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Now, consider how the e-commerce business model fits into the CVP formula. You’ve seen throughout this chapter how useful CVP can be, and you can use it for online selling too. To explain, I’ll address each component of the formula.

Not having a physical store location saves money, but e-commerce sellers often pay a fixed monthly cost for IT services. Keeping the website up and running is priority number one, and you need reliable experts to help you. Technology expenses may end up in the fixed cost bucket.

Vary your spending on marketing based on the strategy you implement. Many businesses are seasonal, and you may spend more to get attention when consumers start shopping. If you sell baseball gear, for example, you’re gonna ramp up marketing before the baseball season starts.

E-commerce firms can experience huge swings in demand, and that impacts sales and costs. If an article explaining your product goes viral, sales may spike, and that increases your cost of sales (a variable cost). Head over to Chapter 9 to learn more about capacity issues and costs.

You may find it difficult to increase prices (see earlier in this chapter to find out why). That viral article may boost sales, but increasing prices may give your customers indigestion. Mull over these key points, if you operate an e-commerce business.