Calculate the net contribution of the SWS initiative by estimating its increment

Question

Calculate the net contribution of the SWS initiative by estimating its incremental costs and revenue streams. Remember that SWS would be piloted in 10% of Best Buy's 1400 stores. (Use the attached worksheet titled ‘Analysis question(5)’ to make the calculations wherever highlighted in yellow)

Assumptions Size of sales force 30000 Personnel to Yl Y2 15000 15000 trained Training 1500 cost/Salesperson Cost of mobile 500 device/Salesperson Best buy revenue 42 40,00,00,000.00 Revenues Sales Increase Nest buy profit-1· 184800000 . Y1 Y2 848000000 169600000 424000000 margin Costs Training costs2 Cost of uograding 5000cooa 12 22500000 22500000 online system Cost of GMS Mobile devceS Total cos 1200000 500000 2000000 17500000 2000 127600000

Explanation / Answer

Analysis Question (5) Number of stores 1400 Number of stores pilot tested 140 Best Buy store traffic 2000000000 Traffic per store 1428571 Number of SWS in each store 2 Total area of SWS in each store 714286 Cost to train associates 22500000 Cost to train associates in each store 16071 One time cost to set up SWS 50000000 One time cost to set up SWS each store 35714 Revenues: Total revenue from pilot = SWS leasing fee + SWS traffic fee + Cross-selling of accessories + Profit margin from products SWS Leasing Fee 1428571 SWS Traffic Fee Revenue 14286 0.01 Cross selling of accessories Per centage of customers exploring SWS 50.00% Customers per store 714286 Per centage of customers cross buying 5.00% Number of customers cross buying 35714 Incremental revenue from SWS ($/sq ft/yr) 71428571 100 TOTAL 73621429 Costs: Cost to train associates 22500000 One time cost to set up SWS 50000000 TOTAL 72500000 Profit 1121429

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