Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
expert
Expert with best answer

Luca

100% Recommendation Rate

44 Meetings

2,574 Q&A Upvotes

USD 189 / Coaching

3

Why are only the transportation costs reasons for the decline in gross profit and not the increased shipping costs?

3 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Luca

100% Recommendation Rate

44 Meetings

2,574 Q&A Upvotes

USD 189 / Coaching

Hello Lukas,

You are right, in the whole case there is a clear distinction between shippping costs (from Onlinestars to final customers) and transportation costs (from Chinese suppliers to Onlinestars).

Anyway, be careful about what the text says:

  • In order to be competitive, Onlinestar delivers free shipping. In the past, however, Onlinestar observed that shipping costs have increased disproportionately high to sales growth.
  • Based on a conducted investigation, it was found that products with a gross profit margin of less than 10% do not make a positive contribution to earnings due to high shipping costs.

The first bullet point suggests to exclude the possibility to charge for shipping. The second one tells us that the problem is circumscribed to small items. In fact it's not clear that we are paying more for the single shipment: the ratio "shipping costs/sales" could be higher just because we are selling more small items.
For example, if we do the assumption of a fixed costs per shipment. The cost to send 2 items of 5€ would be the double ofone item of 10€, and we still have the same total of sales. Therefore we would have a ratio that is 2x the previous one even if we have the same cost per shipment.
That's why, without having further information, the increased shipping costs could just be inluded in the mentioned bucket of "Increased sales of small intems".

Does it make sense?
Your point would be anyway a good challenge to do to your interviewer, but be careful on the meaning of the ratio and to fully understand the dynamic of their changes.

Hope it helps,
Luca

Hello Lukas,

You are right, in the whole case there is a clear distinction between shippping costs (from Onlinestars to final customers) and transportation costs (from Chinese suppliers to Onlinestars).

Anyway, be careful about what the text says:

  • In order to be competitive, Onlinestar delivers free shipping. In the past, however, Onlinestar observed that shipping costs have increased disproportionately high to sales growth.
  • Based on a conducted investigation, it was found that products with a gross profit margin of less than 10% do not make a positive contribution to earnings due to high shipping costs.

The first bullet point suggests to exclude the possibility to charge for shipping. The second one tells us that the problem is circumscribed to small items. In fact it's not clear that we are paying more for the single shipment: the ratio "shipping costs/sales" could be higher just because we are selling more small items.
For example, if we do the assumption of a fixed costs per shipment. The cost to send 2 items of 5€ would be the double ofone item of 10€, and we still have the same total of sales. Therefore we would have a ratio that is 2x the previous one even if we have the same cost per shipment.
That's why, without having further information, the increased shipping costs could just be inluded in the mentioned bucket of "Increased sales of small intems".

Does it make sense?
Your point would be anyway a good challenge to do to your interviewer, but be careful on the meaning of the ratio and to fully understand the dynamic of their changes.

Hope it helps,
Luca

(edited)

Book a coaching with Antonello

99% Recommendation Rate

142 Meetings

4,829 Q&A Upvotes

USD 219 / Coaching

Hi Lukas,
I think the solution includes the shipping costs into the transportation costs.

Hope it helps,
Antonello

Hi Lukas,
I think the solution includes the shipping costs into the transportation costs.

Hope it helps,
Antonello

Book a coaching with Clara

100% Recommendation Rate

50 Meetings

12,429 Q&A Upvotes

USD 229 / Coaching

Hello!

Indeed it´s a bit weird, but as it´s laid out, I assume that the shipping costs are included into the transportation costs.

Does it make sense?

Hope it helps,

Clara

Hello!

Indeed it´s a bit weird, but as it´s laid out, I assume that the shipping costs are included into the transportation costs.

Does it make sense?

Hope it helps,

Clara