SWOT analysis

msdoc · 10-09-2014 9:05am #1

I want to expand my business and am thinking of the following.
Import papers, package & brand them, use independent sales agents on commission basis to sell them in to retail units.
Not saying that it is going to be a safe bet but I'm thinking that my biggest outlay is the cost of stock and storage of same. I am aware that getting payment will be an ongoing job and would propose that I only pay the sales agents once I get paid.
I have already started reselling the papers to an online retailer and could directly target a few more of these.
I'm basically looking for some critique/provocation.

kirb42 · 10-09-2014 9:14am

wouldn't do any harm to check this out first ,porter's 5 forces....

http://en.wikipedia.org/wiki/Porter_five_forces_analysis

pedronomix · 10-09-2014 9:15am

What kind of papers? The logistics/distribution chain for these shops is via wholesalers.

thecommander · 10-09-2014 9:22am

pedronomix wrote: »

What kind of papers? The logistics/distribution chain for these shops is via wholesalers.

Exactly. Any paper shop (e.g. Daintree) will have it's own suppliers, why would they go with you? A newsagents that sells paper will just buy from their wholesaler along with pens, rulers etc.

What is different about your paper, and why would a store ditch the current supplier for you? Are you cheaper, or faster, or better quality?

msdoc · 10-09-2014 9:28am

They are speciality papers - from India.
I'm thinking more of the UK market, rather than Ireland

msdoc · 10-09-2014 9:30am

thecommander wrote: »

Exactly. Any paper shop (e.g. Daintree) will have it's own suppliers, why would they go with you? A newsagents that sells paper will just buy from their wholesaler along with pens, rulers etc.

What is different about your paper, and why would a store ditch the current supplier for you? Are you cheaper, or faster, or better quality?

These papers are new to the market. Daintree, or others, would go with me, or at least consider me, as I'm bringing something new that maybe they have had previous requests from their customers for.
Sorry that I didn't clarify that the papers are different from anything else on the market.

pedronomix · 10-09-2014 9:54am

msdoc wrote: »

These papers are new to the market. Daintree, or others, would go with me, or at least consider me, as I'm bringing something new that maybe they have had previous requests from their customers for.
Sorry that I didn't clarify that the papers are different from anything else on the market.

Then they should be very attractive to the established wholesale network too! The product range is probably far too niche to sustain a separate national sales/distribution operation.

thecommander · 10-09-2014 9:58am

msdoc wrote: »

They are speciality papers - from India.

What's different about them? I'm a designer and do a ton of print. While most of it is on standard stocks, we do use speciality papers for invites etc.

msdoc · 10-09-2014 11:24am

pedronomix wrote: »

Then they should be very attractive to the established wholesale network too! The product range is probably far too niche to sustain a separate national sales/distribution operation.

I don't think that I can go low enough on the price for a wholesaler to get enough of a markup.
I was thinking of using sales agents who would normally call to craft shops and that they would add this to their portfolio. I would pay them commission on sales. They would typically carry a few lines of different products.
What would a typical wholesaler mark up be? 40%

msdoc · 10-09-2014 11:25am

thecommander wrote: »

What's different about them? I'm a designer and do a ton of print. While most of it is on standard stocks, we do use speciality papers for invites etc.

You couldn't print on them - they are embossed papers. They can be used for backing and to make wallets out of.

thecommander · 10-09-2014 1:04pm

msdoc wrote: »

You couldn't print on them - they are embossed papers. They can be used for backing and to make wallets out of.

Who do you see buying them?

10-09-2014 1:08pm

msdoc wrote: »

I don't think that I can go low enough on the price for a wholesaler to get enough of a markup.
I was thinking of using sales agents who would normally call to craft shops and that they would add this to their portfolio. I would pay them commission on sales. They would typically carry a few lines of different products.
What would a typical wholesaler mark up be? 40%

Probably 30% margin, although Im not sure about that particular industry, thats the margin I work off in wholesale distribution of other products. But you could go yourself to the wholesalers instead of paying sales agents to do it, then the numbers will probably work.

msdoc · 10-09-2014 2:54pm

thecommander wrote: »

Who do you see buying them?

Brides/crafters wanting to make wedding stationery
Some examples here
pinterest.com/HappyEverAfter4/embossed-papers/

msdoc · 10-09-2014 2:54pm

Deleted User wrote: »

Probably 30% margin, although Im not sure about that particular industry, thats the margin I work off in wholesale distribution of other products. But you could go yourself to the wholesalers instead of paying sales agents to do it, then the numbers will probably work.

I wasn't going to go to sales agents and they go to wholesalers. I was going to go to sales agents and they go to retailers

pedronomix · 10-09-2014 6:55pm

And have a bunch of low sales value accounts plus all the logistics/distribution costs plus sales agents fees, if you can find any (a big if!) . Model does not work for me. If you want to step outside the industry norm you better have a range with both huge margins and sales potential

10-09-2014 7:13pm

pedronomix wrote: »

And have a bunch of low sales value accounts plus all the logistics/distribution costs plus sales agents fees, if you can find any (a big if!) . Model does not work for me. If you want to step outside the industry norm you better have a range with both huge margins and sales potential

Indeed. If these sales agents are going to be hitting small individual stores its too messy and too much work for little return. If you want them to hit big chains, your better off doing it yourself and saving that commission margin. Theres not that many of them to hit.
Or as advised use the wholesalers to do that for you, a couple of pitches could save you a whole lot of pain and admin.
Its also a risk getting the salespeople, because if you are fortunate enough to get them, if they are on commission only and not under your control most of the time, chances are its not going to work. From my experience commission only models only really work for the companies that are hardcore sales with all the bells and whistles that entails in terms of motivation and training.

msdoc · 10-09-2014 10:50pm

Could someone help me do the math? If the RRP is €1 (including VAT) what would a distributor sell for and what should/could I sell to a distributor for?

11-09-2014 7:38am

If VAT is 20% then its 17 cents of the 1 euro. I dont know what margins retailers work with for newspapers, but I imagine its at least 40%. So 35 cents for the retailer. Then 30% for a wholesaler - 15 cents. So that leaves 34 cents for you. I'd say thats your ballpark. You'll have some logistics costs in there too I'd say you'd need to buy on a 50-60% gross margin yourself to make it work.

Im sure theres someone in retail here who can confirm the margins on papers etc

msdoc · 11-09-2014 8:17am

Sorry. I'm normally good with maths but have a brain block on margins

Retails for €1
20 c VAT
40c profit for retailer
20 c profit for wholesaler

so after everyone has taken a cut there is 20c for me which has to cover the costs of goods and logistics etc.

Does the wholesaler's profit look right? Spoke to someone and he said that he needs 40%

pedronomix · 11-09-2014 8:51am

Vat is 23%, so ex vat retail is 81.3c
Retailer will want 50% MARGIN so his cost is 40.69 ex vat
Wholesaler will want 40% Margin so you get 24.39 ex-VAT

11-09-2014 8:52am

pedronomix wrote: »

Vat is 23%, so ex vat retail is 81.3c
Retailer will want 50% MARGIN so his cost is 40.69 ex vat
Wholesaler will want 40% Margin so you get 24.39 ex-VAT

Seems a lot for a wholesaler 40%, is that the standard with newspapers etc?

pedronomix · 11-09-2014 9:12am

Deleted User wrote: »

Seems a lot for a wholesaler 40%, is that the standard with newspapers etc?

they are embossed art papers not newspapers!!

11-09-2014 9:36am

pedronomix wrote: »

they are embossed art papers not newspapers!!

You and your semantics Pedro

But same point applies, I would say 40% is pretty high for a wholesaler

pedronomix · 11-09-2014 9:45am

For low value items I would say it is an absolute minimum! ( based on personal experience)

I would never let facts get in the way of semantics, soo much more fun!!

pedroeibar1 · 11-09-2014 11:14am

Semantics - where would be without them, a horse chesnut and a chesnut horse are quite different!:)
I agree with el Rifle and Pedronomix above. For the sake of it let’s assume the margins available are adequate, and that the ‘agent’ will not do a banana to the source and cut you out.

A key issue is marketing the product. When agents have more than one ‘principal’ it is very hard (read often impossible) to manage and/or motivate them on your product. If your product is really ‘special’ (high commission/unique/door-opener) it can work if each agent has a complementary range of products and your product is an ‘add-on’ – otherwise the sale cost will not be worth their while. (Why waste time trying to find customers and sell a product that is not remunerative in terms of ‘income per sale’?)
You are correct to tie payment of commission to receipt of payment by you.

SWOT analysis

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