Candy Japan: Variable cost breakdown

Candy Japan is a subscription service delivering bi-monthly envelopes of random Japanese sweets. In this post I am going into detail on the costs of running it. My information is still limited, having run the club for about a month, but I will attempt to break it down as well as I can at this point. 

Why would I reveal these things? I want to contribute something back after enjoying the posts of Kalzumeus on his blog about Bingo Card Creator and KreCi's monthly revenue posts. Revealing my numbers might also get me valuable feedback that will help me improve the club. It also turns out that when you write interesting content, other bloggers read them and mention you on their blogs. Getting the message out there is useful for getting members for the club.

Variable costs

These are the costs for each additional subscriber. Monthly subscription cost for the club 16.50 EUR or 23.95 USD. At the current exchange rates that averages out to 16.73 EUR. This gets the subscriber two envelopes per month. I wish I could write that most of the subscription price is my profit, but unfortunately almost all of it I am expecting to go into expenses. Some of these are guesstimates at this point.

#1 Shipping 6.54 EUR

Shipping has so far been averaging 6.54 EUR / subscriber / month and is my biggest cost. For the previous envelopes I sent, shipping was 330 JPY by Airmail, taking 4 days to arrive, depending on country. Next cheapest option is "SAL" at 280 JPY and takes "2-3 weeks". The absolute cheapest one takes 2-3 months. A small hack I have considered to get cheaper postage and minimize trips to the post office would be to combine the use of Airmail and SAL. Instead of going to the post office every 2 weeks, I could just go once and still get the packages to arrive roughly 2 weeks apart. Send the first package using airmail, but then immediately also send the next package using SAL. Airmail is delivered in 4 days, while economy airmail is "2-3 weeks", so the average difference would then be about the required 2 weeks. 

This would save a lot of time and about 7% on shipping, but I am not doing this yet. I worry though that the post office might actually deliver the economy packages faster than they say, causing deliveries to get clumped together.

#2 Product 3.50 EUR

This might not seem enough to fill two envelopes with candy per month, but so far it seems that it is. As an example, in the next shipment I plan on sending hamburger candy sets. I think it is a really fun and tasty product, but regardless the cost here is only 148 JPY (1.33 EUR). At first I thought I would need to continue buying these items from the supermarket like everyone else until I reach some massive scale, but already when ordering 50 pieces I was able to use a provider I found on Rakuten that could ship them to me for only 120 JPY / piece. I am looking forward to reaching a bigger scale to save even more.

I think this is a great product to include, and I hope you can agree I am not cutting any corners here on the product side, even if the cost is cheap. If I had a larger budget, I would probably look into getting regional product gift packs, but those would not fit in a normal envelope and would be more complicated for the customers to receive, probably requiring trips to the post office to receive in some countries.

#3 Handling 1.10 EUR

This is the cost of labor for attaching address labels, filling in the customs note for each envelope, sealing the envelope with tape, attaching the correct amount of stamps and then dropping the package in the mailbox or lining up at the post office to get it sent.

Even though I did not count my own blogging / coding labor as a cost, this one I will as it is much easier to calculate and could easily be done by someone else. Every student in Japan tends to have a part-time job or "baito" .The typical rates for part-timers are between 800-1000 JPY / hour (7.20 - 9.00 EUR). I assume there will be some side costs, so I am guessing in reality it would be closer to 11 EUR. Allowing 5 minutes per subscriber comes to about 1.10 EUR.

#4 Paypal fee 0.90 EUR

This is what Paypal is charging me to handle each payment. Might be reduced in the far future by using some other provider, but not being US based limits my options a bit. 

#5 Customer support 0.80 EUR

This is a really wild guess, based on imagining a future scenario where I would have 3000 subscribers. At that point someone might need to spend all their time supporting them. It might seem like that would not be possible for one person to handle, but even if every subscriber sent a mail every month, that would still average to 100 per day and seems possible. It does not seem now that the amount of mail would be that high.

#6 Packing materials 0.56 EUR

An envelope costs about 0.05 EUR and sealing tape is almost free at around 0.01 EUR per envelope. Customs declaration stickers are free. I use two address labels, one for my return address and one for the recipient address, so four per month total. These cost about 0.11 EUR each, expensive as I am currently getting cartridges for a Brother label printer. Each cartridge costs about 8 euro and can make about 70 labels. If I did more comparison shopping on the cartridges, I could probably halve the price, so a lot of room here to improve.

 

- Profit 3.33 EUR

Total costs added up to 13.40 EUR., comparing with the subscription revenue of 16.73 EUR, we get 3.33 EUR as result. The fun question then is, where should this 3.33 EUR go. This is actually the very point at which a lifestyle business and a swing for the fences -style ideology would start differing. At first I will not mind putting everything back into the business. In fact I bought the label printer using money I had gotten from the previous envelopes where I had written the addresses by hand. The profit would go completely back into the business at first, when clear ways to do that would be available. I would like to use more effort to do guest blogging, since I feel it is out of the options related to marketing, least bad. When it works well, it can even be a win win situation. 

In my next posts I'm planning on talking about my attempts to support Bitcoin. I will also write about the possibility of open sourcing this whole effort so that others with similar projects could find some snippets of code that could be useful for them. I also would talk more about my ideas on churn, ARPU and those things and how they relate to this candy business. If you would like to see me focus on something else, please suggest a topic in the comments.

Until next time, thanks for reading.