The ‘cost business model’ of omni-channel

 

Let’s see what the cost business model of omni-channel looks like, when you mix physical stores and e-commerce:

  • your average physical store typically adopts a fixed-cost business model, where “fixed” means that there is no strong, direct relationship between costs and revenues; in other words, your brick and mortar store costs you X$ (for real-estate, logistics, personnel, etc.), and X doesn’t change significantly if you sell hundreds of items every day or if you sell ten times as much
  • your e-commerce is far less capital-intensive and basically employs – above certain volumes – a variable-cost business model: the more you sell (…accept orders, process them, pick-pack-&-ship…), the more it costs

When you go omni-channel, you sell the same stuff, but using a mix-and-match of radically different cost business models:

  • fixed-cost

and

  • variable-cost

Is this a problem?

Basically it’s not, but it can become a big one if you don’t fully understand what your cost-behavior is.

Andy Cavallini

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s