Customer Profitability: B2B Segment 30% Margin, Retail 20%, Wholesale 5% (Defund Wholesale)
Manufacturer: B2B (direct to companies) SGD 5M revenue, 30% margin = SGD 1.5M profit. Retail (e-commerce/stores) SGD 3M revenue, 20% margin = SGD 600K profit. Wholesale (distributors) SGD 2M revenue, 5% margin = SGD 100K profit. Blended: SGD 10M revenue, 22% margin = SGD 2.2M profit. If you shift 10% from wholesale (SGD 200K) to B2B (SGD 200K): new profit = -SGD 10K from wholesale, +SGD 60K from B2B = +SGD 50K profit (2.3% improvement). Recommendation: phase out wholesale, focus B2B and retail.
Calculating Profit by Segment#
Track revenue, COGS, and direct costs per segment. B2B: lower COGS (volume discounts), lower fulfillment cost (direct ship), higher margin. Wholesale: high COGS (distributor discount 20-30%), high fulfillment (must support distributor). Retail: medium COGS (standard), medium fulfillment, medium margin.
Why Segments Differ#
(1) Price power: B2B negotiate on value (margin 25-40%), retail negotiates on price (margin 20-30%), wholesale on volume (margin 5-15%). (2) Volume: wholesale high volume/low margin, B2B lower volume/higher margin. (3) Fulfillment: wholesale requires distributor support (returns handling, marketing), retail self-serve, B2B customized.
If profit margin order: B2B > Retail > Wholesale.
Segment Strategy#
If profit margin order: B2B > Retail > Wholesale. Strategy: (1) grow B2B (highest margin), (2) maintain retail (solid margin, brand visibility), (3) minimize wholesale (trap of low-margin growth). Avoid: chasing wholesale volume for vanity ("we do SGD 10M revenue!") when it erodes profit.
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AskBiz Segment Profitability#
Tracks revenue and profit per segment. "B2B SGD 5M revenue, 30% margin = SGD 1.5M profit. Retail SGD 3M, 20% margin = SGD 600K. Wholesale SGD 2M, 5% margin = SGD 100K. Blended: SGD 2.2M profit. Recommend: grow B2B (highest ROI per sales effort). Phase out wholesale (SGD 2M wholesale tied up capital, yields SGD 100K profit = 5% return; same capital in B2B = SGD 600K profit). Reallocation timeline: 3 years, gradually move customers from wholesale to B2B."
- Manufacturer: B2B (direct to companies) SGD 5M revenue, 30% margin = SGD 1.5M profit.
- Retail (e-commerce/stores) SGD 3M revenue, 20% margin = SGD 600K profit.
- Wholesale (distributors) SGD 2M revenue, 5% margin = SGD 100K profit.
People also ask
Should I exit wholesale entirely?
Not immediately. Wholesale may be: (1) distribution network (reach markets you can't reach direct), (2) cash flow (fast payment), (3) volume for manufacturing efficiency. Phase gradually, don't exit abruptly (lose volume, demand drops on remaining segments).
How do I transition wholesale to B2B?
Approach wholesale customers directly: "buy from us direct, same price as wholesale (or 10% less), faster delivery, better support." Some convert. Others stay with distributor (convenience, relationships). Gradual attrition = natural transition.
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Analyze Profitability by Customer Segment (Optimize Mix)
AskBiz tracks profit per customer segment (B2B, Retail, Wholesale). Recommends segment mix optimization. Identifies high/low profit segments. Try free.
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