Why can you make a profit with “free shipping even for one bottle of beer”?How to create a business model that keeps making profits without running easy price cuts

The most important thing for a company is “going concern”, that is, the company’s ability to operate continuously.

If a company goes out of business, it will disappoint customers who liked the company’s services, and it will also force inconvenience such as not being able to receive after-sales service even after purchasing. Of course, not only customers but also employees and other stakeholders are inconvenienced.

So how does one become a Going Concern?that ismaintain stable profitsthat’s all.

Japan has not been able to “raise the unit price” for the past 30 years

Profit = Sales – Expenses, so if sales are greater than expenses, you will make a profit. It’s a matter of course. However, there are many companies that do not do this obvious thing.

The history tells us that. Around the year 2000, during the dot-com bubble, there was a time when a company that acquired a large number of users had a higher corporate value. If the number of users increases, there is a certain probability that they will become paying customers. Sales should increase as a result. In other words, “the larger the number of users, the more sales can be expected in the future,” and the higher the corporate value.

But for most companies, the rosy future they hoped for didn’t happen. Even if we acquired a large number of users, only a very small percentage of them converted to paying customers, and sales did not grow.

There are recent stories similar to this. It’s a “subscription model”. A subscription model is a model in which users pay a small flat fee every month. Although the monthly payment is small, it is said that after a certain period of time, sales will increase more than the outright model, and after that period, a high profit rate can be expected.

With the evolution of the Internet and the prosperity of the SaaS business, the subscription model has spread in Japan since around 2018. But this, too, did not lead to a rosy future for most companies. Users left in a shorter period of time than we expected them to continue using the service for as long as they did.

In this way, it is not easy to make a profit, but management is about doing something about it. How can I continue to make a profit?

As mentioned above, Profit = Sales – Expenses. In addition, sales can be decomposed as “unit price x number of units”. In other words, either raise the unit price or increase the number of sales.

However, in Japan, due to the effects of deflation, it has been virtually impossible to raise prices for the past 30 years.. Since I couldn’t take the option of “raising the unit price”, I was oriented to the opposite, to “increase the number of sales” by lowering the price.

However, it is also not easy to reduce the price and increase the number of sales. As I explained last time, it is even more difficult to increase profits.

Increase customer turnover and increase profits

Under such circumstances, of course, there are companies that have succeeded in increasing the number of sales.

Source: BusinessInsider

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