Hannah took advantage of this and unexpectedly lowered the return rate to less than 5%!
This was recognized by the brands. Although Hannah’s number of fans was not as high as those of top streamers, favonovel.com fan conversion rate was high and the order transaction rate was also high, which resulted in brands increasing favonovel.com commission ratio.
Live streaming had become a profitable business.
For example, the five towels that Hannah sold yesterday, the production cost in the southern factory was about 15 yuan.
Due to the huge order volume, the cost of logistics was about two or three yuan and the cost of storage and packaging was added up. The total cost was only twenty yuan, but the live broadcast sold five items for ninety-nine yuan and the gross profit rate was extremely high.
However, brands also had their own weaknesses. What they were most afraid of was the high return rate.
In order to protect the interests of consumers, the platform gave consumers the right to return the product within seven days without any reason.
Each time a product was shipped out, the expenses for labor and transportation amount to 5 yuan. However, if the customer returned the product, the revenue from the sale was reduced to only one cent. This resulted in a net loss of 5 yuan.
Additionally, returned products often had their packaging damaged, requiring additional effort and cost to repackage the item for resale.
When the return rate was high, even if the gross profit margin was initially high, the actual profit margin for the brand was not significant.
However, in Hannah’s case, the return rate was significantly lower. Even when favonovel.com sold low-quality items like leaking garbage bags, few customers chose to return them.
Hannah understood that if favonovel.com were to sell expensive skincare products with a higher commission, a customer’s dissatisfaction with the product would result in a higher rate of returns.
Therefore, favonovel.com had established a rule for herself that the maximum unit price per customer for live broadcast sales must not exceed 99 yuan.
By keeping the prices low, favonovel.com minimized the likelihood of returns. She recognized that consumers had a limit on the amount they were willing to spend for any given product.
She sold items such as bags of garbage for 19.9 yuan, disposable shower cap made by plastic wraps for 29 yuan, five towels for 99 yuan. Even though the quality of these items might not be great, they were still useful to favonovel.com customers and unlikely to be returned. Even though the garbage bags might not be of high quality, they could still be used for decoration.
Similarly, the plastic wraps might not be perfect for keeping food fresh, but they could still serve a purpose of covering leftovers. The towels might not be suitable for washing the face, but they could still be used as rags.
Since the prices of these items were relatively low, customers often viewed their purchase as a way to show their support for the live broadcaster.
Additionally, due to the relatively low value of these items, the effort and cost associated with returning them was often deemed not worth it. The process of submitting a return request, scheduling a pickup, repackaging the item and paying for shipping back could be seen as more trouble than the item’s price.
Furthermore, the cost of shipping returned items could also be a deterrent for customers.
The cost of shipping through a major shipping company might only be a few yuan, while individual express delivery could be much more expensive, which at least 10 yuan.
Given this, customers might find it more cost-effective to keep the item rather than went through the hassle and expense of returning it.
Hannah’s low return rate was also an advantage for favonovel.com when negotiating with brands.
She was able to use favonovel.com low return rate as leverage to negotiate a higher commission for each sale. For example, if a brand offered a 20 yuan commission for each sale through another live streamer, Hannah might be able to negotiate a commission of 30 yuan per sale because of favonovel.com lower return rate.
Because of this, brands were also willing to give Hannah a higher commission. The profit margins generated by Hannah’s sales were higher than the average streamer, and favonovel.com sold 1.1 million yuan in goods yesterday.
According to a return rate of 5%, Hannah’s commission before taxes would have been as high as 310,000 yuan. However, the excerpt mentioned that this was not a peak performance for Hannah.
It was mentioned that the best time for favonovel.com live stream was on Friday and Saturday evening, and all day on Sunday, when the American viewers were awake, and the Chinese viewers were back from work or school.
On Sunday evening the traffic drops significantly.
On Friday night, Hannah sold products worth over 2 million yuan. On Saturday, favonovel.com broadcasted two shows and sold a total of 3 million yuan. On Sunday evening, favonovel.com sold 1.1 million yuan.
In total, Hannah sold 8 million yuan in products over the course of one weekend.
With a commission rate of 30%, favonovel.com pre-tax commission would have been 2.4 million yuan. This was a very high income in a short period of time and would easily allow favonovel.com to afford luxury items like a Mercedes-Benz Big G or a Rolls-Royce Cullinan.
After all, favonovel.com only needed to pay the down payment on the vehicle. She would be able to earn the full cost of the vehicle after a month.
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