Group 2: e-Commerce vs. Storefront Kevin Sell Minh Si Kimsenjaya Tjendana Xibin Wu
Dec 19, 2015
Group 2: e-Commerce vs. Storefront
Kevin Sell
Minh Si
Kimsenjaya Tjendana
Xibin Wu
Business Venture
• Business Type: Book Seller
• Market focus: College students
• Scenarios:
1. Storefront
2. e-Commerce
Key Advantage
• Bookstore:
– Higher discount percentage per book from the retail book seller
• e-Commerce:
– Low overhead
Criterion to Determine the Best Alternative
Neither Input Nor Output is Fixed
Therefore
Maximize Profit
Assumptions• Minimum Attractive Rate of Return: 15%
• Annual Book Sales: 20,000 books
• Average Selling Price: Storefront - $90 e-Commerce - $85
• Analysis Period: 10 years
• Discount: 10% for e-Commerce 15% for storefront
• No equipment purchase, lease instead
Annual Cash Flow Diagram
e-Commerce Storefront
Annual Worth Analysis
• Bring all annual ATCF to present
P=F(P/F,i,n)
• Find Annual Worth from P
A=P(A/P,i,n)
e-Commerce Storefront
AW $28551 $84767
Sensitivity Analysis: MARR
Range: 10% - 30% SENSITIVITY ANALYSIS: MARR
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$50,000.00
$60,000.00
$70,000.00
$80,000.00
$90,000.00
$100,000.00
$110,000.00
10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%
MARR, %
An
ual
Wo
rth
, $
E-COMMERCE STOREFRONT
Sensitivity Analysis: Analysis Period
Range: 4 - 20 years in 2 year incrementsSENSITIVITY ANALYSIS: ANALYSIS PERIOD
$0.00
$20,000.00
$40,000.00
$60,000.00
$80,000.00
$100,000.00
$120,000.00
$140,000.00
$160,000.00
$180,000.00
$200,000.00
0 5 10 15 20 25
Analysis Period, yrs
An
ual
Wo
rth
, $
E-COMMERSE STORE FRONT
Sensitivity Analysis: Discount Percentage
Range: 5% - 20%SENSITIVITY ANALYSIS: DISCOUNT PERCENTAGE
($100,000.00)
($50,000.00)
$0.00
$50,000.00
$100,000.00
$150,000.00
$200,000.00
0% 5% 10% 15% 20% 25%
Discount Percentage, %
An
nu
al
Wo
rth
, $
E-COMMERCE STOREFRONT
Sensitivity Analysis: Sales Volume
Range: 10,000 - 30,000 books SENSITIVITY ANALYSIS: SALES VOLUME
-$50,000.00
$0.00
$50,000.00
$100,000.00
$150,000.00
$200,000.00
$250,000.00
0 5000 10000 15000 20000 25000 30000 35000
Sales Volume, units
An
nu
al
Wo
rth
, $
E-COMMERCE STOREFRONT
Sensitivity Analysis: Selling Price
Range: $82 - $100 per book
SENSITIVITY ANALYSIS: SELLING PRICE
($100,000.00)
($50,000.00)
$0.00
$50,000.00
$100,000.00
$150,000.00
$200,000.00
$250,000.00
$300,000.00
$70.00 $75.00 $80.00 $85.00 $90.00 $95.00 $100.00 $105.00 $110.00
Selling Price, $
An
nu
al W
ort
h, $
E-COMMERCE STOREFRONT
Conclusion
The Winning Scenario
Based on Maximizing Profit
is “Storefront”
Reference
• Newnan, Donald G.. Essentials of Engineering Economic Analysis.
Oxford University Press, NY. 2002
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• Dr. Phillips R. Rosenkrantz