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QuietGuyInThecorner
Perkone
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Posted - 2009.08.11 19:06:00 -
[1]
Costco Model In EVE
IÆve been mulling this idea in my head for a wile and I would like to share it with you for feedback.
For those who donÆt know, Costco is a wholesale warehouse that requires membership to purchase from them. They charge $50 a year for the ability to shop there and they sell products cheaper the ômarketö and try to cut them lower by selling in bulk.
So my train of thinking on this based on an example of a zealot with fake numbersà
Lets say that producing a zealot costs 80mill and market value is at 120mill netting 40mill a unit. Alternatively, charge someone 100mill a month and then sell it to him or her for 100mill a unit. You still make a per unit profit just not as much with a guaranteed profit of 100mill a month without resource consumption. In addition, any smart consumer will buy enough units to at least break even on the deal. Therefore, you are almost guaranteeing the sales of X units per membership where X allows the customer to break even. In this example that would be at least five zealots per membership.
My thinking originally aligned me with membership on an individual basis but if has also considered running it on a corporation level. Where a corp would pay a membership fee and any member of the corp or the corp itself could benefit, analogues to a Site license.
Issues if found / thought of
-Resellers: Obviously, any smart trader would use this as an opportunity to buy under market and make back the other half of the profit. This is something under this system that canÆt be helped but this can also be seen as a way to guarantee a constant buyer for your goods or you can charge a higher membership fee for those customers proved to be resellers.
-Is the margin worth it? This issue is based on the market prices being to close to the cost of building that splitting the profit to provide under market prices is not enough of an incentive to attract customers. This can be weighted against the significant difference on those products that could support a large price cut and stay above cost. For example sell ammo and drones at market value, cut T1 ships X% and T2 ships Y%, so as the profit margin widens you more a higher % savings to the customer to off set the products you cannot afford to discount.
-Volume on discounted items. With selling things at discount you can expect a large volume and most likely for the more expensive items. Chances are those are the ones that you will not be able to mass-produce as easily. This can be helped by a order queue or by adding additional players to the process.
Finial points (For Now)
Thus would never build at a loss in the sense of a net loss but it will however lose potential profit had you used the market.
I am looking for more or less a think tank discussion. At this point, I am not planning on this turning into any kind of Bond or IPO situation. I just want feed back on the process, concepts, marketability, feasibility, and anything else relating you can think of.
~Thanks Quietguy
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Stela'Artois
Capital Ventures Incorporated
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Posted - 2009.08.11 19:20:00 -
[2]
Interesting idea, but it seems like it would be a logistical nightmare.
I was in a 0.0 alliance that had a corp that ran a web page that you could use just like Amazon.com and go out, order all the stuff you wanted, then pick a place to have it delivered, and they would provide it as just a smidge above cost to pay for the transport. It kept the industrialists busy, and the fighters fighting in an area where supply was a challenge.
So, in short, I could see something like this being applied even in high sec...a monthly fee to join a website where you could "shop" for items and them have them delivered at a discount.
Personally, I love the concept that some corps have worked out like the OneStop mining shop and Evalfs Delivery Luck corp where you get pretty much a one stop shop to provide a need. Heck, I dont mind paying a bit extra just to have the leg work done for me.
Anyway...that would be my thought...have members pay a fee for access to a special corp website where they could shop, purchase, and have delivered modules for a discount price. You could feed your supply chains by soliciting traders/industrialists by publishing a standard "will buy X for Y amount" list they could work off of.
I know personally, as a small time trader, if I knew I could sell you all of my stock of something at a 5% profit rather than waiting weeks to make 15% on it, I would go with the quick turn around.
That was a lot of babble...sorry.
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SencneS
Rebellion Against Big Irreversible Dinks
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Posted - 2009.08.11 19:22:00 -
[3]
Your biggest issue would indeed be resellers, in the example you gave, I would gladly pay 100mil a month to gobble up all the ships for 40mil off market price.
As a consumer I don't think I would bother with paying a monthly membership fee that is considerably larger then the savings I get.
In the example you give, you charge 100mil a month for the luxury of buying the ships 40mil less then market. This means I would need to lose 3 ships in order for me to have saved 20mil.
As a manufacture, it goes the other way, why would I pay 100mil, just to guarantee a sale of 100mil.. Why not just place the ship on the market for 100mil in the first place, by passing your 100mil membership fee. I'd be saying 100mil a month and making the exact same ISK of sales of the ships.
Logistically - You charge membership for customers, which instantly drops your audience down to a select few who actually consume or at least "resell" the products. This is literally no good for manufactures as described above, the open market has a much large audience and believe me if I place something on the market that sells for 140mil, for 100mil IT WILL get sold very quickly.
The only way this could possibly work is.
1) Manufactures/Suppliers don't pay membership, it's of no benifit to them to pay to sell to a smaller audicance. 2) You capture the entire market of something. Lets assume you manage to find all the Hulk BPO holders and they all signed up for this. Leaving JUST Inventors out. Which causes an issue with 3... 3) Memberships fees for consumers can't be more then the ISK saved on the product they are buying.
You could kill two birds with one stone, have the consumers membership pay out like dividends to the suppliers, but how do you work out which supply gets what.. Wouldn't be right to just sign up as a supplier and sell nothing but get ISK from everyone else's sales etc.
Amarr for Life |
QuietGuyInThecorner
Perkone
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Posted - 2009.08.11 19:47:00 -
[4]
First off i would like to thank you for the quick feedback.
Alright then...
To Stela
I did invision this as a high sec operation exclusivly letting and 0.0 customer worry about their own lodgistics.
I do also agree that some form or shipping needs to be in place, after all they are paying to shop with me so they should be getting something.
To SenceneS
After what you said i'm am leaning more twards the corperate membership instead of the indavidual membership. You could even take it as far as limiting the rights to purchase to Director level people and only from the corp wallet. You can also then vary the membership fee based on the size of each member corp.
I Don't think i explained some points well. only the consumers of the final product pay the membership fee. The company itself is the producer of the goods. Materials are accuared like any other production operation, and at no extra cost to the supllier.
Also you could have a regular market price and then a Members price. this would not limit your activity to the public because you can still be competative as well as offer a discount to those who pay for membership.
And like i said there is really no way i can think of to stop resellers but again i'm not loseing money just potentail profit. each sale is still profitable just less so then selling it stright to market.
~QuietGuy
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LaVista Vista
Conservative Shenanigans Party
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Posted - 2009.08.11 19:47:00 -
[5]
I hate to explain myself this briefly. However the argument against this idea is simple:
EVE's market obeys to the rules of perfect competition. Costco wouldn't exist in a world with perfect competition. Hence this idea won't work in EVE.
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Stela'Artois
Capital Ventures Incorporated
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Posted - 2009.08.11 19:56:00 -
[6]
The question I would have about resellers is this: If you are making a profit you are happy with, do you really care if others are just re-selling your goods?
I at times notice large amounts of stuff I am selling get purchased at once. Now, it could be a corp/alliance stockpiling, or, more likely, it is a trader who found a juicy sales opportunity in some other region.
Problem is, I dont really care either way...I still made my profit, and happily have isk in my wallet. So, does it really matter if you supply the resellers or supply the user?
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Sophie Daigneau
CAPITAL Assistance in Destruction Society GoonSwarm
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Posted - 2009.08.11 19:58:00 -
[7]
I think an idea like this might work as a meeting place for industrialists and traders. As an industrialist, you want to focus on building things, not on playing the .01 isk game in Jita. Selling to buy orders in many cases more than shortchanges you just a little. As a trader, picking up substantial volumes can be hard at times. An operation like this would enable industrialists to sell their product in volume to traders at a discount to the market that's reasonable to both parties.
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Kazzac Elentria
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Posted - 2009.08.11 20:01:00 -
[8]
Originally by: Sophie Daigneau I think an idea like this might work as a meeting place for industrialists and traders. As an industrialist, you want to focus on building things, not on playing the .01 isk game in Jita. Selling to buy orders in many cases more than shortchanges you just a little. As a trader, picking up substantial volumes can be hard at times. An operation like this would enable industrialists to sell their product in volume to traders at a discount to the market that's reasonable to both parties.
Thats about the only niche I could see it working.
I think I would pay a monthly fee if someone could guarantee me 600m trit at X price. |
QuietGuyInThecorner
Perkone
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Posted - 2009.08.11 20:17:00 -
[9]
I do like this idea of a distributer or middle man for miners, producers and traders givin enough people on each side of this 3way fence you could gauruntee or try to at least that certin volumes will always be atainable.
Back to earlier... I dont see why it will not work. even if you are selling exclusivle to resellers you are still selling higher then cost and thus making a profit. just on that alone would seem that it would work. Now i'm no econ major but i would really like to know if there is something wrong in my thinking. And yes I understand it not as much rofit then you could be makeing but it is still profit.
~Quietguy
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Sophie Daigneau
CAPITAL Assistance in Destruction Society GoonSwarm
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Posted - 2009.08.11 20:31:00 -
[10]
Back when I was mass producing T2 modules via invention I would have been more than happy to sell an entire batch of a few hundred or more modules to someone at 95% Jita and let them resell them.
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Dethmourne Silvermane
Gallente Ceptacemia Systematic-Chaos
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Posted - 2009.08.12 02:46:00 -
[11]
I would be more than happy to make low profit margins on my manufacturing items in exchange for guaranteed/quick purchase - and I'd love to be able to buy minerals cheap, even if it means I need to buy in a large bulk.
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cosmoray
Cosmoray Construction
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Posted - 2009.08.12 03:26:00 -
[12]
Originally by: LaVista Vista I hate to explain myself this briefly. However the argument against this idea is simple:
EVE's market obeys to the rules of perfect competition. Costco wouldn't exist in a world with perfect competition. Hence this idea won't work in EVE.
In a world of "perfect" competition, who makes the profit and how? My assumption is there wouldn't be any, except adjustments for transportation costs due to distance from distribution center.
Am I wrong?
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Nairb Ecrep
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Posted - 2009.08.12 03:34:00 -
[13]
I had to laugh that Eve markets have "perfect competition". Make sure you don't tell the market manipulators....
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LaVista Vista
Conservative Shenanigans Party
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Posted - 2009.08.12 05:47:00 -
[14]
Originally by: cosmoray
Originally by: LaVista Vista I hate to explain myself this briefly. However the argument against this idea is simple:
EVE's market obeys to the rules of perfect competition. Costco wouldn't exist in a world with perfect competition. Hence this idea won't work in EVE.
In a world of "perfect" competition, who makes the profit and how? My assumption is there wouldn't be any, except adjustments for transportation costs due to distance from distribution center.
Am I wrong?
Depends.
Economics describes profit as being that money which you gain, beyond the best other oppertunities. So in effect a profit in the real world is ACTUALLY whatever more money you made than what you would have made off a bank account.
But due to the nature of perfect competition, profit in a market can't always be guaranteed. Hence perfect competition relies on low barriers to entry and exit. This is quite reasonable to say that there is in EVE.
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Mme Pinkerton
Caldari
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Posted - 2009.08.12 07:39:00 -
[15]
Edited by: Mme Pinkerton on 12/08/2009 07:40:02
Originally by: LaVista Vista Economics describes profit as being that money which you gain, beyond the best other oppertunities.
this.
Originally by: LaVista Vista So in effect a profit in the real world is ACTUALLY whatever more money you made than what you would have made off a bank account.
don't know enough about accounting, but in terms of economics that's way too narrow - you also have to take into account other (eventually more risky or less realizable) investment vehicles (e.g. there is no compelling reason why you are taking a bank account and not government bonds as a point of reference). The above definition based on opportunity cost is better, as it does help to explain why - in perfect competition - profit has to be 0: as there cannot be any possibilities for arbitrage in interest rates between different investment vehicles (they would have already been used). (The other key argument is that in perfect competition: marginal cost == price).
Originally by: LaVista Vista Hence perfect competition relies on low barriers to entry and exit.
The second important point is that perfect competition relies on perfectly homogenous goods and while you might want to argue that this is a given in EVE, I think one should definetely keep an eye on A. Smith's theory of compensating wage differentials which allows people to make a profit, if they tend to enjoy a job that is generally thought to be not-so-desirable (e.g. the passionate miner): the notion of which parts of EVE are fun is not homogenously distributed, which leads to different distributions of opportunity costs -> which allows to sustain different effective rates of interest (even if adjusted for the average hardship connected to this sort of money-making) -> which allows people to make an economic profit.
" Credit is the economic judgement on the morality of a man. " |
Daeva Vios
New Eden Credit Bureau
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Posted - 2009.08.12 15:59:00 -
[16]
As a trader, I would love to have a one-stop shop to buy a whole lot of stuff at a discount. I would gladly pay a membership fee for the privilege provided the fee did not make turning a profit impossible. If the fee is too high, I won't be a member.
What I would probably do, in your shoes, would be to limit initial members to a certain amount and add from there. Simply put, it would allow you to work out most of the potential problems in the logistics chain before going truly public. This is really important to the survival of the business. As a buyer I want my items promptly because I might not be ordering some things until I have recognized an opportunity and the window may be brief. If I have to wait too long to receive my order you'll find yourself having to wait significantly longer to receive my money.
Charging business customers more is not a good idea. Business customers will be a large portion of your customer base, and you want the largest portion of your active customer base to be happy. Work it so that you turn a tiny profit on the goods you are buying from the manufacturers. While it might not make much of a difference to the individual who comes and buys one or two things, business customers will be buying in bulk, which will improve your margins. Since you're not using the Market to move your goods, your margins won't be reduced by broker fees or sales taxes. ------------------------------------- NECB |
Stela'Artois
Capital Ventures Incorporated
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Posted - 2009.08.12 16:44:00 -
[17]
I agree with Daeva, if there were a place where I could buy bulk items at a steady pace then it would be worth a monthly fee. As we all know time=money, so if I could get supplied twice as fast, even with less margins than I currently enjoy, then in the end I would make more money.
I guess I see it more as creating a middle-man between manufacturers and traders. If you could set contracts with certain builders at certain fixed prices, and then provide them to traders at a slightly marked up price, then I think you could make a pretty good amount of isk. Builders would have a steady stream of capital to build more, and traders would have a steady stream of "stuff" to sell.
Hrmm...if I had time...I may run off with this idea...
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nether void
Caldari Caldari Provisions
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Posted - 2009.08.13 06:12:00 -
[18]
I think in the most generic sense of the 'Costco model' you have a good business idea. Costco is basically a distributor*1, but instead of reselling product to retailers (smaller, public-facing sales companies), it just sells directly to the general public. This ensures lower cost of product at the same (or more) profit as would be seen by reselling to a retailer. When you shop at Costco, you really are buying directly from their warehouse: directly from the distributor (wholesale).
So in this most generic sense, you could set up a distribution company that either sells directly to market at lower prices due to passing the savings (buying bulk from producers at 90-95% Jita) of avoiding buying from retailers (traders) directly to your customers or the public, or you could really be a distributor company who buys direct from producers and sells direct to retailers (traders).
*1 Distributor - an enterprise that purchases your products for resale to their customers who are usually retail outlets. The distributor expects to receive a significant price discount for providing the distribution service.
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Lhotse Face
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Posted - 2009.08.13 17:03:00 -
[19]
just to add to the discussion:
How will you force people to pay a membership? i.e. (What keeps me from coming in to your station (warehouse) and buying up a load of goods and walking away?)
How will supply-side distribution work? (i.e. how will the merchandise get to you? Will you pick it up or will industrialists deliver it to you?)
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RothimusPrime
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Posted - 2009.08.13 17:26:00 -
[20]
Originally by: Lhotse Face just to add to the discussion:
How will you force people to pay a membership? i.e. (What keeps me from coming in to your station (warehouse) and buying up a load of goods and walking away?)
I believe the intention is to courier orders to a desintation of the member's choosing, at which point the items would be exchanged via contract.
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Lhotse Face
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Posted - 2009.08.13 17:29:00 -
[21]
I figured as much, but wanted to air it to make sure.
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