[green]

Chuck Taylors. I don't know how big they are in America, but in Sydney it feels like every 2nd 15-25 YR old is wearing them. Most people seem to form some sort of emotional attachment to these shoes (myself included), and everyone I've talked to who owns a pair, wants to buy a few more and start collecting them.

Chuck Taylors retail here for $70.00, My friend recently went to America and picked up a pair for $25 USD, which is about $33 AU. A $37 price difference.
Chuck taylors seem like the perfect product to sell online, because of..

1. No sizing issues: Unlike clothes, once you know your chuck taylor size you can be 100% sure the shoe that you purchase online will fit you.

2. Product is continually updated: Every 6 months new designs are released-- Most stores here get these shoes at least 4 months after they are released in America, So if you could get them in earlier (which doesn't sound too hard), you would have 0 competition for those shoes.

3. Large market- In Sydney, im pretty sure Melbourne too.

4. There currently is no online store selling converse shoes in Australia.

5. Cheaper price- Seeing you can buy chuck taylors for $33 in the US, Even if you factor in the shipping- Im guessing the total cost per shoe if you ordered about 100 would be $40. If you sold these for $60- You would make $2000 , from which you could buy 150 shoes, leading to a upward spiral of profits and maybe even a pair of gold plated converse shoes

This is all purely conceptual- I havent gathered enough information to decide whether it would be worth trying.
Do you guys think this could work? see any flaws? Have any info about importing that I could use?

[Antdizzle]

Yeah, everyone has those shoes out here. Even I bought them, but they give you no support. If you can buy them in the US and sell them in Australia then that might work out for you.

[akula]

typical retailing operation

high variable costs, no room for jacking up the price.

to sell a shoe to somebody, marketing costs will cost about 30% of your retail price so...

COGS= $30

Marketing costs = $21

therefore @ $70 retail, gross = $19

less tax @ 30%, net profit = $13.3

to earn a salary of 40k = roughly 3,000 pairs.

Can you sell 3,000 pairs of shoes in a year?

If the retail price even drops by $10, or your costs rise by $5, you are out of business because that will destroy your net profit margin.

welcome to retailing. if you can't charge the highest prices in the industry, and still have plenty of customers, you have a problem. loss leaders die quickly.



P.S. pardon the dodgy accounting, i realise salaries come out of gross...this just made the calculation easier

[Antdizzle]

If s/he looked around s/he could probably get the wholesale price that the US vendors get. Seeing that the retail price is $30 here, then the wholesale price should be pretty cheap. So if s/he does his/her homework, then there could be some good profit.

[akula]

Originally Posted by Antdizzle

If s/he looked around s/he could probably get the wholesale price that the US vendors get. Seeing that the retail price is $30 here, then the wholesale price should be pretty cheap. So if s/he does his/her homework, then there could be some good profit.

you don't get it. it's not the profit margins. it's the net profit sensitivity for variance in fixed and variable costs.

you can't raise prices. that's the problem.

look....i tell you this; the poster is making classic planning mistakes (explained to death in every single entrepreneurship text book) which have driven hundreds of ventures into the ground.

it doesn't take a genius to say "hey! I'm gonna buy one dollar and sell it for two. the way I'll succeed is because I'll have the lowest prices around."

you wanna do arbitrage? why not just trade common stock, or options. It's a lot easier than trading shoes.

Green, I won't bag you too much because you are here to learn, but I will tell you to stop listening to people who have nothing to say but to yank you on to making stupid decisions. They're not gonna be there when your website accidentally crashes, you have no cash reserves, you have bills to pay and suddenly, you have somebody selling the same shoes for $50 a click away.


bottom line: Retaining is a bitch. Don't do it. Wanna trade stuff? Go on Ebay. Wanna build a real business? Get a clue for what you're supposed to be doing- pick up a book, so you don't say stupid things like "I'm gonna enter the market being the liowest cost operator".

I wish I could help you, and the only way I can is giving the oportunity to prove me wriong.

....the thoughtful answers to the questions you are asking are complicated...you won't understand them if somebody explains it to you, you need to find these things out for your self. I can't start introducing you to the nature of competitive starategy for example- it's something you need to want to learn your self.

[green]

Typical retailing operation

high variable costs, no room for jacking up the price.

By high variable costs I assume your talking about just the product. Retail operations (not online) would have much higher variable costs- Store rent & Staff hire- + the initial cost to outfit the store, which they would be trying to cover. THe only variables in my case would be the shoes/ website hosting/ -- So i think that works as an advantage, having substantially less variable costs than the (non-online)retail operations.

to sell a shoe to somebody, marketing costs will cost about 30% of your retail price so...

My target marget is very internet savy- often using the net to check out the latest styles on the converse website. So I would use a google adwords campaign- with no online competition (yet) I wouldnot have to pay much per click for my keywords.

Secondly-- you make it sound as if competing on price is a bad thing. The best thing about having the lowest prices, is the word of mouth advertising that follows it.
People love getting a bargain- And when friends comment on their new shoes- they'll be sure to mention where they got them and at what price.
So all in all I think 30% is too high a figure-- I would aim for 10%.

And if you could think of a Unique selling proposition-- that isnt based on price, I'd like to hear it

[Steve]

Akula,

Although I understand your logic. There are a couple things that I feel you are making seem pretty cut and dry.

Marketing is 21% -- you make that seem like an exact number, please give us some more information on how you came up with that???

Other reasons beyond price: Do people buy online because it's cheaper??? Definitely not always. Maybe the shoe is not avaliable, maybe the person is busy, maybe since they are so popular the store doesn't have the styles I like, maybe I can't go to the store, maybe the store is too far, etc.

The person doesn't have to be the lowest price to close the sale, they just have to meet someones needs on certian points.

Obviously, marketing one brand of shoes leaves you very open to price hikes, market popularity, etc issues. But it's a starting point or a niche of it's own.

[akula]

Originally Posted by green

By high variable costs I assume your talking about just the product. Retail operations (not online) would have much higher variable costs- Store rent & Staff hire- + the initial cost to outfit the store, which they would be trying to cover. THe only variables in my case would be the shoes/ website hosting/ -- So i think that works as an advantage, having substantially less variable costs than the (non-online)retail operations.



My target marget is very internet savy- often using the net to check out the latest styles on the converse website. So I would use a google adwords campaign- with no online competition (yet) I wouldnot have to pay much per click for my keywords.

Secondly-- you make it sound as if competing on price is a bad thing. The best thing about having the lowest prices, is the word of mouth advertising that follows it.
People love getting a bargain- And when friends comment on their new shoes- they'll be sure to mention where they got them and at what price.
So all in all I think 30% is too high a figure-- I would aim for 10%.

And if you could think of a Unique selling proposition-- that isnt based on price, I'd like to hear it

Ok, I want to help you, so let's quickly work through this;

1) You are selecting where to invest your time and capital. You think that selling cheap shoes online is a better investment than your other options. The base option is getting a job in retailing, making the cash and reinvesting into a whole different of investment options- including further education. This is your risk free option.

2) Firstly, the numbers. Historical retailing figures for top 400 Internet retailers show that for every dollar in revenue, the average net profit is about 4c- 10c. Likewise, there is a lot of churn. Retailers go broke all the time. http://www.internetretailer.com/article.asp?id=15099

Do you think an online retailer is a better investment decision than your risk free option?

3) You are choosing to compete in an industry without having a competitive advantage. If your prices are low, you will not make enough profit to reinvest back into the business and make it grow.

Basically, low prices are not a sustainable competitive advantage. Anybody can lower their prices to match yours. You are entering a competitive industry with no competitive advantage. If you have no competitive advantage- don't compete!

4) How to compete? You've asked for tips on how to compete on anything other than price. This is very valuable information. Management consultants charge $500hr just to chat about it. Because you expect this information for free, you won't implement it, so there is no point giving it to you. You won’t value it.

I will, however, quickly reflect of some historically common, competitive strategies for retailers.

Exclusive Range. If you can secure rights for exclusive distribution for these shoes in Australia- that's an advantage. If you want to compete in retail, try to get exclusive geographical rights to one or another product.

Novel Distribution. If you can find a novel way of selling the product, you can get a competitive advantage. Estee Lauder did it with department stores (before that, you could only get cosmetics in pharmacies. Microsoft did it with a deal with IBM. Michael Dell did it with online distribution.

There are many other ways to compete, but they all fit in the wider definition of entrepreneurship and understanding these things requires understanding of a few other things. Entrepreneurship is an integrated conceptual framework and looking at particular aspects of it in isolation is dangerous.

Look. Why do you care what I have to say? Go and start the damn business. See how you go. Either way, I support you 100% and if you want to consider some actual interesting opportunities with retail- we can do that too.

[nado]

My 2c, I've never heard of that brand at all. And I'm in Australia (4 hours south of Sydney) and fit into the age bracket you mentioned.

... and I've never heard anyone talk about that brand

[green]

My 2c, I've never heard of that brand at all. And I'm in Australia (4 hours south of Sydney) and fit into the age bracket you mentioned.

... and I've never heard anyone talk about that brand

Nado: how odd, which part of the south coast?

Look. Why do you care what I have to say? Go and start the damn business. See how you go. Either way, I support you 100% and if you want to consider some actual interesting opportunities with retail- we can do that too.

Like I said before-- this is all purely conceptual-- Im not planning to start this anytime soon( web hosting is what im working on at the moment). I just wanted to get some discussion going on internet retailing.

And yes, I would like to hear about some 'actually interesting' retail opportunities