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BNBT #3, Habitat - shocking maths

Watched Britain's Next Big Thing episode 3 last night, designers trying to get a foot in the door at Habitat (150 outlets). For starters, if anyone still dares to say Britain does not have designing talent any longer, they better start watching this program. From frog-brackets (Debbie Evershed, selling them already at markets - through to the next stage) to modular seating (not gone through).

The eagerness

What made me shake my head various times during the program is - as mentioned last week - the eagerness some display to get that foot in the door with one of the big retailers, no matter what the costs!

One candidate who was introduced last week, pitching her sunsnoozer to Boots buying team, has gone through the next stage of discussions with the health and beauty retailer but nothing definite yet. Still, Brigitte Lydum as gone ahead and ordered 1500 units of her Sunsnoozer from her Srilankan manufacturer (that's a lot of boxes stored in her living room, as you can see during episode 3).

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It's down to Mr Retail himself Theo Paphitis to tell her to start thinking about how she's planning to sell the 1500 units if Boots decides not to take it on now - the sunsnoozer being a seasonal product, no much sun in Winter. A personal loan she took out for the order is at stake if she doesn't start asking Boots what their real and short term plans are. Being asked the samples is all she heard lately, not even a date of when the next discussion will take place based on the samples sent.

The maths

Beside the "I am in the next stage, so I'll just wait for things to happen" there are the maths.

Steven Bidduph pitched his Beeble footstool at the open day of Habitat. During his pitch he mentioned the retail price he had in mind the outlets would charge for his product - around £199.00 and him selling his footstool to Habitat for around £ 85.00.
This was immediately waved away by the buyers: we have to sell this under £ 100.00 so that means a purchase price lower than £ 30.00

Holey smoke! Supposing the £ 100.00 is including VAT (£ 83.34 ex) it is still lower than the purchase price the designer had in mind. I can imagine the overheads of a big retailer being quite large, but a mark up of 177% is jaw dropping. But again, a very delighted designer - he's gone through the next round and is already hard at work of getting his product price to the level habitat is expecting of him.

Simple maths now. There is of course economy in large numbers, but still. Steven still has to make his own profit. Suppose he manages to bring the purchase price for habitat down to £ 29.00 and habitat sells it for £ 99.00 (£ 82.50 ex VAT). Habitat's gross profit £ 53.50 per Beeble, Steven's profit per Beeble? Sincerely hope for him he makes at least a fiver out of it or perhaps even a tenner. Let's, for simplicity sake, make it £ 7.50 gross profit for him per Beeble. So he has to hope habitat sells all lot of Beebles. It will take at least 7 of them for Steven to make roughly the same money (gross) Habitat does on one.

What if he would sell the Beebles on his own? Retail price £ 95.00, on a higher production price (lower numbers in production) of £ 35.00. That would make his gross profit around £ 44.00 per Beeble. Meaning, he only has to sell 2 to reach the same gross profit he would have if Habitat managed to sell 7.
Another designer at Habitat's open day also got through to the next stage with her Hula lamps, but on the condition she will stop sell her products (charging £ 300.00 a piece) herself and grand habitat exclusivity on them - while they plan to sell them at a much lower price, more in line with other lighting articles they already carry.

The Long Tail

Getting through to the next stage during the open days at the big retailers in this program means a few things, one extremely important:
if big retailers can see there's a market for your design, product - so should you. Proof is in the pudding with the frog-bracket, Tracy Woods Eczema ointment and even the Hula's

Many other hopefuls fell at the first round, they didn't. I just can't get my head around the fact that especially now with more and more evidence of Long Tail commercial viable products - read "profitable in smaller numbers", it's still the big retailers many turn to instead of doing some simple maths and "going-it-alone". To me it's a no-brainer

Selling Online Basics (SO-basic)

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Since the second episode of BNBT I've been steaming ahead with my new E-guide: Selling Online Basics and it is progressing nicely. The more I see of BNBT, the more I'm convinced it is the basic online knowledge - absolutely not hard to learn - many are missing to take the step to "go-it-alone" with their products.
Give it another week or so and my guide will be ready. 

UPDATE 19.05.11: "Selling Online Basics" officially launched!

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