Business Model Question

[tatehanners]

I would like to enquire about the feasibility of a potential business venture. I am very interested in building a business centered on selling products for "at cost" prices to consumers for a monthly membership to shop at my online store. The idea is a hybrid between Amazon, Sam's Club, Alibaba, and dropshipping. For example, I would buy product X from a wholesaler for $10. I list product X on my site for $10. I would make no direct profit from that item; however, customers would pay a monthly fee, say $25, to shop on my site. If that customer were to look on Amazon for that item or go to Walmart, they would be charged the $10 for the wholesale cost as well as a markup cost to increase profit. And, if the customer is buying from Amazon, they're also paying a monthly membership on top of that. I want to put the consumer back in control of their spending. I don't want them to have to pay unnecessary markup costs when they can actually be paying way, way less. I would like help considering any potential legal implications or challenges that may arise from this business model.

 

[Just Blue]

I would like to enquire about the feasibility of a potential business venture. I am very interested in building a business centered on selling products for "at cost" prices to consumers for a monthly membership to shop at my online store. The idea is a hybrid between Amazon, Sam's Club, Alibaba, and dropshipping. For example, I would buy product X from a wholesaler for $10. I list product X on my site for $10. I would make no direct profit from that item; however, customers would pay a monthly fee, say $25, to shop on my site. If that customer were to look on Amazon for that item or go to Walmart, they would be charged the $10 for the wholesale cost as well as a markup cost to increase profit. And, if the customer is buying from Amazon, they're also paying a monthly membership on top of that. I want to put the consumer back in control of their spending. I don't want them to have to pay unnecessary markup costs when they can actually be paying way, way less. I would like help considering any potential legal implications or challenges that may arise from this business model.

What state?

 

[tatehanners]

Missouri

 

[Zigner]

Your question is far too broad for an internet forum.

 

[LdiJ]

I would like to enquire about the feasibility of a potential business venture. I am very interested in building a business centered on selling products for "at cost" prices to consumers for a monthly membership to shop at my online store. The idea is a hybrid between Amazon, Sam's Club, Alibaba, and dropshipping. For example, I would buy product X from a wholesaler for $10. I list product X on my site for $10. I would make no direct profit from that item; however, customers would pay a monthly fee, say $25, to shop on my site. If that customer were to look on Amazon for that item or go to Walmart, they would be charged the $10 for the wholesale cost as well as a markup cost to increase profit. And, if the customer is buying from Amazon, they're also paying a monthly membership on top of that. I want to put the consumer back in control of their spending. I don't want them to have to pay unnecessary markup costs when they can actually be paying way, way less. I would like help considering any potential legal implications or challenges that may arise from this business model.

You are going to have to be cognizant of ALL of the costs that would be part of such a venture, in order to make sure that your membership fees would be enough to cover all of those costs. Unfortunately, I think that the biggest downfall of your idea is that costs and expenses would increase the more that people buy, but the membership fee would be fixed. Markups are not just to establish profits, but also to cover costs and expenses, and you really are not allowing for that in that model.

 

[adjusterjack]

I would like help considering any potential legal implications or challenges that may arise from this business model.

The first thing that comes to my mind is how much money do you have for starting this business?

I pay $50 per year for a Sam's Club membership with thousands of products to choose from at a moment's notice. I pay $169 to Amazon per year with thousands of products to choose from, free shipping, and all the TV and movies that I can watch.

If I'm going to pay you $25 per month to buy stuff at your cost, how many products will you have available? Will you ship for free or will I pay for shipping on top of my membership fee? Where are you going to warehouse these products? You will have to lease a building before day 1. You will have to stock product before day 1. You will have to have your commercial insurance in place before day 1. You'll have to advertise before day 1. You'll have to have a website up before day 1.

Your biggest challenge is going to be coming up with the money to start this business. It'll probably take hundreds of thousands of dollars.

Or were you planning on operating this business out of your home with very little investment? Good luck with that.

 

[quincy]

Following is a link to a guide published by your Secretary of State with basic steps to starting a business in Missouri. Not all steps will be required for your proposed business.

https://www.sos.mo.gov/business/outreach/starting_steps

 

[Taxing Matters]

I would like help considering any potential legal implications or challenges that may arise from this business model.

Your particular business model doesn't raise any legal issues. You are free to sell your products at cost. You'd need to study the feasibility of what yu propose. There are several things I would look at if I were you. First, the big retailers buy their products in large volumes, resulting in lower per unit cost for them than the small business is going to be able to match. If you haven't checked out this part yet, that's critical from a business point of view. You are going for a low price model that undercuts what the big players in the market. You need to know if you can actually buy at a price equal to or less than what the competition sells it for. Then you need to make sure that the membership fee will be enough to cover alll your operation costs. People using your site are going to have incentive to lots of stuff from you if you are the lowest cost seller. But those increasing sales won't help you a bit under your proposal. You get just the monthly subscription fees to use to cover all your costs and still make a profit that's worthwhile. Those increasing sales therefore will increase your costs, meaning that each sale you make actually reduces your per unit profit on the items you sell. For you, the best deal would be people paying you the $25/month but not actually buying a whole lot from you. That keeps your costs down leaving more profit for you. Your idea might be great for the consumer, but if they use it a lot it could actually drive you into bankruptcy. Typically you want the business to make money on each sale so that your total income goes up with each sale. You can lessen the hardship your fixed model might cause you by having membership tiers, charging buying different rates based on the volume of the stuff they buy from you. Whether you'd get enough buyers for the higher tiers would depend a lot on what products you sell and what costs you have.