Idea: Subscription based online store with no markups (everything at cost), revenue from subscription. Also no warranty

ModernPowerSolutions on 04/03/2019 - 11:30

Hi guys,

I want to get your feedback on a topic,

The subscription-based revenue business model has disrupted industries. For example from iTunes paid per song, to now unlimited songs for a monthly subscription. (Mostly digitla/service-based industries)

Could this work in retail? Imagine a large online store, only making money from revenue on a subscription? Everything at cost?

While maybe also providing no warranty and limited customer service. (I know this is against consumer laws). But will allow for cost pricing.

For example, I saw this post a while back which came to mind:
https://www.ozbargain.com.au/node/431768
The Xiaomi scooter cost price is ~$400. To consumers, it costs ~$550. Would people prefer to save about $100 without warranty, customer service etc…?
This could then apply to many other products/industries.

Or do you guys think that many stores have the approach where they sell some products below cost to entice consumers into purchasing from the store, then make money on other higher markup items when they rebuy? In this case, a cost-price online store would not be cheapest all the time.

What are your thoughts?

TLDR: A large online store whereby everything is sold at cost price, charging customers a subscription, offering no warranty - with the expectation all prices will be cheapest on the market. Would this work?

Poll Options

  • 306
    Would not work
  • 25
    Could work
  • 7
    Would work
General Discussion

Comments

  • altomic on 04/03/2019 - 14:03
    +3

    consider the ebayplus concept and how much "benefit" that has provided subscribers.

    • [Deactivated] on 04/03/2019 - 14:15
      +2

      SHHHHHHHHH.

      The OP can't handle the truth.

  • derpdeder on 04/03/2019 - 14:07
    +2

    I'm on the negative side, but wouldn't refuse to read the business plan.

    The subscription fee would need to be large - under your model, it needs to cover all the non-cost of sale related fixed and variable costs of the business (as you're not making anything on the sale of goods), dependent of course on what you allocate to the "cost price" of an item.

    From a consumer perspective, I wouldn't really be that keen on paying a large subscription fee for discretionary items. I would feel I need to spend to a certain amount to make the subscription fee worthwhile and would rather have the ability to shop around without being tied to a store I've already effectively paid the retailers profit on.

    I don't know why so much of the conversation is caught up in the warranty issue - probably just let that go and make the costs associated with warranty just become part of the subscription fee like the rest of the pricing model.

    • ModernPowerSolutions on 04/03/2019 - 14:27

      I appreciate your comment,

      I agree with your comments about the warranty service.

      I also agree that for this to work, subscription fees would have to be a reasonable amount and that it is easy to conclude that this would not be achievable in business -> UNLESS the business was efficient "enough"

  • orangetrain on 04/03/2019 - 14:49
    +3

    OP, I would love to sell my defective hoverboard through your website without the hassle of warranties, truth in advertising and other legal issues. When does it go live?

    My cousin sells body parts and drugs. Can they sign up to this libertarian utopia too?

  • Zondor on 04/03/2019 - 14:55
    +1

    "While maybe also providing no warranty and limited customer service. (I know this is against consumer laws)."
    Sounds like a great way to get smacked down and fined by the ACCC

  • No ONE on 04/03/2019 - 15:06

    Yeah pay $500 for something that may break in 1 month and no warranty? Ain't no sane person in their right mind would buy things without warranty. Service are something else that does not fit into the same category as physical goods.

    • ModernPowerSolutions on 04/03/2019 - 15:11
      -1

      I think there are a lot of people that buy things more than $500+ with the risk of no warranty,

      For example, does Aliexpress offer warranty? (I genuinely don't know, but to the best of my knowledge, most sellers do not?)

      • [Deactivated] on 04/03/2019 - 15:17
        +1

        I think there are a lot of people that buy things more than $500+ with the risk of no warranty

        Example please - a specific item costing more than $500, that a reasonable person would be prepared to by without warranty.

        Awaiting your response.

      • No ONE on 04/03/2019 - 15:22

        Are you serious! Yes, they provide warranty. It is upto individual to excersie that warranty.

  • GG57 on 04/03/2019 - 15:16

    Putting aside the Consumer protection requirements, before I personally would subscribe I would want to know that I (as a customer) would likely benefit from your business model.
    I would want to know what types of goods are to be sold, assess how often I buy those types of goods, how much I might save in your model (after allowing for the subscription cost), etc.

    • ModernPowerSolutions on 04/03/2019 - 15:25

      That is very logical, I agree,

      And I think that would certainly be the case for most consumers.

  • t_c on 04/03/2019 - 15:21
    +2

    You couldn't warehouse stock as per bangom comment. So the only way it could work is as a dropship model, which means essentially your users are paying a subscription for a list of dropship warehouses albeit formated into a nice ecommerce solution.
    Exploring further why charge a subscription at all when you can just get a affiliate commission from your suppliers for each sale.

    • ModernPowerSolutions on 04/03/2019 - 15:26
      -1

      Drop shipping would not work, as it adds "just another middleman".

      It would have to be an efficient supply chain….

      • t_c on 04/03/2019 - 15:35
        +7

        So where is the stock going to come from, your mums basement?

        • ModernPowerSolutions on 04/03/2019 - 15:40
          -2

          Stock would need to come directly from the source (or as close to as possible) for the most efficient pricing.

          • brendanm on 04/03/2019 - 20:49
            +3

            @ModernPowerSolutions: Manufacturers don't ship to individuals, that's why they sell at wholesale price. They aren't geared to post single items via auspost. The only way you could do it is dropahipping, which anyone with Google can already do themselves.

  • haemolysis on 04/03/2019 - 15:43

    You might have an easier time just dropping some of your conditions re: no customer service, no warranty. Frankly, consumers don't WANT a store with no customer service or warranty.

    If you let go of those ideas, there's no reason a store can't lower cost and recoup on a subscripion.

    But the way such subscription models usually operate, is on some security and regularity for the seller: regular, repeated sales, or high revenue bulk sales. Nobody will subscribe for "once off" use. They're all in shops designed for bulk sale. CostCo as example: everything is in bulk portions. Even digitally, the idea is you are getting a whole library in bulk at your fingertips as opposed to single songs. When you subscribe to dollar shave club, toilet paper deliveries, etc, the idea is: you're not making a one off purchase, you're pledging to potentially to hundreds of ongoing purchases.

    Basically, nobody will "subcribe" to make a once-off discount. It needs to be a long term gain, or at LEAST appear that way (cough, ebay plus.)

    That's not a "problem" but it makes initial investment in the concept a lot higher. You can't just whip up a massive bulk industry overnight. Most of the examples came out of industries which STARTED without subscriptions and added them on later. Or they start small with single products (toilet paper, razors.)

    You'd have a hard time whipping up an "all purpose" store like this.

    And Amazon is already beating you to the punch.

    It's a very difficult kind of industry to just "start up."

    • ModernPowerSolutions on 04/03/2019 - 15:54
      -1

      Fair comment and I agree on some points,

      I do not agree that every consumer wants a warranty and after-sales service. For some items, I believe that consumers would be willing to take the risk for a financial saving.
      But for the purposes of this discussion, we will assume warranty and customer service would be provided anyway.

      Good points on subscription, the store would need to be able to provide value to consumers over the long term rather than short term. Like Netflix releasing new movies all the time,

      Of course, you can not just "whip up a massive bulk industry overnight", nor did I suggest this.

  • HighAndDry on 04/03/2019 - 15:47
    +6

    Tl;dr of all the responses, warranty aside: You can't just say "We just need to be efficient enough" for the business model to work.

  • myusername on 04/03/2019 - 15:57
    +4

    no warranty no deal

  • Gaz1 on 04/03/2019 - 16:20
    +1

    One of the issues is that MSY often retail products below wholesale price.
    The next step if you wanted to pursue this would be to give people some examples of common tech products & what you would expect to sell for.
    Unless you an be cheaper than MSY & Ebay (with coupons & cashback) then no point continuing.
    Assuming you are buying from local distributors then you should be able to offer warranty, most manufacturers will allow consumers to go direct to the warranty centre which would minimise your effort.

  • photonbuddy on 04/03/2019 - 16:54
    +10

    Putting aside the warranty issue, there is another massive issue OP is ignoring.

    OP will find it very hard to get name brands on-board. A large name brand is not going to let you sell their stuff substantially cheaper than everywhere else, because if they do, their bread and butter retailers will simply stop stocking their stuff.

    With the whole warranty thing, if people want to take a punt on warranty, they have a vast choice of Chinese sellers to buy stuff from.

    If OP seriously thinks he can out-price the Chinese …

    • ModernPowerSolutions on 05/03/2019 - 12:53

      Yeah not every supplier would supply to a business with this model, but then again, many would because they want the demand. Depends on product, and supply chain.

      • Ughhh on 05/03/2019 - 13:54

        Many well known brands are very particular with who they choose to stock their item. Demand alone won't cut it.

  • BudgetAce on 04/03/2019 - 17:25

    OP needs to consider the basics. Companies are in it to make "More Money". Digitising software removes the middle distribution costs so margins are bigger being sold direct = "More Money".

    Apple and Samsung despite economies of scale are increasing the price of phones every year. now averaging over $1000 ~ $1500 per phone. The main reason is to show their shareholders the profits are increasing year on year = "More Money".

    Telcos or electronic stores already made phones available on a subscription basis. But once you factor in their need for "More Money". it's not a very compelling price.

    For a business model to work. The supplier in this case the big brands need to see the value your model is delivering to them. Is it going to reduce their costs or improve their margins = "More Money".

    Just drawing a business model from a consumer point of view isn't going to get traction.

    • ModernPowerSolutions on 05/03/2019 - 12:53

      Yeah but starting with the consumer in mind isn't a bad option….

  • smartazz104 on 04/03/2019 - 17:40
    +3

    This sounds like an idea that would have been thought of before the dot com boom…

  • brendanm on 04/03/2019 - 17:49
    +2

    Factory in coat of warehouse space, cost of employing people to fulfill orders, shipping, you still have to pay tax etc. Silly idea, the subscription cost would be absurdly high.

  • KBZ on 04/03/2019 - 17:57
    +3

    You have an attractive idea 'at cost', 'no mark ups'. But what idea isn't attractive to consumers when you're telling them that their going to be paying the cheapest possible price.

    It's all about the execution and you haven't provided details how you're going to be have lower overheads or how you'll solve warehousing, logistics and wages to pay your staff; that'll fit your model of giving the consumers the best price when all these issues cost alot of money. And that's the tip of the iceberg.

    If you have the answers and you don't want to answer sure. Go ahead and launch it you don't need the justification of OzB to do it.
    Like I said the idea is attractive (who wouldn't want to buy at cost) whether you can execute this is the question.

  • ronnknee on 04/03/2019 - 18:33
    +3

    For example, I saw this post a while back which came to mind:
    https://www.ozbargain.com.au/node/431768
    The Xiaomi scooter cost price is ~$400. To consumers, it costs ~$550. Would people prefer to save about $100 without warranty, customer service etc…?

    This came to mind: RoboGuy and Xiaomi Robot Vacuum Cleaners Part 1 Part 2

    What happens when the company cannot deliver? Who would the consumers complain to? It won't work with no warranty and no support. That all cost money.

  • Name on 04/03/2019 - 20:51

    People will abuse the system you are proposing and you'll end up failing fairly fast.

    There are too many products with too many variations to be able to buy from suppliers enough product in bulk to make a reasonable "cost" price. You'll also need to buy product in advance and store, this all costs a lot of money.

    Further you won't have access to enough suppliers to be able to have enough coverage to appeal to the masses to get enough people to subscribe to make the subscription price cheap enough per person to make it attractive enough.

    On top of that you'll have "consumers" buying heaps of products all for a cost of say $15 per month and then on-selling. Or you'll have them buying products for friends /family. Your profit per item only worsens the more people buy. You'll need to put the price up on your subscription in order to pay for more staff to cover shipping items. You'll end up at a Prix price point that is comparable to other non-subscription based services.

    Actually I don't think this is a new idea. I think I remember years ago (over a decade ago) paying to access cost price. The pdf had a list of computer parts at cost prices. edit actually no. Would have been longer. I was either just out of high school or still in high school, so like 18-22 years ago.

    Besides all of that. You'll need to have good customer service and returns (all costs money) otherwise you'll get heaps of negative feedback and no one will want to join.

    Look at zapals. They were offering cheap (not even cost) usb cables I bought 2, it never arrived, because they skimp on customer service no one got back to me, I refuse to buy anything from them again and I warn everyone about it too.

  • serpserpserp on 04/03/2019 - 20:56
    +2

    (I know this is against consumer laws)

    lol and you are still asking?

  • pais on 04/03/2019 - 21:00
    +1

    Even as a thought experiment, anyone who has ever seen a ledger of even a small company would tell you there is no way for you to make this work. The subscription price would have to be exorbitant (destroying your business model) or it would end up too low due to some unforeseen variable / business condition / stiff breeze that would destroy your business model (and business).

  • bettina44 on 04/03/2019 - 22:57
    +1

    The closest real life example i can think of is Park Slope Co-op where everything is a uniform 21% markup and people volunteer their time to keep costs that way.

    They is also places that do price beats guarantee and will beat prices even if it's below cost and you don't need a subscription for that - it's free.

    I think you need to figure out what the startup would actually sell and do the maths on how much the average individual spends and the average profit the company makes to figure out if its viable.

  • phoenixx on 04/03/2019 - 23:07

    Can't imagine how this would work. Interesting idea but just unfeasible. Speaking in basic terms for a bricks and mortar retailer to keep doors open it costs 35% of margin, how could you possibly measure that through subscription? You have no idea how many people are going to subscribe, and how much in turn they will buy? The more you sell, the more it costs you?

  • Aerith-Waifu on 04/03/2019 - 23:18

    Only thing I think this will work is you are the owner of a dating business, where you get people to subscribe for a monthly fee for the possibility of romance or one night with benefits.

  • Geryatric on 05/03/2019 - 00:20
    +1

    You started with a sensible idea and then lost credibility when you starting talking about not adhearing to basic consumer law.

    Sounds like university coursework.

  • Brick Tamland on 05/03/2019 - 07:33
    +3

    Simply won't work in the real world. You might be able to push the warranty off to the manufacturers, but by doing that you will be providing a poor experience to the customer.

    To cover costs you would need a minimum amount of subscribers and would need to commit them to contracts. Your ability to change cashflow would be very low, you would only need a few months of a reduced subscriber base to start losing money and go broke. You could reduce the subscription to bring more people in but then you piss off your existing base.

    There is a huge cost in warehouse/retail space and staffing costs… and like everything these costs go up. As these costs go up you still have a static income from your subscriber base…

    I could go on and on but I won't

  • T1OOO on 05/03/2019 - 08:21

    isnt this costco?

  • blitz on 05/03/2019 - 09:43
    +3

    Is this homework, OP?

  • KBZ on 05/03/2019 - 11:45

    RIP OP

  • guidedlight on 05/03/2019 - 12:42

    There are also reseller agreements to consider, they often cover RRP, maximum discounts, etc.

    Often reseller agreements are tiered, so your buy-price starts quite high and will become discounted as you sell more. Other distributors achieve this through rebates.

    Apple in particular has a very tight reseller agreements. The way around this is to parallel import your goods, which is basically what Kogan do. But then you need to handle warranties yourself, as distributors won’t take your imported goods.

  • cashless on 05/03/2019 - 12:54

    I hope OP isn't Roboguy in disguise

    • ModernPowerSolutions on 05/03/2019 - 13:11

      Hahahaha, I can assure you not. What is the go with Roboguy?

  • SlickMick on 05/03/2019 - 12:55
    +4

    I wasted my day's quota of negs on you early in this thread, and as I read on I realised that you don't listen, you just keep hunting for someone to agree with you.

    The most important thing you need is to implement a 10 second rule. Before you post, take 10 seconds to think through your idea. I think this post would then never have happened.

    If not, you need to get married. Then share you ideas with your spouse. Only post the ones that get through.

    I used to have stupid ideas too, but marriage teaches you to think before you share them.

    • ModernPowerSolutions on 05/03/2019 - 13:10
      -8

      Yeah, maybe I am an arrogant guy, I won't take feedback from someone unless they are reputable. This may be my weakness.

      As I still think this is a great idea.

      However, I was never serious about doing this. Just wanted to have the discussion and get other peoples thoughts.

      It is obvious that this could only be done by a company with the human and financial resources

      • SlickMick on 05/03/2019 - 13:22
        +2

        we can see what your weakness is :)

      • Ughhh on 05/03/2019 - 14:02
        +1

        I won't take feedback from someone unless they are reputable. This may be my weakness.

        Who do you consider "reputable"? Someone who agrees with you? You'll definitely fail in business with this attitude.

        Perhaps you'll get a better understanding of the risk and responsibilities of being a seller by a selling on gumtree or eBay.

        • ModernPowerSolutions on 05/03/2019 - 14:41
          -1

          Reputable, as in someone who has proven experience working in a specific industry, and has shown results doing the right thing.

          I have some experience in retail, more than just eBay and Gumtree.

          • hikaru78 on 05/03/2019 - 14:45
            +1

            @ModernPowerSolutions: if you have experience in retail why do you have absolutely no understanding of ACL

            • ModernPowerSolutions on 05/03/2019 - 14:51
              -1

              @hikaru78: "absolutely no understanding of ACL", that's a big call.

              • hikaru78 on 05/03/2019 - 15:09
                +1

                @ModernPowerSolutions: You comments saying you can just put a disclaimer on your website or find loophole show you have no understanding of ACL..

                • ModernPowerSolutions on 05/03/2019 - 16:07
                  -1

                  @hikaru78: What about an overseas entity shipping to Australia?

                  • hikaru78 on 05/03/2019 - 16:20
                    +2

                    @ModernPowerSolutions: still bound.. not generally enforced unless its big enough which you need to be to get your economies of scale. thank you for proving my point

                    • ModernPowerSolutions on 05/03/2019 - 16:38
                      -1

                      @hikaru78: Read this:
                      https://www.monash.edu/law/news-and-events/news/articles/arc…

                      I had a brief read (I might be wrong with this, and not sure about the source):
                      ACL does not define the term 'carrying on business'. If the entity is operating overseas and is not "carrying on business" in Australia then the ACL does not apply to the local consumer?.
                      "even if the US company regularly supplied its goods to Australian consumers, it would not constitute sufficient grounds for claiming that the company is carrying on business in Australia"

                      Now obviously there is more too it, maybe as you mentioned this would not be the case for such a large organisation? I do not know.

                      It may be unethical, and I am not saying I agree with this offering.

                      • Baysew on 05/03/2019 - 16:47
                        +1

                        @ModernPowerSolutions: Valve to pay $3 million in penalties for misrepresenting gamers' consumer guarantee rights

                        The Court held that the terms and conditions in the Steam subscriber agreements, and Steam’s refund policies, included false or misleading representations about consumers’ rights to obtain a refund for games if they were not of acceptable quality.

                        “We will continue to take action to ensure Australian consumers benefit from these Australian Consumer Law guarantees, regardless of whether the business which supplies them is based in Australia or overseas.”

                        Wiggle pays penalty for misleading consumers about their rights

                        “It does not matter that Wiggle is based overseas or that the consumers had used the goods, the Australian Consumer Law still applies to faulty products,” Ms Rickard said.

                        • ModernPowerSolutions on 05/03/2019 - 17:25
                          -1

                          @Baysew: You have provided good supporting articles.

                          Wiggle may be defined as a business that is "carrying on business" in Australia? As It had a .com.au domain? And therefore ABN?

                          What are your thoughts on this though?
                          https://www.monash.edu/law/news-and-events/news/articles/arc…

                          Is it incorrect then?

                          • Baysew on 05/03/2019 - 17:55
                            +1

                            @ModernPowerSolutions:

                            Is it incorrect then?

                            Probably not. See opening paragraph.

                            Australian law (notably the Australian Consumer Law – the 'ACL') probably applies in many instances where a consumer purchases goods online from an overseas seller – at least in a formal legal sense.

                      • hikaru78 on 05/03/2019 - 17:17
                        +1

                        @ModernPowerSolutions: care to revise your statement based on the above and agree that you have no understanding of ACL

                        • ModernPowerSolutions on 05/03/2019 - 17:26

                          @hikaru78: I do not agree?

                          • hikaru78 on 05/03/2019 - 17:32
                            +1

                            @ModernPowerSolutions: If you bothered to read the whole article you quoted you would have seen that Australian courts would still find in favour of a consumer however it may not be worthwhile for someone to pursue a small claim internationally. However, if you are a large company that is where the accc steps in like in the case of Valve and Wiggle

                            • ModernPowerSolutions on 05/03/2019 - 17:35
                              +1

                              @hikaru78: Ok thank you for clarification,

                              I do agree that to suggest methods of avoiding warranty to consumers in Australia means I am not familiar with the ACL?

                              • hikaru78 on 06/03/2019 - 08:50

                                @ModernPowerSolutions: What is especially scary is you now admit your not familiar with acl. Yet you have 5000+ sales and are somewhat informed.. did you miss the bit where being informed meant you had to understand acl before selling anything as a business

                      • HighAndDry on 06/03/2019 - 11:56

                        @ModernPowerSolutions:

                        I had a brief read

                        Read it less briefly. I.e. - read the next few paragraphs following the one which you quoted from. "Carrying on a business in Australia" is not the only way in which Australian laws can apply to foreign companies.

              • HighAndDry on 06/03/2019 - 11:57

                @ModernPowerSolutions: Worse - from your comments here, you have a fully misapprehended understanding of the ACL. You're not at 0, you're at -100.

      • hikaru78 on 05/03/2019 - 14:41
        +2

        If its so obvious to do why hasn't a not for profit done it??? they have money and resources…And it would be better for everyone… You've come here asking if the world is flat and when everyone tells it round your like nah its flat.

  • akqrate on 05/03/2019 - 16:49
    +1

    What business wants to operate at no profit, no net worth, no financial value to shareholders? Who are your employees? What is your business model? How will you sustain and grow the business?

    • ModernPowerSolutions on 05/03/2019 - 16:52

      I think it is more about the customer base, reputation and end service, with the goal of creating a valuable business, rather than short-term profit.

      From what I understand, many startups have no intention of making a profit anytime soon. More about developing the business into a valuable asset that can then sacrifice the future potential for short term profit.

      • Ughhh on 05/03/2019 - 17:59
        +2

        I think it is more about the customer base, reputation and end service

        Reputation for not providing warranty and limited customer service (as you said in OP)? What end service?

        A lot of buzz words but no substance.

  • hikaru78 on 05/03/2019 - 18:03
    +2

    So here is another big problem, in the startup phase you are not going to be able to be competitive in the market place. You will only be able to buy for more than what other people sell for. Large suppliers have things like volume rebates built in so they actually make most of their profit from that. Until you reach the economies of being to buy at that price you will have to sell at a loss just to compete.. you will be haemorrhaging money with the only income being your subscriptions.

    The other major issue is your model doesn't want people to by more. ie you get one subscription to pay for everything that person purchase in that month. So you basically don't want regular customers who order a lot because you sub cost won't carry the logistics side. The domino effect of this because your not wanting people to buy alot regularly you wont reach your volume targets and get access to better pricing

    As someone who has operated a successful retail chain of over 25 stores that actually all ran at a profit, I can tell you this just wont work.

    • ModernPowerSolutions on 05/03/2019 - 18:16
      -6

      I disagree,

      For some products, this is not the case.

      And this selection of products would assist with the startup of this kind of business.

      The subscription cost, plus the cost of the desired item for the end consumer would need to be less than what the consumer could purchase the product for elsewhere. If this is the case, the consumer would pay the subscription and buy the product if the conditions were right.

      Then maintain purchasing from this store over time enough to make the subscription price more than worthwhile over the long term. In this case, the store does not need to have many items… But just a good enough selection.

      This sort of business may be detrimental to a business like yours, likewise to my retail business. I am only 22, but I have been selling many items online for a few years now (5000+) and have a shop front. My reviews speak for themselves. I would consider myself at least somewhat informed in this industry. But I am still learning every day.

      • hikaru78 on 05/03/2019 - 18:49

        there is an easy way to settle this. Take whatever profit you have made from your 5000+ sales and run with it. Set it up and shoot for the moon. If you are so convinced this will work I'm sure your happy to invest your own money into it

        • ModernPowerSolutions on 05/03/2019 - 19:03

          Like I mentioned in another thread, I do not have the intention of doing this.

          Just thought it would be a good discussion.

  • altitudinous on 05/03/2019 - 18:09

    Close to Costco business model.

  • pformag on 05/03/2019 - 19:00

    Never say never, but I think this would have to be very specific. ie, shoes. Almost fixed carton sizing, and storage cost, shipping cost etc.

  • CalmLemons on 05/03/2019 - 19:47
    +1

    Wages, rent + other running costs. You will find servicing people takes much more than just a website running via subscription. This is why amazon has a huge distribution network storing many products themselves and has only recently begun to generate profit for it's shareholders, and they make margin on their products.

    People want to be served. The ozbargain or supercheap community only attributes a very small proportion of the market. You will also find your suppliers will not sell to you when you are selling things at cost as you would only have a very small portion of the market and they would be supplying other retailers with a much better physical distribution network. This is why harvey norman and jb hifi stay in business. Wholesalers need a solid distribution network, not just some guy on a wordpress site.

    People want to buy brands for trust and brand development is 80% of the cost. They are definitely not going to let you ruin that.

    You would be running a very low number of product categories.

    Australia is also one of the only countries in the world that seemingly won't read FAQs and still persists to call or ask customer service when the answers are clearly written.

    I really need to emphasis, no reputable manufacturer or wholesaler will sell to you in their right mind.
    You also need to consider what type of product you are selling and how much markup there really is in the product. A fridge for example has 100% markup. Costs $800, sells for $1600. You tell me pay $900 but no warranty and then I have to contemplate buying a fridge every year when it breaks down…whereas just pay $1400 after discount and get peace of mind.

    Your model would work on low value items no one cares about if they break, but good luck making money on low value items.

    • TheBird on 06/03/2019 - 09:16

      You also need to consider what type of product you are selling and how much markup there really is in the product. A fridge for example has 100% markup. Costs $800, sells for $1600. You tell me pay $900 but no warranty and then I have to contemplate buying a fridge every year when it breaks down…whereas just pay $1400 after discount and get peace of mind.

      Assuming the same product, at a near 50% discount, personally speaking, I'd put some serious thought into buying without warranty. At a 20% discount, no. It's not worth the risk to me.

  • jason101 on 05/03/2019 - 20:38
    +2

    I think its a great idea, but I also think its a commercial flop. Consumers in Australia are demanding and used to high levels of customer service and consumer protection.

    Consumers have been conditioned (thanks largely to eBay and Amazon) to think delivery is "free" - ie. Clients in tim-buk-to will want their $400 (at cost) scooter delivered free. Then 1% of clients will want to return their apple watch because they wished it had a 4mm larger bezel https://www.ozbargain.com.au/node/442134 or they will demand you repair or replace 2.5 year old headphones https://www.ozbargain.com.au/node/441632 or they'll bitch and complain when you actually change their inverter for them twice in 7 years and still want some form of compensation or discount when the thing fails again. https://www.ozbargain.com.au/node/385852 or they will garner support on websites such as https://www.ozbargain.com.au/ and you'll get hundreds or thousands of do gooders egging people to take you down. You will either go broke or commit suicide. If you want to help society make as much margin/profit as you can and donate everything to a charity of your choice.

  • syousef on 05/03/2019 - 20:45
    +1

    No warranty? I know it's illegal but it's okay because it fits in with my idea? GTFO. If you're going to present an idea don't do it in a way that invites ridicule.

  • bmerigan on 05/03/2019 - 21:35

    Costco

  • Indomietable on 05/03/2019 - 22:13

    I really behind this idea! Once you set it up let me know and I will open "ModernPowerSolutionsProxy.com" where I dropship your cheap items for public to use.

  • quirki on 06/03/2019 - 01:35

    Can we all just agree with OP so he can feel good about himself and move on?

  • bongom on 06/03/2019 - 03:21
    +4

    Looks like ACL is not important to ModernPowerSolutions?

    Text below from last paragraph from previous post https://www.ozbargain.com.au/comment/5852689/redir

    FYI: your page at https://modernpowersolutions.com.au/updated-returns-policy/ is non-compliant with the ACL, and you may be exposing yourself to
    potential ACCC reprimands if you get any complaints.

    • hikaru78 on 06/03/2019 - 11:49
      +2

      This is their idea of being somewhat informed. A returns page that is misleading and deceptive in regards to consumer advise under ACL.

    • HighAndDry on 06/03/2019 - 12:01
      +1

      Heh, now it's:

      The page you were looking for cannot be found

      Their not-updated Returns policies page is also likely afoul of the ACL.

      Now that I'm on the site, I'm not even sure their products are all AUNZS compliant. For example:

      Mainline: Flexible Power Track
      Modern Power Solutions [MPS] does not manufacture or import the Mainline flexible power track system. Please contact POWER AND DATA CORPORATION PTY LTD for more information

      It doesn't matter that OP doesn't manufacturer the product, they, as the seller, needs to make sure the product is safe for sale here in Australia.

      • hikaru78 on 06/03/2019 - 12:13
        +3

        The dont have SAA or rcm for all their 240v products. The name on their SAA certificate dont match all their products..
        should we go on

  • Wardaddy on 06/03/2019 - 07:40

    That's the Costco model, along with paying suppliers at 90 days and playing the short term money market.

  • Godric on 06/03/2019 - 08:39
    +3

    OP reminds me of the restaurants Gordon visited in Kitchen Nightmares, where the owners would call for help then refuse anything is wrong

  • TheBird on 06/03/2019 - 09:22

    My 2 cents. I'd consider being a customer if this idea existed if it was a better option for me… assuming prices are indeed significantly cheaper and I had the time to weigh up the options properly. When you add risk to the transaction for the customer, you'll add resistance to the sale.

    Then again, I'll probably just wait for a better discount on OzBargain. Once cost price becomes the new norm, I'll probably wait for better than cost prices to occur.

  • [Deactivated] on 06/03/2019 - 09:32
    +1

    Your goal - long term viable retailer

    Your aim - be the cheapest

    Your method - sell at cost, circumvent local laws (let's humour this)

    Your competition - every other grey importer that ships to Australia

    Your profit margin - subscription fees

    Your advantage - a fresh concept

    Your disadvantage - your competitors have years of experience and huge financial backing

    Stock procurement - suppliers will not extend line of credit to an unproven concept. Subscription fees unlikely to be a factor nor obtainable without first having products.

    Stakeholder pitch - will become a long term viable business

    Stakeholder concern - when can I see a dividend?

    Stakeholders walk out

    Assuming you can front a few million cash and got ten thousand subscribers

    Operating cost - warehouse, packaging and dispatch, damaged and lost stock, typical overheads

    New product cost - either the cost is distributed across all products or initial subscribers need to support the cost of warehousing, staffing…

    There are other avenues for income if you had 10,000 subscribers but then this model ends up being a rehash of existing established businesses.

  • SnakeCasablanca on 06/03/2019 - 09:45

    What is cost price? In management accounting you need to manage your overheads and allocate this to the "cost" you paid for the goods. As many have mentioned the issues here are:

    1. Overheads - Can't just drop ship everything as then you are paying the "cost" price of that business plus overheads. Cost of customer service. Cost of running a complicated website / processing payments. Warranties, returns and obsolete merchandise. Marketing / advertising. Supply chain management.

    2. Barriers to entry - Even if you were just going to assume that overheads would be paid for by the subscription you would probably need to run at a loss for several years to get the subscription numbers you are after so the barriers of entry to be would be quite large as Im guessing you don't have tens of millions of dollars to gamble with this business model on. Amazon took 6 years to turn a profit.

    3. Economies of scale - Larger organisations can buy things for cheaper. So their cost could be cheaper than your cost and realistically if you were even close to a threat to them they could afford to pretty much run you out of business while taking a hit on any items you offered.

    I think a business that has probably done this well is the dollar shave club. They found one item that was fairly cheap to manufacture that had a bit of a monopoly and people were paying a premium. They started a subscription model for that one product that added convenience for the people and cost less than competitors. Then once they had this going they added products.

  • echelon6 on 06/03/2019 - 09:58

    isnt this sort of how costco works?

    you'd still need some markups to cover overheads - staff, rent etc

  • Duram on 06/03/2019 - 10:46
    +1

    Hey OP I like this idea and here is my offer 100 dollars for 93% of the business and a royalty on every item ever sold of 94%. Let me know if you are down.

    • Krankite on 06/03/2019 - 14:46

      Your valuing this 'business' at $108?

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