Buying inventory for eCommerce

[Twiizlar]

I am starting an ecommerce website. I am planning on having over 50+ products to start and plan to keep adding products. I have a couple questions.

1. I do not want to get stuck with inventory since I am boot strapping. Is there anyway to test which products will sell without actually purchasing the products and getting stuck with inventory.

2. I cannot run this out of my house (due to multiple reasons) and I will be using a fulfillment center. Any suggestions on which one is good? At first I may only order 20-30 items.

Drop shipping would be ideal but I will be ordering from China.

 

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[Kevin Peter]

Yes, purchasing items from 3rd party and having it shipped directly to customers works well as you do not have to worry about the own inventory.
Profit margins might get hit. Shipping issues, suppliers errors might haunt the brand.

Basics of digital marketing helps you.

You have a website?
I feel testing demand for your inventory before building an store, is by observing search trends related to the prodcut based on geography.
Use Google's free Keyword tool
Use Google trends
Run Google Adwords campaign to test market validity, by sending the traffic to a landing page. Without re-directing them to payment gateway, return UNAVAILABLE.
This helps you guage the percentage of people that visited the product page.
Competition analysis - see what they are doing online.

 

[DamienP]

Drop shipping comes with several complications. It is not the easy route people think it is. Generally suppliers will prioritise their own orders, and chasing down missing or damaged orders is usually done manually and with several hoops to jump through.

I'd suggest buying stock as soon as you are able, and passing the stock to a fulfilment house.

 

[Ecom man]

Why would you start with 50 items? If you are bootstrapping this then start with 1-5 depending on your budget. Order a few of each item and see what sells. Order more of what sells and don't order what doesn't.

I'm not sure what could possibly be the reason for not being able to run this out of your home. I have run my business out of my home/garage for quite some time. I am pushing 100 different products that I stock (not including the ones that are drop shipped) and a garage is a viable option that saves you money on warehouse/rental space.

 

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[jazb]

Start with a few items...ones which you are sure about. then act as an affiliate for the rest. use profits to buy your own inventory.

Inventory is the easiest, sales is the hardest.

 

[DamienP]

Start with a few items...ones which you are sure about. then act as an affiliate for the rest. use profits to buy your own inventory.

Inventory is the easiest, sales is the hardest.

This is a great idea. Affiliate sales would enable you to test your ability to sell specific products before committing to stock.

 

[ToniLene]

Drop shipping comes with several complications. It is not the easy route people think it is. Generally suppliers will prioritise their own orders, and chasing down missing or damaged orders is usually done manually and with several hoops to jump through.

I'd suggest buying stock as soon as you are able, and passing the stock to a fulfilment house.

That's not necessarily true. If you work with legitimate manufacturers and distributors, your orders are typically placed within 1-2 business days. I have never had a missing, damaged or late shipment sent to a customer. Find distributors that don't advertise drop shipping on their website. Set up a Wholesale/Reseller account first, then ask them to dropship. You'll get more yeses than nos.

 

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[DamienP]

That's not necessarily true. If you work with legitimate manufacturers and distributors, your orders are typically placed within 1-2 business days. I have never had a missing, damaged or late shipment sent to a customer. Find distributors that don't advertise drop shipping on their website. Set up a Wholesale/Reseller account first, then ask them to dropship. You'll get more yeses than nos.

I have worked with more than 20 dropshippers over the years, and I have generally found them to be willing, but often unable to make the process efficient, and are often reluctant to service your requirements as a priority if they have their back against the wall with their own customers. You can't blame them really.

For example, I remember shipping around 20 orders per day with one manufacturer on the approach to Christmas, and they were proving themselves to be inconsistent and downright unreliable. I discussed my concerns with them, and they simply stated that they have to put their own customers first, as dropshippers simply couldn't take priority. I asked them if their priorities would change if I quadrupled orders, and they responded with earnest.

From then on, I sent them 80 orders per day by diverting orders from other dropshippers to them instead (all dropshippers sold similar products, I was just cherry-picking prices). What I lost in price efficiency, I gained in service quality. I lost 5 so-so dropshippers and gained a good one.

So yes, I agree that my comments are not necessarily true all of the time, but you have to create conditions that make the dropshipper WANT to work with you. This is especially hard if you trade on Ebay or Amazon. Here in the UK, it's often the first question a prospective dropshipper will ask you, because many of them are sick and tired of hearing from wantrepreneur Ebay traders, as most of them add ZERO value to the process. The more you sell, the less one of their other dropship customers sells, so the net result is more or less neutral for the manufacturer.

Dropshippers must RESPECT you if the agreement is to be mutually successful. I have found the best way to earn their respect is to do one or more of the following:

• Sell a lot of volume
• Don't try to screw them down to unsustainable margins
• Treat their staff with respect
• Treat your competitors (likely their other trade customers) fairly
• Find a way to increase the value of orders like cross-selling, upselling or bundle selling

 

[Imgal]

I'm guessing from the fact that you're at the point of setting up an ecommerce site that you've done your research into the niche and know the most popular items that are selling. My advice would be to start with those, or add-ons very closely connected to them (for example when smartphones blow up then the market for phone cases did too). I definitely wouldn't recommend going anywhere near 50 items until you are aware of what does and doesn't sell.

As @jazb says acting as an affiliate is a great idea to get some market research done without having to spend out a lot of money. There are loads of Wordpress affiliate store themes to use that can make it look like a real shop. If you can't find an affiliate for a particular product then send the link to a competitor / supplier or just an article about it if you're nervous about losing potential buyers and putting tracking code on it. If you want to be really smart about then then add retargeting pixels to the links so you can start building up custom audiences in Facebook / Google Analytics so then when you are ready to go full steam ahead you've already got a list of interested buyers to sell too.

 

[DamienP]

That's not necessarily true. If you work with legitimate manufacturers and distributors, your orders are typically placed within 1-2 business days. I have never had a missing, damaged or late shipment sent to a customer. Find distributors that don't advertise drop shipping on their website. Set up a Wholesale/Reseller account first, then ask them to dropship. You'll get more yeses than nos.

Sorry, one more comment on this.

Manufacturers/distributors/wholesalers that actively advertise dropshipping on their websites are often highly efficient at the process, but it rarely makes sense to buy from them. Everyone else will be doing so, therefore failing the commandment of entry and meaning you'll have a LOT of competition in the marketplace, and you're unlikely to get attractive trade prices unless you're selling a lot of volume or being poached from a rival manufacturer. Plus the likelihood is that manufacturers like these will be selling direct on Ebay and Amazon, making it even harder to compete.

The key is margin. You need strong margins, period, and you won't get these by buying through a company that a million other traders are buying from.

 

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[ToniLene]

Sorry, one more comment on this.

Manufacturers/distributors/wholesalers that actively advertise dropshipping on their websites are often highly efficient at the process, but it rarely makes sense to buy from them. Everyone else will be doing so, therefore failing the commandment of entry and meaning you'll have a LOT of competition in the marketplace, and you're unlikely to get attractive trade prices unless you're selling a lot of volume or being poached from a rival manufacturer. Plus the likelihood is that manufacturers like these will be selling direct on Ebay and Amazon, making it even harder to compete.

The key is margin. You need strong margins, period, and you won't get these by buying through a company that a million other traders are buying from.

No. Many companies that actively advertise dropshipping on their website are in fact NOT manufacturers/wholesalers/distributors, but retailers attempting to cash in on naive newbies. The Retail drop shippers will also typically charge a set-up fee and a per order fee --a practice that legitimate manufacturers/wholesalers distributors don't do.

Many wholesalers/distributors do not advertise drop shipping. It does mean that they don't dropship, nor does it mean that they're not efficient in shipping, it only means that they are selective in whom they partner with which is why becoming approved as Reseller is an important first step in building the business relationship, so that they will agree to dropship for you. Many wholesalers/distributors dropship efficiently and never advertise dropshipping because they don't want to deal with newbies that just find them by googling "dropship."

As far as drop shipping to ebay or Amazon or your own ecommerce website, that's a personal choice. I dropship using Amazon and have never had a distributor have an issue with it. A company such as Tech Data will even have the manufacturer drop ship the product directly to your customer in the even that the product is out of stock at Tech Data--all within 1-2 business days. So yes, work with legitimate distributors that don't advertise drop shipping and you'll have reliable results.

 

[DamienP]

No. Many companies that actively advertise dropshipping on their website are in fact NOT manufacturers/wholesalers/distributors, but retailers attempting to cash in on naive newbies. The Retail drop shippers will also typically charge a set-up fee and a per order fee --a practice that legitimate manufacturers/wholesalers distributors don't do.

Many wholesalers/distributors do not advertise drop shipping. It does mean that they don't dropship, nor does it mean that they're not efficient in shipping, it only means that they are selective in whom they partner with which is why becoming approved as Reseller is an important first step in building the business relationship, so that they will agree to dropship for you. Many wholesalers/distributors dropship efficiently and never advertise dropshipping because they don't want to deal with newbies that just find them by googling "dropship."

As far as drop shipping to ebay or Amazon or your own ecommerce website, that's a personal choice. I dropship using Amazon and have never had a distributor have an issue with it. A company such as Tech Data will even have the manufacturer drop ship the product directly to your customer in the even that the product is out of stock at Tech Data--all within 1-2 business days. So yes, work with legitimate distributors that don't advertise drop shipping and you'll have reliable results.

You started your post with the word "no", then later appear to agree with my views. So do you agree, or disagree??

Picking up on one of your points, I have only ever known ONE instance of a retailer dropshipping for other retailers, where it actually made sense to buy from them. In this particular example, there were three reasons for this:

• They bought in such extreme volume, they were able to offer the equivalent of manufacturer-direct prices as they were buying stock at a price that was unattainable by other retailers
• They were based right next door to a manufacturer that produced a popular branded product, and so could collect the goods in person, saving interim shipping costs
• The manufacturer mentioned above refused to dropship for anyone, so this was the only way to dropship this very popular brand

 

[Ankerstein17]

I am starting an ecommerce website. I am planning on having over 50+ products to start and plan to keep adding products. I have a couple questions.

1. I do not want to get stuck with inventory since I am boot strapping. Is there anyway to test which products will sell without actually purchasing the products and getting stuck with inventory.

2. I cannot run this out of my house (due to multiple reasons) and I will be using a fulfillment center. Any suggestions on which one is good? At first I may only order 20-30 items.

Drop shipping would be ideal but I will be ordering from China.

Where are you storing your inventory? Be aware of what your products turn over rate is so you know how long you will be handling products. Inventory can be an evil to a business as seen with BlockBuster... and then when things went online with Netflix. Since Netflix took domination of the market and took BlockBuster out of business, a lot of the movies had to sold at a heavily discounted items.

In your case, find your market, find your suppliers. Work an exclusive deal with them saying that when the order comes through you act as an intermediary and send a purchase order to the supplier for the product. Then you have a period of time to get the product to the end user.

 

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[biophase]

From then on, I sent them 80 orders per day by diverting orders from other dropshippers to them instead (all dropshippers sold similar products, I was just cherry-picking prices). What I lost in price efficiency, I gained in service quality. I lost 5 so-so dropshippers and gained a good one.

At this rate, why didn't you switch to importing your own product? You could have tripled your profit (assuming you weren't selling a well known branded product).

 

[biophase]

Manufacturers/distributors/wholesalers that actively advertise dropshipping on their websites are often highly efficient at the process, but it rarely makes sense to buy from them.

My experience is that you never get the best price from any company that advertises that they dropship. They usually are not the manufacturer, but a distributor that is already distributing to many retail and online stores, so they don't mind adding new sales channels.

They usually all charge a small dropship fee.

 

[biophase]

No. Many companies that actively advertise dropshipping on their website are in fact NOT manufacturers/wholesalers/distributors, but retailers attempting to cash in on naive newbies. The Retail drop shippers will also typically charge a set-up fee and a per order fee --a practice that legitimate manufacturers/wholesalers distributors don't do.

I probably get an email once every 2-3 months from some new guy opening up an ecommerce store asking if I would dropship for them. It makes no sense for me to do that because I don't need another ecommerce competitor and this person will not get as much traffic as I already do. And when they do make a sale, I do more work with their order than I do with my own orders and get paid less. So no thanks.

I do currently dropship for a larger company, but I am thinking of stopping that after the new year.

 

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[DamienP]

At this rate, why didn't you switch to importing your own product? You could have tripled your profit (assuming you weren't selling a well known branded product).

The product was a specific-fitment item for cars. There were hundreds of applications, so it was not viable to order containers of stock when everything could be custom manufactured one item at a time by our supplier. I wouldn't want to be in their shoes, but they were happy and of course, so was I.