Calculate product profits based on competitive pricing and cost pricing. Take DREVO’s first high-performance hole mouse Falcon on Amazon UK as an example. The weight of the product is 70g, the product size is: 12.6 cmx6.3cmx3.9cm, the packaging size is: 22cmx13 cmx6cm, the packaging weight is 220g, and the exchange rate of the pound to the RMB is 8.87.
1. Calculate profits using competitive pricing
Competitive pricing is to compare the functional features of the target product with the competing products by listing them, and based on the selling price of the competing products, increase, reduce or sell the target product at the same price.
DREVO’s first high-performance hole mouse Falcon competes with Cooler Master MM711. The comparison shows that:
(1) Both products have the same honeycomb design, but the competing product MM711 is lighter, so this item of Falcon mouse is a demerit, and the price of Falcon needs to be reduced.
(2) Both products have the same optical engine, PixArtPMW3389, which is an equal item.
(3) Both products have RGB backlight, but Falcon has a fully transparent backlight, which is cooler than MM711. This is a plus point, and the price of Falcon is increased.
(4) Both products have ultra-soft cables and driver software, which are equal items. In summary, the pricing of Falcon is consistent with that of its competitor MM711. However, considering that the product is newly launched and has low traffic, in order to make the product more advantageous, it can be sold at a price 10% lower than the market price of MM711, and the price of Falcon is set at 49.99×90%=44.99 (pounds). Product cost Assuming that the purchase price of Falcon is RMB 160, after conversion to pounds RMB GBP is 18.04 pounds (see Table 3-3). According to the cost accounting operation process, 160 18.04
Falcon Cost of sales expenses
Based on the above costs, calculate the net profit of product sales:
Net profit of product sales = product selling price – first-leg freight – product cost – Amazon platform fee Product sales net profit margin = product sales net profit / product selling price ① If the first leg is by sea:
Net profit of product sales = 44.99-0.9-18.04-6.75-2.14-2.25-1.35-0.45 = 13.11 (pounds) Product sales net profit margin =13.44/44.99≈30%②If the first leg is air freight:
Net profit of product sales = 44.99-2.03-18.04-6.75-2.14-2.25-1.35-0.45 = 11.98 (pounds)Net profit margin of product sales = 11.98/44.99~27%
2. Calculate profit using cost pricing
The cost pricing method is to reverse the market price based on the cost price on the basis of a certain profit. Adopting cost pricing can help us quickly occupy the market.
When the first-leg logistics is sea transportation, assuming that the net profit margin is controlled at 15%, the product price is reversed:
Product price x15% = product price – first-leg freight – product cost – Amazon platform fee
Product price x15% = product price – 0.9 – 18.04 – product price x15% – 2.14 – product price x5% – product price x3% – product price x1%
It can be concluded that the product price when the first leg is sea transportation is 34.55 pounds, and the net profit of product sales is 5.18 pounds.
Since a product will not set multiple prices due to different first-leg transportation, in most cases, the first-leg transportation will be sea transportation, so 34.55 pounds is used as the price of this product. Further calculation shows that when the first-leg transportation is air transportation, the net profit of product sales is 4.05 pounds, and the profit margin of product sales is 11.7%.