I’m in a conundrum. I’m selling a product with a 36% net profit. However, since I’m getting my products through air cargo due to my low inventory, my final net profit (including duties and transport) is only 7%. The product is good, much better than the majority of my competitors, and people so far are liking it. However, this situation is unsustainable. What options do you think I have to improve this situation?
Try lots of freight forwarders or shippers. I got wildly different prices when I started looking. Can you take a hit on this order and then do sea next time? Ask for better pricing on your product or shipping. It never hurts to ask. I once got a DHL shipment cost cut by about 30% because I simply asked for it.
Ultimately it sounds like you are looking to optimize your system. Look for waste and costs and evaluate each one, one-at-a-time and figure out how you can reduce just that one. Ask your manufacturer what the next price break is on quantity – maybe you’re close and they can make you a better deal. At the end of the day, net profit is still net profit – you just have to decide how much work is worth the 7%. If all else fails and you simply cannot increase the margin, you may just want to let it ride at 7% and go find the next one. If it mostly takes care of itself, let it build you cash until you find your next product…
The net profit is too low to begin with. Have you factored in marketing costs like PPC etc? You may have to abandon this product. If the dollars don’t work then it is not a good business idea. The dollars and the net profit are vital to success. You could try decreasing your costs as that will definitely help, but it is sounding too tight anyway
36% net profit seems good to me. You’re probably looking at 100%+ ROI, which is what they recommend for this, and also lots of big business operate on much less than that. As long as you can scale to freight and properly plan your inventory, it should be sustainable in the long run.
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