1. You operate, as an independent, a point of sales located in the centre of a capital town selling tableware items (covers, plates, dishes and dcor items) that you import from various foreign suppliers. You practice a multiplying factor of 2.7 to calculate you sales price to the public.

Due to the Covid-19 lockdown, you had to close the shop at the beginning of March and your turnover since then has gone to zero (instead of the 10000 that you usually register with 100 customers each month). Unfortunately, you were unable to renegotiate your rent that amounts to 1750 /month nor your other general and administrative fixed costs that represent 5% of your usual turnover.

So you envisage to go over to e-commerce to compensate for the loss of sales.

A well-known e-business platform operating in your country and the neighbouring countries made the following proposal to you:

Registering fee to reference your 30 best-selling items on their platform with pictures and descriptions: forfaitry amount of 5000

Commission on sales realised through the platform: 15%

You remain in charge of expeditions and transportations via post-office at a cost of 10 / trip

Your contact person from the e-business company recommended to reduce your usual selling price by 10% for the products you sell on the platform in order to penetrate the market. And since 70% of the turnover of the selling platform is made in promotion, he also suggests you follow that pattern with a regular monthly promotion on a few items, applying an additional promotion rebate of 15% on those.

a.How many sales transactions at average basket do you need to break-even on the e-commerce operations under these conditions?

b.How many more do you need till the end of this year to realise the same annual profit as before if you cannot reopen your store until year-end?

c.Do you accept the proposal? Explain why or why not.

NB: VAT Rate on this type of goods is 21%.