Your one test item is flying off the shelves within the first two weeks of selling.  What do you do in the following scenario?Your one test item is flying off the shelves within the first two...

Your one test item is flying off the shelves within the first two weeks of selling.  What do you do in the following scenario?

Your one test item is flying off the shelves within the first two weeks of selling. It was selling at a Wholesale Price of $10.00 = Original Retail Price of $30.00. It turns out that you need to replenish your stock. What are the steps that you will take to replenish this style to be able to get it on your stores' floors in the shortest time possible?

You are also aware that you can charge $40.00 for this item, and the target market will still be willing to purchase it. If you get this item produced domestically, it will cost you $20.00. Determine whether you are going to produce this domestically to be able to get it on the floors to sell this season or if you are going to be willing to wait to produce it overseas and sell it next season.

Asked on by yacel0762

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

Just given this information, it is impossible to know for sure if we should have the item made domestically this season.  It appears that we will be able to make the same amount of profit either way.  That being the case, it is probably best to make the item domestically.

To reach that result, we have to assume that the markup from wholesale to retail price is a flat $20.  If that is so, then having the item made for $20 and sold for $40 will make us the same amount that we have been making.  If we can make the same amount of profit that we are already making, there appears to be no reason to wait for next season.  We should go ahead and make the item domestically now so we can make money while we know that the demand is there.  By next year, the item may not be in such high demand.

If the item seems likely to be in high demand again, we will want to ensure that we do not buy too few and run out of inventory again.

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