|Huge auto parts retailer reports 8.5% sales decrease|
This company moves a lot of money around without keeping any for itself.
This article in Internet Retailer caught my eye this morning. I was impressed by the numbers until I saw their net profit.
It reads, to me, like another company from the dot com bust. They handle many millions of dollars and forgot that you're supposed to keep some for the company too.
I know I shouldn't be, but I'm surprised that a company could handle that much money and not make a profit.
Thanks for that Trucker, interesting read.
They turned a small profit, but without seeing the financial statements, it's hard to determine whether that reflects low operating margins or not.
What was more interesting to me was the drop in conversion rate from 1.4% to 1.2%. I would have expected a higher conversion rate from a store carrying as much merchandise as they are.
I suspect that a few things caught them, such as high shipping costs.
But it does not seem right that they sell 8x as much as we do, but we made 5 times their last years profit.
They must be operating on really small margins, or (most likely), they have a ton of overhead.
|For the quarter, marketing expenses totaled $3.4 million |
Their marketing expenses are more than our sales. I wonder how much of that is in sending out tons of paper ads, and in thousands of Adwords...
Our business has pretty tight margins, but over the past year or so we have cut our overhead by 10-15% even with rising prices.
[edited by: Wlauzon at 4:52 am (utc) on May 30, 2008]
Having to move that much product and money for that kind of profit is crazy. I'm not sure if they just have bad accountants or what, but I really wish companies that do this would just all go away. We have two other companies that compete directly with us and both have prices that are one third of ours. I know exactly how much it costs to make the products they offer, so I know they're barely making a profit, if any. I think some companies are just so desperate to make sales, they operate on a wing and a prayer. It just makes it that much harder for everybody else though, because even though they'll probably go away eventually, there will be two more to take their place. Between that and trying to compete with the 'make money on eBay' crowd who selling stuff from liquidation sales for pennies on the dollar... it can be quite demoralizing. When customers see something for such a cheap price, they couldn't care less how it's being sold for that price... They just think your higher price is a "rip-off", even though it's completely legit.
Amazon had been losing money for years before they turned a profit. When you reach that size, there are other motives involved other than short term profits. A recession is typically the time that the big guys can wipe out the smaller guys.