Sell (Company) Cost
In the analysis of a company's approach to managing functional costs, this terms refers to the cost the company incurs to sell the product. In a manufactured product, Sell Costs include all the costs of creating customer awareness, differentiating the company and the product from its competitors, and making the product available to the customer. These costs would include advertising, marketing, sales, and most outbound logistics expenses. In a wholesale or retail company, these costs would include the cost the company incurs to make the customer aware of the company and its products, to differentiate the company and its products from competition and to help the customer find, choose and pay for the product.
Examples of Sell (Distribution Company) Cost
Example 1: Avis is offering a program that allows customers to pay a three-month rate for the right to rent a car as many times as they want in that period. The program is designed for business travelers who visit several cities each trip.
(Year 1992-SIC 7514)
Explanation: Avis is attempting to reduce its Sell Costs by including several sales in one transaction.
Example 2: Hertz, a unit of Ford, poured cash into a computerized yield-management system, which adjusts car rental prices based on anticipated demand.
(Year 1995-SIC 7514)
Explanation: The yield management system is part of the Sell Costs for Hertz.
Example 3: Compared to smaller florists, mass merchandisers offer the same prices for flowers, but they offer more Convenience, longer hours and bigger floral displays.
(Year 1986-SIC 5900)
Explanation: Mass merchandisers are gradually squeezing out smaller flower retailers because the mass merchants offer more Convenience. The investments that the mass merchandisers have made in bigger floral displays and the expenses they incur for their longer hours of operation are part of their Sell Costs.
Example 4: Customers at Circuit City's CarMax stores browse through the offerings from easy-to-use computer kiosks that print a photo, price, and specifications for any car selected. They also print the row of the parking space, so shoppers don't get lost in the huge inventory.
(Year 1995-SIC 5511)
Explanation: The investments and operating expenses Circuit City's CarMax stores have made in computer kiosks and software are part of the company's Sell Costs to help customers find, choose and pay for the product.
Example 5: All of Casey's General Stores have self-service gas pumps.
(Year 1995-SIC 5411)
Explanation: The investment in self-service gas pumps is part of the Sell Costs at Casey's General Stores. The company uses self-service as its mode of helping customers find, choose, and pay for the product.
Examples of Sell (Manufacturing Company) Cost
Example 1: Over the years, USG has purchased some of its distributor customers. The decision to integrate was driven by a desire to have a guaranteed market for USG gypsum in down markets, to insulate the Company from the dramatic swings in utilization rates, which plague the industry, and to produce more profit for the Company in a tight market.
(Year 1995-SIC 3270)
Explanation: USG reduced its Sell Costs by purchasing some of its Larger customers.
Example 2: Sales at Heinz are down nearly 1%. Its advertising declined over 40% from 1990, to an estimated $78.5 million. Heinz is putting an extra $100 million into trade spending, the fees and discounts it gives to retailers.
(Year 1992-SIC 2000)
Explanation: Heinz spending on advertising and trade expenses are part of its Sell Costs. The Company is changing its approach to the management of these costs by emphasizing trade spending over advertising.
Example 3: Southdown's customer portfolio is stronger but smaller than Holnam's. Southdown does not have the luxury of spreading many bad accounts over a large customer base like Holnam. Instead, Southdown selects the customers with the best credit, reducing allowances for losses. In 1990, Southdown's allowance for doubtful accounts was 3.4% versus Holnam's 5.8%.
(Year 1991-SIC 3241)
Explanation: Expenses related to the creation of allowances for doubtful accounts are part of the Sell Costs of both Southdown and Holnam in the cement industry. These two companies use different approaches to manage these costs.
Example 4: Margins on retail water sales are about the same as on other beverages – less than 5%. But home and office delivery, which accounts for more than 80% of the water business, allows sellers to tack on $15 to $30 in monthly charges for dispensing machines.
(Year 1986-SIC 2086)
Explanation: The home and office delivery service entails additional Sell Costs of $15 to $30 over the cost of selling through retail outlets.
Example 5: Both Shaw and Mohawk have a national system of distribution which allows them to plan inventory levels adequate to ship product to every market within 24 hours. This service level is unrivaled by other competitors. Shaw's superior sales force and customer response system far exceed the quality of those offered by its rivals.
(Year 1996-SIC 2273)
Explanation: Shaw's extra spending on its sales force and customer response system are part of its Sell Costs.