned but credit related. So the minute things slowed the higher vend prices simply equated into lower sales.

 

It is notable that Peter Becker ran Toy and Joy into bankruptcy. This was not all business related but when the family took the business back over it could not be saved because its underlying merchandise plan was unsustainable.

 

Now, there are people that are quite successful with higher vend prices. Service Vending comes to mind. They are still considered the most profitable bulk operator in the country. But the elephant in the room is that rack sales ARE slower than they used to be. Higher vend prices have kept operators afloat but the revenue to locations has dropped significantly the past decade. This means that as retailers look at the realestate they have we are not as attractive as we once were.

 

This is the lesson we must take away from this argument. As far as suppliers go remember this: to maintain their sales level they can and will market directly to locations. Direct marketing can restore the viability of bulk vending as a store profit center. So the END RESULT of the higher vend price is that we as distributors are being cut out of the value chain by some of our suppliers.

 

Now a shameless plug, Cardinal Distributing was an operator  until just recently. Their business is still based on bulk route operators. The same can be said for Flatline, and a couple of others, TNT comes to mind.

 

Yes higher vend prices can make you money but there is a cost in this that many don't understand.

[Makes Cents]

I think those higher vend prices are attractive now due to the higher profit margin which offsets the slowdown of sales, but that high margin is temporary and IMO a marketing strategy to get all bulk vendors aboard. What I think is coming is that profit margin will diminish to the point where the only higher margin is being made by the suppliers and we'll be selling stuff twice as high for the same profit we had before selling stuff half price with more sales volume.

[musser]

you got it

[Rick]

I think those higher vend prices are attractive now due to the higher profit margin which offsets the slowdown of sales, but that high margin is temporary and IMO a marketing strategy to get all bulk vendors aboard. What I think is coming is that profit margin will diminish to the point where the only higher margin is being made by the suppliers and we'll be selling stuff twice as high for the same profit we had before selling stuff half price with more sales volume.

If that's the case it would have happened already. The market will always have smaller suppliers willing to sell for lower. Part of the beauty of the free market. Just my opinion.

[hanihotdog]

There is a simple calculation that you can make to determine how much your sales need to improve to justify paying x amount more for your products. 

 

Basic operating profit formula:

Profit = Revenue - variable costs

variable costs...   (Revenue * (cost of goods sold as a % of sales + Commission % + service costs as a % of sales))

 

how much do your sales need to increase by selling a 30% product cost vs a 20% product cost?

assumptions..  commission rate is 30% and service cost is 5%

 

Px=R-R(.3+.3+.05)

solve for Px

P=.35R

 

and @ 20% product cost the formula looks like this

Py=R-R(.2+.3+.05)

P=.45R

 

In short, just take your profit margins and divide the higher margin over the lower margin to figure out how much more of the lower margin (higher priced) item you need to sell to justify spending the money.

 

.45 / .35 = 1.29  ...   Revenue must increase by 29% to justify vending the more expensive item at the same price point...

 

Lets see what happens when service goes up to 10% of revenue and products stay the same.

variable costs = (.3+.3+.1) and (.2+.3+.1)

P=.3R and P=.4R respectively  

The 30% product cost item needs to out perform the 20% product by  .4/.3 = 1.33 or  33.3%.

 

How about a 40% product cost compared to a 25% product cost @ 30% commission and 10% service?

.35 / .2 = 1.75 or 75%

 

This formula will not help you pick the next winner.. but it will certainly help your analysis. 

[BouncyBalls]

Clear as mud!

[hanihotdog]

Clear as mud!

haha.. sorry. Let me clear that up.. just add up all of your variable costs as a % of sales to figure out your operating margin. Do that for both products.. then divide the larger operating margin by the smaller operating margin. You have your answer.

The answer will be expressed as a decimal.. for example 1.33 would mean the Lower margin item needs to outperform the larger margin item by 33%

[Makes Cents]

I get it. Its one of those things that looks harder than it is. Thanks for the formula, copied it to my important vending info folder.

Im sure I'll be using it alot in the future as these COGS go up and start to erase my temporary profit increase on my slower sales volume- Kinda like watching the river level rise after a storm.