Ferrit – It’s worse than I thought

Some interesting Ferrit stats from this article (thanks Q). Firstly only 1.2% of the visitors in December bought anything, secondly Ferrit makes “between 4% and 8%” of each sale. (Let’s be nice and say an average of 6%).  Thirdly the average order size was “more than $100”. Let’s call it $110.

So in December 2,700 people spent a total of about $300,000, and Ferrit made just shy of $18,000 from that.

I do not know how much Ferrit spent in advertising during December, but it was a lot – Ferrit had a full-court press approach, ranging from online to TV (which is really expensive) and billboards. Online ad spend would have been the most effective, but even that is not free – the online rate card for NZHerald  suggest costs of at least $6000 per week for a home page banner. The December ad spend number may bever be know, but it could well be north of $250,000. or $1m. or $5m. Gee – I’m just guessing here – anyone care to provide the real number or a good estimate?

That’s not a great ROI, considering that the customers acquired do not seem to be coming back in droves.

Now let’s revisit the numbers from before.

“Given that Ferrit is on record as saying that 2% of visitors buy something, that’s an estimated 1,600 buyers in the first half of Feb (to the 15th), or 108 per day. Call it 3,500 buyers per month, at an average of say $10 revenue per buyer (I made the $10 figure up, but the average sale price is most likely between $80 and $120 from the comments in the blog entry linked above). That’s $35,000 per month in income.”

This now changes to 960 buyers in the first half of Feb (@ 1.2%), and, at an average of $6.60 (6% of $110) revenue per buyer, that’s a trivial $12,500 per month in income. That’s truly pathetic for a dot com that has been going for 14 months and with the amount of money spent.

Wake up Telecom.

Published by Lance Wiggs

@lancewiggs

6 replies on “Ferrit – It’s worse than I thought”

  1. We’re building a business. It takes time. We’ve been generating revenue for a full 14 weeks now. And we’re happy with how it’s going. If you know of some examples of companies that were cashflow positive after 14 weeks then we’d love to hear about them… we are learning and are happy to learn as we go. Cheers Peter Wogan, head of marketing at Ferrit

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  2. Thanks for commenting Peter
    As I replied earlier, Ferrit has been in business for a lot longer than 14 weeks – approaching a year and a half in reality.

    Moreover the business model just does not stack up for spending $12m per year for the first three years.

    Here are some questions we’d al love to know the answers to:
    What was the original business plan?
    e.g. When were you expecting to pay back the investment? what was the original investment level forecast to be? What was the original revenue stream forecast? How do those numbers compare to the results today?

    Are all costs included the $12m? (i.e. internal advertising on xtra and staff secondments) When are you expecting to pay back the investment now? What happens if you do not make targets?

    eBay is a good example of early cash flow – The Perfect Store is a great and recommended read

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  3. The original business plan was (and still is) to provide an online shopping option for new goods for Kiwis, believing that New Zealand in time won’t be much different to the rest of the world who are spending more and more online. Telecom is committed to the business long term and the payback will be over several years – probably somewhere between three and five. Our costs are right on track. We were a few weeks late launching Phase II but we’re happy with sales progress so far. You bagged us about the revenue we have generated since we started as a business, but we have only been generating revenue for 14 weeks (also in the business plan). If we don’t meet our targets then we work out what we did wrong and do something about it. We’re as accountable as any business.

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