We have a very peculiar financial year at KMD, which runs from July to July and means I'm doing stuff to send to the government right now... and that I'm trying to understand things accountants say. I thought this might be of some interest to you so here are some tasty pie charts!
So, what does this show? The pie is our total income for a calendar year (ex tax money, which we should put into a savings account and then hand over to the government every quarter). The blue slice is the money coming from selling direct to you, the consumers, and the purple is the money from selling to shops and websites.
You can see that the blue slice is getting steadily bigger, which is not at all unusual as far as I can tell from other small business. Now, I can hear a few stores in my head who I know would say "well you are cannibalising our sales" so here's the thing; I made the pies size proportional to the total income. And the pies are getting bigger. I was actually expecting 2013 to be much bigger rather than a mere 8% or so, but the Autumn season was quite honestly very strange.
What I haven't shown here is two other important things.
Firstly, doing retail is much more labour intensive in some ways than wholesale - when we first started and only did wholesale, myself and my then partner used to do everything from our spare room, around other jobs (but the pie would have been less than 1/5 the size of 2011), whereas now we have to have two people full time plus helpers. But even taking that into account, because most of our stockists have a small average order value, the overall margin - the profit - on the retail is higher. All our profits go back into creating new styles, by the way. I'm not sure when that will stop!
Secondly, if I were to divide that wholesale slice up by retailer, none of them would be more than 5% of the pie. This is a welcome change. On the one hand it reduces margins, but on the other hand, in the past we had a retailer who was 30% of our income, and when they decided to close, that left us very vulnerable. It's very risky if you have a few stockists who account for large chunks of your income who aren't tied into any contracts longer than a season or two away, and it's a classic way for both factories and brands to go bust.
Hi to all our A-level marketing/business student readers by the way, I hope you appreciate this justification for telling your concerned relatives that looking at the KMD site is "educational" ;)
(This is seriously a thing, I once got a lovely thank you note from an 18 year old boys grandfather!)