Analysis of inventory-to-sales ratio and profit margin in cross-border e-commerce
Inventory-to-sales ratio (stock-to-sales ratio) is the average inventory of goods in a cycle or the ratio of inventory at the end of the cycle to total sales in the cycle. It is used to reflect the relative quantity of the immediate status of inventory. The smaller the inventory-to-sales ratio, the better, meaning funds are used more efficiently. For example, an inventory-to-sales ratio of 0.1 means that every 10 cents of inventory brings in $1 of sales revenue, indicating that the seller is making better use of capital.
Calculation method of inventory-to-sales ratio
The calculation formula for the inventory-to-sales ratio is as follows:
[ text{Inventory to sales ratio} = frac{text{Average inventory value}}{text{Net sales}} ]
Among them, the average inventory value is the average of the cost of inventory held at the beginning of the analysis period and the cost of inventory held at the end of the period. Net sales are total sales minus returns, subsidies or discounts.
Profit and profit rate
Profit refers to the difference between store revenue and cost. The calculation formula is:
[ text{Profit} = text{Transaction amount} – text{Total cost} ]
Profit margin includes sales profit margin and cost profit margin, etc., which is used to measure the value conversion of sales, cost and other items.
Cross-border e-commerce store cost data analysis
Common costs in the operation of cross-border e-commerce stores include commodity costs, promotion costs and fixed costs:
- Commodity cost: Involves purchase cost, logistics cost, labor cost, loss cost and other costs. Different purchase channels have a direct impact on the cost of goods.
- Promotion costs: By analyzing promotion costs, you can evaluate the effects of different promotion methods so that you can adjust your strategy.
- Fixed costs: Such as office space rent, staff wages, equipment depreciation and cross-border platform fixed costs, etc.
Profit calculation for cross-border e-commerce companies
When developing products, cross-border e-commerce companies need to calculate their sales profits:
[ text{Product sales profit} = text{Product sales price} – text{Product cost} – text{Sales expenses} ]
This formula helps companies make correct decisions in fierce market competition.
Factors affecting profit margins
The profit margin of a product depends on the difference between price and cost. When the price is fixed, the lower the cost, the greater the profit margin; and when the cost is fixed, the higher the price, the greater the profit margin.
Case study: DREVO high-performance cave mouse Falcon
Take Falcon, DREVO’s first high-performance burrowing mouse on Amazon’s UK site, as an example. The competitive product pricing method and the cost pricing method are used to calculate product profits. By comparing functional features and combining with market strategies, the final selling price and profit margin are determined.
To sum up, cross-border e-commerce companies need to comprehensively consider factors such as inventory-to-sales ratio, cost structure, and pricing strategies to maximize profits.