"As a new distributor, we haven't worked with those toy companies before. So the wholesale cost we pay is higher than what other distributors get. Fortunately, our store locations are excellent, so business is decent — but profits aren't very high," Eric explained in detail.
Isabella added specifics: "Normally, distributors earn between 10% and 20% profit. For blockbuster, long‑lasting products, distributors only get about 10%. Most products bring 15%. A few weaker sellers, or products that have been popular for many years and are now declining, can give distributors 20%."
"Since we're new and haven't built relationships yet, our profits are reduced by 3% across the board. So if another distributor earns 15% on a product, we only earn 12%."
"As for actual figures: January doesn't count since we only operated about ten days. In February, total revenue was 2.4 million USD. Of that, blockbuster products made up 60% of sales, items with 12% profit accounted for 25%, and average toys made up the remaining 15%."
"Total profit was about 240,000 USD. Across 40 stores, we have 160 employees. Small stores have one manager and two staff; large stores have one manager and four staff. Ordinary staff earn 260 USD per month, managers 350 USD. Altogether, monthly wages are about 45,000 USD."
"That's just store staff. The company also has salespeople, receptionists, and dozens of other employees, plus Eric as manager with the highest salary. Altogether, wages reach 100,000 USD monthly."
"Beyond wages, utilities and other expenses add another 30,000–40,000 USD. So last month's net profit was only about 100,000 USD."
"Since we just opened, revenue should rise in coming months, and profits too. But given Boss's investment, it will take years to recover costs."
Even if monthly profits reached 200,000 USD, annual profit might be 2 million. But after other expenses and taxes, even 1.5 million USD net profit per year was uncertain. With Lin BaoCheng's investment of 8 million USD, even at 1.5 million per year, it would take five years to break even — assuming business stayed strong every year. If one year was weak, recovery would take longer.
But Lin BaoCheng was prepared. Without selling his own products yet, covering wages was already good. And since their margins were currently 3% lower than competitors, that gap would eventually close, improving profits.
Lin BaoCheng spoke: "Jupiter Toys has already stockpiled a large number of Rubik's Cubes. It's time to sell them. The marketing focus will be intelligence and eco‑friendliness. Intelligence means playing with the cube helps children's intellectual development — linking the cube with 'wisdom.' Parents will pay for that. Eco‑friendliness refers to the materials: we use safe, eco‑friendly materials that won't harm children's health, reassuring parents."
"I plan to promote through television and newspapers in the U.S., Japan, and Hong Kong simultaneously, and hold competitions in all three places to create a bigger buzz."
"What do you think?"
"Boss," Isabella replied, "I don't think we should spend too much on promotion. The profit margin on Rubik's Cubes is limited. You mentioned a price of 9.9 USD. Even if we sell a million, that's only 10 million USD revenue. After costs, labor, and other expenses, if we spend too much on promotion, profits could vanish."
Eric agreed: "Some promotion is necessary to raise awareness, but as Kent said, we can't overspend or it won't be worth it."
"So you're saying competitions aren't necessary?" Lin BaoCheng mused. Their reasoning wasn't wrong. Selling cubes was about profit — if it didn't make money, selling more was meaningless.
Isabella said: "For now, competitions aren't needed. But once the cube becomes popular, then we can hold contests to push it further."
"What about pricing? What do you think is appropriate?" Lin BaoCheng asked. He knew better than to assume. As a non‑American, he wanted Isabella and Eric's input.
"At first, we can set the price higher. After half a year or a year, we can lower it. That way, customers feel they're getting a deal," Eric suggested.
"An initial price of 20 USD — is that too high?" Isabella asked Eric. Clearly, she also thought a higher starting price was fine.
"It's fine," Eric nodded after thinking. "The cube is an educational toy, helping children's intellectual growth. That's not a lie — just a bit of exaggeration. So a higher price is justified."
"Since you both think 20 USD is suitable, let's sell at 20 USD," Lin BaoCheng said, clicking his tongue. These two were even bolder than him. But since both Americans agreed, he followed their advice.
The cube's cost, even with eco‑friendly materials, was only 5 HKD per unit at a million‑unit scale — about 1.2 USD. At 9.9 USD retail, profit per unit was 8.7 USD. Even after shipping, labor, promotion, and taxes, average profit per unit would still be about 5 USD if sales exceeded a million. Lin BaoCheng had already thought that was quite ruthless, given the 1.2 USD cost.
Now, at 20 USD retail, the profit margin was staggering.
Lin BaoCheng instructed Isabella and Eric to draft a promotion plan. Once he approved it, Rubik's Cube sales would begin.