Ecommerce business questions

[Splitlight]

Hello,

I've been here a while looking at the forum after reading TMF , and I'm very interested in E-commerce business models. I run a service at the moment, and I want to try sell products.

Various posters on here call the thing they sell *WIDGETS* because we don't discuss our exact niches because then everyone will do it and it's no longer a niche.. So I'd like to ask some questions about selling *WIDGETS* in a small-ish scale way, to test it out as a side business.

I have a service business currently, not exactly fastlane in terms of making crazy amounts of money quickly, but it's a good business. I'm busy, people are happy with the work we do, and I'm gradually raising prices and turning away crappy jobs/customers because I have enough work to be able to do that.

I recently met a friend of a friend, and he has a very successful E-commerce business selling a product which is imported from China, repackaged, improved in various aspects, and marketed in very intelligent and effective ways. He (I've heard) drives a top end sports car, has made money in a day which takes me months to earn, and while I don't know if envy is the right word, there's something about all of that I want a part of. My business is in a sense time-limited, in a way which the E-commerce model is not, in terms of potential sales and money made in a day.

So I would like to trial an E-com website and market a product, maybe a few different ones in vastly different niches, and just see how it goes. Anyone with experience in this business model can you please tell me:

• What are your biggest problems with this business type - I am guessing problems with suppliers, delays to shipments, not having enough stock to meet demand and then having unhappy customers.. If you don't have stock, does shopify have a feature where someone can buy with the knowledge it will take X days or weeks to ship?
• How much of your time does running it all take up? What are the biggest time-sinks? Am I naive to think once the stock is bought, and the store is set up, I can leave it on its own and just reply to emails in the evening, and do a run to post packages early morning before work?
• How big can the business get with as few employees/workers as possible? What are pros and cons of bringing people in VS solopreneur'ing it
• Any general tips on the E-com model would be appreciated, I know there's lots of experienced people here

 

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[MitchC]

1. Unless you drop ship it takes a lot of cash. It’s a treadmill where you are constantly looking for new customers, new ads, new products. You’ll run out of stock a lot when starting. You can also F*ck up and get stuck with a heap of stock. Some people are better at it than others but it’s more art than science, no company is getting their stock amounts perfect.

2. It’s fairly passive but as above is also a treadmill. Ads die, especially at scale.

3. Depends how much work you want to do and what employees and systems you have. If you outsource fulfilment the only thing you really need is ads. To scale ad accounts you need new creative. If you have the stream of creative running then the scale is fairly unlimited. You’ll likely run out of cash to scale rather than need to hire someone to scale.

4. Don’t quit your job, takes money and time, everything is slow when you are doing physical products. Try to pick something people will reorder so you aren’t constantly looking for new customers like I am. I wish I went higher ticket too.

 

[Jobless]

Don't think of e-commerce as a 'business type'. E-commerce is a sales channel.

"E-com website" -> It's possible to do e-commerce without a website. It's also possible to do e-commerce without paid advertising, without stock, without a brand, without suppliers, or without shipping anything.
"A product" -> A wide selection can outperform a great product.
"How much of your time does running it all take up?" -> A few hours per day, but when starting out I spent 12 hours a day. There is heavy emphasis on the 'E' in E-commerce if you want to have an edge. You need to understand data, software, logistics and how many small details can matter (or not matter at all).
"What are the biggest time-sinks?" -> Sourcing stock. I don't sell items I can get from a factory. When you solve some bottleneck though, you usually must shift your time to address the next bottleneck area.
"Am I naive to think once the stock is bought, and the store is set up, I can leave it on its own and just reply to emails in the evening, and do a run to post packages early morning before work?" -> Formulate a plan and do something small to test it, then be ready to do another 1000 experiments and iterative improvements. Replying to emails and sending packages sounds easy, but try doing it at high volume, which is where the profit is made. If you achieve some revenue, you will discover the next set of problems.

 

[amp0193]

Sounds like shiny object syndrome to me.

You're dissatisfied and jealous and looking for something else.

Service can scale if you build systems. Case in point, this thread: GOLD! - HOT! - Starting (and Fastlaning) a lawn care service business

I wouldn't necessarily recommend e-com to anyone. Unless you have a strong affinity (compulsion?) to bringing physical products into this world. It's harder than ever to be successful in e-com, so you have to really want to do it.

Most important things for you to figure out if you want to do it in 2024:
1. How to make a proprietary, unique product with very good gross margins (shoot for 80%+).
2. How to create a content-producing machine.


The era of me-too Amazon arbitrage is largely over. Don't waste your time with drop-ship nonsense either.

 

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[The-J]

What are your biggest problems with this business type - I am guessing problems with suppliers, delays to shipments, not having enough stock to meet demand and then having unhappy customers.. If you don't have stock, does shopify have a feature where someone can buy with the knowledge it will take X days or weeks to ship?

You can set up pre-orders and that's not too big of a deal, you can also let people know of shipping delays

But to answer your question: when you're small, demand forecasting is hard, and if you're doing well, the answer is "MORE". So you might want to push ads/marketing but you just don't have the inventory to do so, and you can onyl convert a certain % of people who sign up to the mailing list, and pre-orders convert much lower than a regular order. Not only that, but people waiting for their product is a terrible experience and might very well be a chargeback waiting to happen (a chargeback that you will lose)

But that's not the biggest problem, the biggest problem is that your shipment could get on a boat and never make it across the Pacific. That's a real risk. Can you stomach it? If you're starting with a $10k test, have a successful product & decide to place a $50k order, can you eat that $50k if it doesn't arrive, or if it arrives broken or otherwise useless?

One forum member years ago got to $200k/mo in sales before experiencing a manufacturing defect that set his business back so long (refunds piled up, fixing the problem took months & lots of cash) that competitors caught up and started selling his product for less. The business never recovered. Can you eat that risk?

How much of your time does running it all take up? What are the biggest time-sinks? Am I naive to think once the stock is bought, and the store is set up, I can leave it on its own and just reply to emails in the evening, and do a run to post packages early morning before work?

Not much (especially if you use a 3PL) but beware the Red Queen effect, where you have to run faster and faster to stay in the same place. If you find a good product, competitors will find it too & sell the exact same thing (if they can), or sell something using the same appeals. So most of the work ends up being running the same loops: testing new ads, testing new appeals, conversion rate optimization, dealing with 3PL problems, dealing with supplier problems, quality assurance, dealing with escalated CS requests. As you grow, the work changes to managing people, but you can grow pretty solidly with a very small team.

How big can the business get with as few employees/workers as possible? What are pros and cons of bringing people in VS solopreneur'ing it

Highly highly depends, can't give a straight answer. Some people do pure dropshipping, outsource the media buy, and outsource CS to a call center. Others own their warehouses, do media buy in house, have in-house customer service... It just depends on your business, your scale, your geographical area, how much it costs to ship...

Any general tips on the E-com model would be appreciated, I know there's lots of experienced people here

It's just a business model, what matters is your product & your people. I'm working with a company that's trying out ecom and honestly I think retail would be much better for them. So ecom is not a silver bullet.

I wouldn't recommend "dipping your toes" into ecommerce without setting aside a decent chunk of cash and having a bit of patience.

 

[amp0193]

before experiencing a manufacturing defect that set his business back so long (refunds piled up, fixing the problem took months & lots of cash)

This happened to me. Had to completely recall the first 2 containers of inventory. Cost hundreds of thousands.

Took on debt, etc. big setback. Was pure luck that competitors didn’t come up from behind and leave me in the dust and I was allowed time to lick my wounds, find a new manufacturer and move on.

 

[MitchC]

This happened to me. Had to completely recall the first 2 containers of inventory. Cost hundreds of thousands.

Took on debt, etc. big setback. Was pure luck that competitors didn’t come up from behind and leave me in the dust and I was allowed time to lick my wounds, find a new manufacturer and move on.

Me too, lost around a year of sales, people didn't catch up but I still missed a massive opportunity. Luckily it wasn't a big order cash wise.

Traction really resonates with me when it talks about having the right team and partners. Make sure you find the right factory.

Product quality, capabilities, lead times and service are far more important than price.

 

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[amp0193]

Traction really resonates with me when it talks about having the right team and partners. Make sure you find the right factory.

If quality is at all mission critical to the success of your business/product line, you’d be crazy not to go see your factory in person.

2016 me was crazy. Never again.

 

[StrikingViper69]

Hello,

I've been here a while looking at the forum after reading TMF , and I'm very interested in E-commerce business models. I run a service at the moment, and I want to try sell products.

Rather than start from scratch, is there a way you can level up what you are already doing? Service businesses can be real cash cows when done right.