The vape industry is so new that the guy who was mowing your lawn last week is now the local business owner and expert. When you ask a tough question he runs to the back and Google’s or YouTube’s you an answer as fast as he can. These new business owners hold a liberal view of the world and an unwillingness to hold a pencil to paper to do some math and set and adhere to an industry standard. When there isn’t a standard take the first step to create one for the future of their own business.
Everyone thinks that WalMart makes billions by being the cheapest place to shop, yet you go into Walmart and always seem to spend $50 to $100 more than you planned. Its not an accident and it wasn’t because it was the best deal in town. Profit blending is the term best used. You bought the new TV for $300 less than the local shop could sell it to you for, but you only buy TV’s once every 5-10 years. You paid $4 bucks for a toothbrush that should of only cost 8 cents. That’s $80 in profit for Walmart over that same 5 years and that basket full of little items is what broke your bank every time.
So knowing what you should pay for the next new thing in the vape box mod world is an important education. Right now our previous lawn care specialist are running what we call a “back-pocket” accounting system. If I spend $10 bucks and sell for $20 I made money they think. Nice thought but not a real world reality. The customer base actually trusts eBay and Amazon for the sales. Well Amazon is a 15 Percent fee and eBay is a 10% or more fee. Customer love those Free shipping auctions only the post office doesn’t work for free so add Another $5 in cost to that and eBay actually charges 10 percent on the Shipping costs as well in their final evaluation fees. Of course the $10 cost of an item isn’t actually the cost of the item had to pay freight to get it usually adds up to around 10% of the cost of product when you buy in bulk. Then you have to pay for packaging to ship the product in and that isn’t free quite expensive actually around $2 per small items and $5 for larger items. Gas, rent, sleeping indoors, eating, clothes the things we use paychecks for we are NOT going to even throw that into the cost of our business ( true definition of a back pocket accountant ignores costs until they are forced to deal with them and why business’s fail in the first year).
Woof you say or yeah we know business owners have to pay for stuff. In our simple scenario though on a $20 sale. Amazon took $3, US Mail Took $5, Packaging took $2, Paypal/CC Fee’s took $1.20 and the $10 item cost you $11 to get in the door to sale. For a grand total of $22.20 to sell a $20 item, Yup you’re an idiot. Even if you were selling just out of the store Rent, Food and profit come into play and eat that $9 margin down to $.50 to 80 cent profit on a $20 item. You go online to increase your gross which cuts your costs but not if the manufacture put you in the hole before you bought from them.
What is worse is this EXACTLY the business strategy of every juice manufacture right now. The only way for a business owner to make money is NOT promote their product and sell it across the counter because of Internet advertised pricing. Of course us demonstrating that these prices are FALSE and any idiot who would be doing this is future bankrupt does not matter to the customer. Many of the manufactures we talk to will here me say it only takes 3 idiots nationwide to destroy a manufactures ability to put product on the floor of a store. All they have to do is promote on Facebook and get a website ranked to showcase their future failure.
When we get into MODS the numbers get worse because they get bigger on the Gross end and the manufactures keep leaving tiny margins while the set costs of freight do not go up the percentages and your lawn mowing business owners think $20 bucks per flip is just way easier than pushing a mower was last summer.
If you viewed my linkedin or you know me personally my background is deeper than most 3 business professionals combined. I worked High end electronics for the Navy and worked on Ion implanters when I left the military, race cars, bikes, mechanic and engineer of both electronics and metal. Went to school in a Minanite community so I am a damn fine carpenter well. Owning a performance part store I spend a large chunk of my week talking Horsepower vs Dollars spent. This is the experience we are going to bring forward from a solid industry that has learned a few lessons about selling product.
Charge by the Horsepower or rather per the Horsepower and you set a market standard. A watt is an electrical communication of horsepower. In fact 1 Watt = .0013 Horsepower So a Tesla 120 Watt box mod is a Tesla 0.161 horsepower mod. Just doesn’t sound as sexy in horsepower because the number is so tiny. The automotive performance world expects to pay around $10-15 per horsepower and the customer knows they have gotten a great deal. Believe it or not that math seems to work out good and if you convert that math it comes out to $1.61 per watt retail and 70 cents per watt wholesale . That makes a 20 Watt mod around $32 bucks retail and $14 wholesale to the retailer.
Right now the market is underselling at the high end of what we are seeing as useless wattage and overpaying in the 20 to 60 watt range.
The Juice guys well they are going to keep doing whatever the “other guy” is doing for while. There seems to be a failure of understanding to just how valuable floor space is to their business model as no retailer can promote their product. With the federal push on regulations they will have to lower the wholesale by half or figure out how to get the market to spend 50 percent more than the standard they already set.
The retailers need to pay attention to the “wholesalers” who are sacrificing Mod pricing online to encourage direct sales of the Juice so they can ignore the problem of zero profit at their margins staring them in the face.