Fri, Feb 26 2010
Hi all,
We wanted to remind you that Monday is March 1, which means our new terms and conditions will take effect. You might remember that Ben blogged about this here, but we figured we’d give you a recap below.
For all product ideas that are submitted on or after March 1st, 2010, the 30/10 product rewards will take effect. In other words, for Product 36 and onward, we will reward 30% to all influencers for direct sales on quirky.com, and 10% to all influencers for indirect sales (wholesale/distribution).
Remember, we are doing this to allow us to invest heavily and confidently in the expansion of all of quirky’s products into channel(s) which should allow for a LARGE increase in overall sales and overall reward distribution.
As we explained previously, changing the product reward % is something we don’t want to have to do, but it has become apparent that if we want these products to reach their full potential, we need to invest heavily in opening up a full scale sales department, retail/wholesale distribution partnerships around the world, etc. All of this will be done at the company’s expense.
That said, once we’ve built the machine, we need to make sure it’s sustainable. Specifically, we need to make sure that the actual sale of each individual unit is profitable– otherwise we won’t be around very long.
Let’s walk through the mechanics of a hypothetical Retail/Wholesale Deal:
:: Assume an accessory type Widget with a retail price of $20.
:: With the way we are pricing items, it’s safe to assume a product with this retail price will cost us roughly $5.50 to source, manufacture, QA , package & ship.
:: An average retailer looks for at LEAST a 50% margin on accessory type items. (this means we would have to sell to them at around 10 dollars)
:: We would likely have to pay a Sales Rep anywhere from 5-10% to complete/manage the sales relationship (lets just say 7%, so $0.70 on this transaction)
:: Once the retailer pays us, (and that could take a while) quirky will take in roughly $9.30.
:: Off of that $9.30, as it stands we would pay 30% out to the community ($2.79)
:: The “profit” received by quirky for the sale of this $10 item would be: $9.30(net receipts) – $7.29 (Community Expense + Cost of goods) = $1.01
:: That leaves us with about a dollar on each unit to pay the quirky staff, run the website, warehouse all of the goods, carry / purchase inventory, market the product, etc.
While we would love to be able to do this, it’s just not possible. We need to build a model that will allow us to provide this service to you for decades to come AND make every product successful/profitable for both the business & our influencers.
We feel strongly that this change will work out for everyone’s benefit, and we are confident that we won’t have to make a change like this again for quite some time. As always, hit up our Community Ambassadors at questions@quirky.com if you have any questions or concerns. We’re always listening!
