Pricing a Sualkuchi Stole for Online Sales
Pranab sells Assam silk (muga and eri) stoles and handwoven cotton scarves from a small workshop in Sualkuchi through an online marketplace and his own Instagram page. A stole sells for ₹2,400. The marketplace charges 12% commission on the selling price, plus ₹120 shipping that he pays on every order, and ₹30 for packaging. His landed cost per stole is ₹1,100. Returns are running at 18%, and about one in four orders is cash on delivery; of those COD orders, 25% are refused or returned. Returned stoles that come back unsoiled can be resold, but he loses shipping both ways (₹240) and the packaging, and 40% of returned stoles come back with perfume or pin marks and are sold as seconds at ₹1,200. A customer has asked for a 'genuine silk' certificate, and a competitor's page is using photographs of Pranab's designs.
1. Calculate the expected contribution per dispatched order, stating your assumptions clearly. Should Pranab raise the price, stop free shipping, or change the return terms?
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Assumptions: commission is reversed on a return; the customer is refunded in full; the 18% return rate includes COD refusals (so they are not added again); a resalable return goes back into stock.
Kept order: 2,400 − 288 commission − 120 shipping − 30 packaging − 1,100 cost = ₹862.
Returned, resalable (60% of returns): −240 shipping both ways − 30 packaging = −₹270.
Returned, damaged (40%): sold at ₹1,200 − 1,100 − 240 − 30 = −₹170.
Average return loss = 0.6 × 270 + 0.4 × 170 = ₹230.
Expected contribution = 0.82 × 862 − 0.18 × 230 = 706.84 − 41.40 = ₹665.44 per dispatched order.
The business is viable but the return loss is eating about 5% of contribution. Before raising the headline price, improve packaging and add a pre-dispatch confirmation (cheap, and it attacks refusals). A modest COD surcharge or prepaid incentive is better targeted than a blanket price rise, which also penalises the 75% of customers who keep the product.
2. Evaluate a ₹50 COD surcharge against a ₹100 prepaid discount. Which would you test, and what would you measure?
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COD surcharge: 25% of orders are COD, so ₹50 adds about 0.25 × 50 = ₹12.50 per order on average, but only if conversion does not fall. Refusals still cost ₹270 each; a 6.25% refusal rate costs about ₹16.90 per order, so the surcharge does not fully cover the refusal risk unless it changes behaviour.
Prepaid discount: ₹100 off is paid on 75% of orders, costing about ₹75 per order, while removing the COD refusal cost of roughly ₹16.90. On these numbers it does not pay for itself; it is a growth investment, not a margin fix.
A better test is a confirmation step: a WhatsApp or phone confirmation before dispatch, costing a few rupees, which usually reduces refused COD orders. Run a four-week A/B test on one channel: group A gets the ₹50 COD surcharge, group B gets prepaid-only with free shipping. Measure conversion rate, return/refusal rate, and contribution per dispatched order, not revenue. Keep the option only if contribution per order rises without collapsing conversion. Also fix packaging and add a 'seconds' listing so damaged returns recover value instead of sitting in the workshop.
3. How should Pranab respond to the request for a 'genuine silk' certificate and to the competitor using his photographs?
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Certificate: Sell only with claims he can substantiate. If the stole is pure muga or eri, apply for the relevant certification and marks, keep the supplier and test documentation, and show the fibre composition and care details on the listing. If a piece is a blend, say so plainly; a 'pure silk' claim on a blended stole is a misleading representation and a consumer-protection risk, and it damages the Sualkuchi cluster's reputation. Do not issue a homemade 'certificate' that looks official.
Photographs: His product photographs are protected as artistic works. Collect evidence first: screenshots with URL and date, and the original image files with metadata. Send a written takedown notice to the competitor and to the marketplace's grievance channel, then escalate if it continues. Going forward, watermark images, use his own model and styling shots, and register the business identity and any distinctive labels or designs where possible.
Both issues are also commercial: trust signals such as certification, clear fibre descriptions and original photography raise conversion and reduce returns, which is worth more than the few rupees saved by using a competitor's images or an unsupported claim.