M. is a medium sized company specialising in retail sales of toys and books. By using ROS (Return on Sales) financial ratio to assess their performance in relation to larger enterprises, M. was found to have a significant decline in operating profit.
This decline was caused by increased expenses which made the company to sell its products at higher prices, a fact that led to a revenue slippage.What could M.’s management team do in order to increase operational efficiency? The ideal solution was buyer2buyers.
A product that would motivate their target market to purchase from their company was a fancy doll with sound. M.’s resources were sufficient for the purchase of 1.000 dolls at the prevailing price of 18 $/unit from the manufacturer. As per manufacturer, the price could be decreased from 18$ to 12$/unit, provided M would buy 4.000 dolls.
In order to sell the excess quantity of 3.000 the company uploaded the product on buyer2buyers at the price of 14$/unit. M. managed to reach four other Buyers (Companies) and sell 750 dolls to each Buyer at the above mentioned price.By registering to buyer2buyers M. managed to increase its Return on Sales.
Before & After becoming buyer2buyers member:
Before
- Cost for 1.000 dolls: 18$ x 1.000 = 1.800$
After
- Cost for 1.000 dolls: 12$ x 1.000 = 1.200$
- Profit per doll: 3.000 x 2$ = 6.000$
After this successful outcome M. company uploaded more products in order to achieve an increase in Return on Sales (ROS). M. company minimised profit loss and gained more advantage over its competitors.