3 ms·
"they're selling at a loss but making it up on volume"
by rmoriz 10y ago
"they're selling at a loss but making it up on volume"
- euyyn 10y agoHow's that possible?
- mangeletti 10y agoEconomies of scale[1]. A simple example is, imagine making pizzas for your neighbors, and it takes you 15 minutes to make dough for 1 pizza, and at a $10/hr wage, that's $2.50 per pizza in dough labor costs. Now, imagine it only takes you 20 minutes to make dough for 5 pizzas. That's $3.33 in dough labor costs for 5 pizzas, or $.66/ea. 1. https://en.m.wikipedia.org/wiki/Economies_of_scale https://en.m.wikipedia.org/wiki/Economies_of_scale
- jacquesm 10y agoYou should read catch-22.
- mangeletti 10y agoWhat in the world does catch-22 have to do with economies of scale, and why the down-vote (if that was you)?
- robterrell 10y agoMilo Minderbinder immediately came to mind for me too. https://en.wikipedia.org/wiki/Milo_Minderbinder https://en.wikipedia.org/wiki/Milo_Minderbinder
- jacquesm 10y agoIt's a quote from the book and no it wasn't me.
- thfuran 10y agoRight, but that only means you generate less revenue while selling at a loss.
- mangeletti 10y agoNo. It means that at the 5 pizza scale, if you're selling your pizzas at $5 (assuming $3.00 ingredient and labor costs other than dough), rather than a $.50 loss per pizza ($5.00 - $3.00 - $2.50), you're now making a $1.34 profit per pizza ($5.00 - $3.00 - $.66).
- thfuran 10y agoBut the stated premise is that they're selling at a loss. Economies of scale don't permit you to generate profit while selling at a loss.
- mangeletti 10y agoThe point of an economy of scale is that, once reached, it can lower costs (think quantity discounts), which means what was a loss at lower quantities can become a profitable business.
- zodiac 10y agoIt's a joke