Deciding on run quantity + distribution methods

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jasonwebb
 
Posts: 111
Joined: Sat Sep 10, 2011 2:15 pm

Deciding on run quantity + distribution methods

Post by jasonwebb »

I've never created and sold a kit before, and I'm not yet sure if I can find a way to successfully sell kits myself yet, but I'll save those questions for another time. Currently, I have four projects in the works that I have generated schematics, PCB layouts, BOMs and begun documentation for, and am about ready to build prototypes and think about the next steps.

While generating my BOMs, I realized the massive savings that can occur when ordering components in bulk. In particular, I noticed that in general, I have found that the price-per-kit of the components (from DigiKey) drops about 60% when enough parts are bought for 100 kits, and the savings just go on from there. The question is, which price point should use base my kit prices at?

I know I should multiply my materials cost by at least 2.66 to account for possible resellers and sustainable growth, but even still, the price of the kit can be halved if the right quantity is chosen. What are some good things to think about to determine a target quantity for a beginning kit maker?

Secondly, I am a student and not particularly interested in the pain that accompanies the path of being a 100% independent kit maker/seller (at least not yet). After developing prototypes, good documentation and maybe a good pitch, how realistic is it to sell kits through already-established companies like AdaFruit, Maker Shed and SparkFun or others? Obviously they each have different demographics and interests, but just curious about whether I can rely on resellers in the beginning or not.

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ryochiji
 
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Joined: Thu Jun 30, 2011 7:25 pm

Re: Deciding on run quantity + distribution methods

Post by ryochiji »

I don't think there's a simple answer, but here are some things to think about:

* your target price
* the quantity you think you can sell
* the amount of risk you're willing to take

Most products have a price above which you probably wouldn't be able to sell. If you know what that price is, you can work backwards and determine where your cost needs to be, and that in turn will determine your minimum production quantity. Assessing demand can be trickier, especially if your product is truly unique and there aren't any similar products out there. If there are similar products, you might be able to gauge demand based on how those other products are selling, though, just because a similar (or inferior) product is selling well doesn't mean yours will sell any better or at all. The other thing to consider is how much debt you're willing to take on. You can (probably) sell 100 of anything, but it might take a while and take a lot of work and you might not make your money back for a while.

If you can crowd-fund your production costs using KickStarter or IndieGogo, that might solve some of your problems. Crowd-funding allows you to gauge demand and you also get the cash to pay for the production run up-front, so you mitigate a lot of risk. You still have to do the legwork to market your product/project, but you'll have to do that either way. If you use KickStarter, your product needs to be Open Source, and it's not clear from your post you're willing to do that (based on the fact that you haven't said much about the kits themselves).

Trying to get someone else to manufacture and sell your kit is an option, and there's no harm in asking around, but keep in mind that if you're not willing to take a risk on your own idea, asking someone else to do so is probably an uphill battle.

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