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Home | Internet & Businesses Online | E-commerce The profitability of a drop-off store isn't determined solely by the number of customers that bring in items. Nor is it gauged by the number of items they take in for auction. Even a high sales figure for the month doesn't mean a store is making money. Some of these stores can, and occasionally do, have high sales figures. Franchisors often report the top five or ten stores as proof of the success of all their stores and their system. Beware of judging a drop-off store business by this information alone. More truth lies in knowing the sales of the lowest ten stores, the average sales per store, and what the high and low sales cycles are over an entire year, than in the total sales for the top stores of a given month. Looking for Profit In evaluating the ability of a drop-off store to generate enough income to be considered profitable, we must look at a number of different, but related factors. The first is the cost of processing items. It is difficult to get a value for that until after the fact because of the constant variety of items. If a store has three employees, how many items can they process per day, per week, per month, and of what value are the items and how many of those processed items sell vs. don't sell? Most stores are loosing money simply by spending more to put an item through to the auction process than they get on commission if it sells. Next point is the sell through rate. All items that go through the store to auction, don't result in a sale. The overhead (cost of processing) and eBay fees are borne by the store unless the store charges an upfront processing fee and the item sells. Most stores tend not to charge a processing fee thinking it discourages customers from using their services. The third factor overlooked by owners that claim to be breaking even is failure to account for one or more of the following monetary obligations: The loan payback to a third party (if any) The payback of any personal funds used to open the business (if any) A return on investment for the owner. Just meeting rent, payroll, and utilities isn't breaking even. The purpose of owning a drop-store is to make money. The payback of loans and start up costs, even if it is to the owner, must be completed before the owner can start reporting a profit and seeing an actual return. Article Source: http://www.articlewheel.com
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