Mon 18 Jan 2010
Happy Monday Everyone. This week will mark a major milestone in Quirky’s growth.
Later this week (fingers crossed), we will be moving our site out of beta, and unveiling a sparkly new (slash awesome) user interface. Beyond that, we will be announcing the close of our seed funding & addition of a few new members of our board / team.
Before that, I’d like to start a dialog about some upcoming changes to our Terms & Conditions. It is important to note that these changes will not take effect until March 1st 2010, and products/influencers of product ideas that were submitted prior to March 1st will not be effected.
The changes are as follows:
Formalization of quirky’s right to use your name / influence % / earning amount in marketing.
Those of you have received a quirky product have seen that we take great pride in presenting the name of all of a product’s influencers on the back of our retail packaging. We’ve been doing this since inception and don’t plan on stopping. To formalize this a bit, we’ve added a clause in our Terms & Conditions entitled “media waiver” — this basically states that you are giving quirky the right to publicize your participation in the creation of our products, as well as the rewards you received.
Social Sales Reward Formalization
Social Sales is one of our major goals of 2010. We love the idea of getting all influencers involved in not just the creation of great products, but the sales & marketing process as well. To lay a good foundation, we have added some language in the payments section which clearly lays out that payments for social sales will be as follows:
10% payment for all product sales (and commitments) brought in via a referral
20% payment for all idea submissions brought in via a referral
You’ll notice we increased the reward for social sales on product submissions from 10% to 20%.
Change In Product Reward % To Allow For Expansion & Development of a Healthy Wholesale/Retail Channel
Currently, we reward influencers of our products with a 30% cut of all top line revenue generated by that product. About 97% of our sales to date have been direct from quirky.com’s store.
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, its just not possible. We need to build a model that will allow us to provide this service to you for decades to come & make every product successful / profitable for both the business & our influencers.
We are therefore implementing a change in the product reward to 30% for direct sales on quirky.com, and 10% for indirect sales (wholesale/distribution). This will 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.
Once again this change will only effect product ideas that are submitted on or after March 1st, 2010, and will have no effect on the current lineup/influencers of that lineup.
We feel strongly that this change works in everyones benefit, and one that will not have to be changed again for quite some time.
I ask you all to remember one of my favorite lines: 100% of nothing = nothing. We are doing this for just two reasons:
1. This to be an opportunity to reward you with a larger dollar amount, even though the % of the sales may be smaller.
2. Because it is necessary for us to be a sustainable business.
We hope you accept this change, and challenge us at the same time. We look forward to proving to you that it’ll be worth your while.
Oh, and remember: 30% still stands for direct sales on quirky’s site.
Once A Day Reward Calculation
There have been more and more influencers with every new product we have launched. With this, it has become more and more taxing on our system to calculate and distribute fractions of pennies to hundreds of users every time someone buys a single product.
Because of this, we are moving to a daily batch system which will look at all sales completed in the previous 24 hours, for each product– and make a single credit to every users account (per product). This will work in the community’s benefit. Simply, by increasing the dollar amount per reward calculation, there will be less of chance (due to a bigger multiplier) that small influence %’s will get lost due to penny rounding.
Requirement of QPIF & Withholding Information
We’ve been writing some hefty checks lately. With that, we are taking tax / financial compliance very seriously. We have added a formal section to the terms & conditions stating the requirement of all users to fill out & return a Quirky Payee Information Form, and corresponding tax information prior to their cash withdrawal.
Further, all references to the kluster debit cards have been removed, as the only current method of payments are check, ACH (direct deposit), and wire transfer (for a fee).
We have received feedback from many users about implementing paypal, as well as other solutions. Rest assured it is a paramount concern of ours to assure that you can access your funds in as many ways possible. We just need to make sure that we can handle all the individual systems / corresponding reporting.
Thats all , folks. Thanks for reading. Obviously, many of these are tough decisions… but ones that need to be made to assure that we are around & building great products for a long time.
You can read the entire new terms & conditions page here. and download a Microsoft Word version of the marked T&C changes (to compare current / revised) here.
Obviously, comment away and we’ll try to respond swiftly. We’ll be posting often this week, so stay tuned.
