The self insurance method. Legit; You sell only one product for $100 each. You realize that on average one shipment is lost/undelivered/seized for every 20 shipments.
- 20 * $100 = $2000
- $2000 - $100(loss) = $1900
- $100 / 19 = $5,26
- $5,26 * 19 = $99,94
- $1900 + $99,94 = 1999,94
Increase your price by $105,26 and never spend the extra $5,26, put it on a separate account called self insurance. So that every 19 shipments you can fully afford a lost one and even reship it to customer if the case is legit.
Fraud; You get an average of 100 orders per month. Again your product costs $100. Out of 100 orders, on average 4 are disputed fraudulently.
- 100 * $100 = $10,000
- $10,000 - $400(loss) = $9,600
- $400 / 96 = $4,16
- $4,16 * 96 = $399,36
- $9,600 + $399,36 = $9,999.36
Increase your price by $4,16 + $5,26 + 1% of $100, your product now costs $110,42. put the xtra $10,42 on a separate account called self insurance and never spend it. Now you can afford the fraud and black list the customer among all vendors.
are your numbers representative of what youve experienced?