Percentage Sold for Completion (PSC) Explanation

Posted by Sean De Clercq on Thursday 09 Jun 16

Kickfurther Blog

The Why

One of the proprietary metrics we have on Kickfurther is the Percentage Sold for Completion. One of the major problems in retail is that retailers need to pay for a product long before it actually sells. However, businesses don’t want to run out of stock so they often want to place their next purchase order before all the inventory is off the shelves, which compounds the problem.

The current policy on Kickfurther is that businesses are not allowed to launch a follow-on offer until the first offer is complete. However, we want businesses to be able to complete their consignments and relaunch before their inventory is depleted. One of the reasons we introduced the PSC metric was to leave businesses with some inventory on their shelves while they launch a second consignment opportunity on Kickfurther for more inventory.

An additional benefit is that, in retail, businesses often are left over with some pieces of inventory here and there. We want to make sure the consignments on Kickfurther are able to complete without KF buyers getting stuck with some odd sizes or colors that did not sell.

Ultimately, the PSC protects KF buyers and facilitates normal business operations for our business partners.

 

The How

In addition to the consignment profit that businesses agree to, they also agree to a revenue share percentage that goes towards buying into the balance of inventory. The below example illustrates what a typical consignment opportunity would look like with a 55% PSC.

How PSC Works on Kickfurther

The complete equation is:  

PSC=((Pieces funded)*(Cost of goods*(1 + Profit offered))) / (Retail price*Revenue share) / (Pieces funded)

If you simplify the equation you get:  

PSC=(Cost of goods*(1 + Profit offered)) / (Retail price*Revenue share)

In the above table, Consignment price is equal to (Cost of goods*(1+Profit offered)) and the Rev share price is (Retail price*Revenue share).  

Completely simplified, the equation is:

PSC = (Consignment price) / (Revenue share price)

 

Onboarding

During our onboarding process, we ask businesses for their historical sales, a timeline they would like the consignment to take place, retail price, the cost of goods, and the number of pieces they wish to fund. From that information, we generate a revenue share that works for their timeline and also adheres to our PSC and consignment standards. For instance, we will not allow a revenue share below the consignment price because that offer would never complete.

This means that if a business owner selects a longer timeline, their revenue share will go down to accommodate the duration, and their PSC will go up. We encourage business owners to be conservative and overestimate their timelines. Projecting a longer timeline will result in a higher PSC. See below for some examples based on the above metrics, just adjusting their revenue share to reflect various timelines.

Kickfurther Example of PSC

Revenue share inversely correlates with PSC. As Revenue share goes down, PSC goes up, and the timeline extends.

 

User Sales

In the near future, one of our major areas of focus is going to be user sales and marketing. In order to drive towards that we are making some changes to the store. One of the important changes coming up will be that if you make a sale in your store, not only do you earn a 5% commission, but you also immediately earn your consigned profit on any consignment inventory you purchased through a Consignment Opportunity. The balance of the revenue share is paid out to the rest of the buyers proportional to their ownership share of the total purchase order.

User Sales on Kickfurther Example

In this case, no matter what the Rev Share is or the PSC, the Kickfurther buyer who originates a sale will immediately earn $0.20 commission and a $1.10 consignment profit for selling a piece. The balance of the revenue share ($2.10 - $0.10) is distributed to the other buyers, including the buyer who originated the sale.

The difference between the revenue share and the retail price, minus the commission, is earned by the business ($2.60 - $0.60)

The lower the PSC, the more you benefit from sales from other users.

Examples:

A high PSC can reflect different realities for a business. Below, you can find some examples of typical businesses we see on Kickfurther.

Low margin, high revenue share. Typically selling wholesale to retailers.

Wholesale to Retailers Kickfurther Example

 

High margin, low revenue share. Typically extending the timeline to create a conservative offer.

Conservative Kickfurther Example

 

High margin, high revenue share. Typically trying to keep timelines short to offer a lower profit.

Short Timeline Kickfurther Example

 

Low margin, low revenue share. Impossible to fund on Kickfurther if Rev share price < Consignment price.

Unfeasable Kickfurther Example

 

A PO with multiple SKUs with variable margins. We calculate (Total Consignment) / (Total Rev share) to get the blended PSC.  If we averaged the PSC it would be lower so we use the more conservative method.

Calculating PSC Kickfurther

A high PSC can reflect either low margins or low revenue share, but a low PSC can only be achieved if margins are high.

 

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Topics: Kickfurther News, Educational

Posted by Sean De Clercq on Thursday 09 Jun 16
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