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Initial Order and How much to Buy?

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stealth09

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So I am starting a e-commerce business for a niche that I am well aware of.

Now I am just starting out, and I am looking at spending $1000 into my first order from my wholesaler for a few products. Just to test the waters and see if the business is viable.

But that puts the cost of my main product at $17.83 CAD landed. My competitor is selling at $17.99 (on sale)

Now if I bump up my order to $2000, the main product that I am selling drops down to $11 CAD landed.

Would you guys recommend starting out first just testing the waters, and taking a loss on your first shipment of products, or would you double up your initial order to make sure you are making a profit?

Now spending the extra $1000 is not an issue for me, I just would hate to be stuck with a lot of product that I cannot move if for some reason the business does not take off.

What are your thoughts?
 

Argue

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I can't give an opinion because I never tried e-com. But @biophase is the man. @Walter Hay too!
(I quoted them because I appreciate the value they provide in their feedback. Helps me with my learning.)
 

Kak

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So I am starting a e-commerce business for a niche that I am well aware of.

Now I am just starting out, and I am looking at spending $1000 into my first order from my wholesaler for a few products. Just to test the waters and see if the business is viable.

But that puts the cost of my main product at $17.83 CAD landed. My competitor is selling at $17.99 (on sale)

Now if I bump up my order to $2000, the main product that I am selling drops down to $11 CAD landed.

Would you guys recommend starting out first just testing the waters, and taking a loss on your first shipment of products, or would you double up your initial order to make sure you are making a profit?

Now spending the extra $1000 is not an issue for me, I just would hate to be stuck with a lot of product that I cannot move if for some reason the business does not take off.

What are your thoughts?

This is a pretty important concept to learn... Entrepreneurship is lonely. You need to create your own confidence in your own decisions. You need to be able to take the leap knowing that you understand the forces at play and are willing to accept those terms. Remember you are the leader, you are the ceo, you are the boss, and the business goes where you steer it.

As far as your question is concerned there is not really a right answer, you could play both options into the ground or do well with either. The only right answer to this question is... It’s up to you.
 

VisionNN

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Are you selling on your own site or through a site such as Amazon? Its a lot easier to liquidate inventory through Amazon than it is through your own site although you could always try to liquidate it through eBay as well if things don't work out.

I personally find an order of $1000 low and i would do at least $2000. Its not even so much for the profit, but the problem is you will have absolutely no margin to play with. You have to also remember there's ads involved and competition might drive your prices down further than you expect.

Having more units on hand also lets you play around more with ads and various strategies to see what sells and what doesn't. Your first order should be focused more on gaining sales velocity and interest rather than profit.

Every scenario is different so do what you feel is right but these are my two cents.
 

Walter Hay

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So I am starting a e-commerce business for a niche that I am well aware of.

Now I am just starting out, and I am looking at spending $1000 into my first order from my wholesaler for a few products. Just to test the waters and see if the business is viable.

But that puts the cost of my main product at $17.83 CAD landed. My competitor is selling at $17.99 (on sale)

Now if I bump up my order to $2000, the main product that I am selling drops down to $11 CAD landed.

Would you guys recommend starting out first just testing the waters, and taking a loss on your first shipment of products, or would you double up your initial order to make sure you are making a profit?

Now spending the extra $1000 is not an issue for me, I just would hate to be stuck with a lot of product that I cannot move if for some reason the business does not take off.

What are your thoughts?
My first concern is that you say you are buying from a wholesaler. As a general principal that will put you at a cost disadvantage compared to buying direct from a manufacturer. See my AMA above for a lot more information on that subject.

Secondly, although I am not directly involved in eCommerce, for what it is worth I would never shoot at a target while wearing a blindfold.

Third, I would never try to market a product on which the gross profit was so low. The barest minimum I would accept, and that I guaranteed to my franchisees, was landed cost X 250%, but often it was much higher. Being B2B sales, cost of selling was very low.

It seems to me that your problem is twofold:
  • Choosing a product that you can be confident of selling.
  • Sourcing that product at a price that gives you a good margin.
Walter
 

PureA

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I'd buy the minimum and even sell at loss/breakeven if it means parting with less cash initially - once you have validated your business through real sales feel free to sink more cash into stock as you please.
 

stealth09

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My first concern is that you say you are buying from a wholesaler. As a general principal that will put you at a cost disadvantage compared to buying direct from a manufacturer. See my AMA above for a lot more information on that subject.

Secondly, although I am not directly involved in eCommerce, for what it is worth I would never shoot at a target while wearing a blindfold.

Third, I would never try to market a product on which the gross profit was so low. The barest minimum I would accept, and that I guaranteed to my franchisees, was landed cost X 250%, but often it was much higher. Being B2B sales, cost of selling was very low.

It seems to me that your problem is twofold:
  • Choosing a product that you can be confident of selling.
  • Sourcing that product at a price that gives you a good margin.
Walter

My plan was to first buy from a Wholesaler for the sake of ease to obtaining the product, once I validate the business I will be reaching out to the manufacturers of the product so I can become on their vendor list.

I am pretty confident in the product moving, and I can mark it up 100%, it is a consumable so I would have return customers every month - 2 months.

The other products that I am sourcing from this wholesaler I can mark up 200-300% and those are non-consumables.

Thanks for the feedback.

I'd buy the minimum and even sell at loss/breakeven if it means parting with less cash initially - once you have validated your business through real sales feel free to sink more cash into stock as you please.

This was my initial thought, just to prove out the business. I have been "action-faking since I joined this site in mid 2016, and figured the end of 2017/beginning of 2018, I would actually do something and either "fail" and learn a lot as opposed to not doing anything and not learning anything which to me is the ultimate failure.
 

stealth09

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Read Millionaire Fastlane
Aug 3, 2016
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Are you selling on your own site or through a site such as Amazon? Its a lot easier to liquidate inventory through Amazon than it is through your own site although you could always try to liquidate it through eBay as well if things don't work out.

I personally find an order of $1000 low and i would do at least $2000. Its not even so much for the profit, but the problem is you will have absolutely no margin to play with. You have to also remember there's ads involved and competition might drive your prices down further than you expect.

Having more units on hand also lets you play around more with ads and various strategies to see what sells and what doesn't. Your first order should be focused more on gaining sales velocity and interest rather than profit.

Every scenario is different so do what you feel is right but these are my two cents.

The plan was to start on my site first, and then add the product to FBA for more of a mark-up. I think people would like to buy it from Amazon due to their reputation and shipping speed. I would send a "business card/thank you message" and direct them to my website for future purchases at a cheaper rate.

Right now there is no competition on Amazon, so it is looking like a good place to add the product to as well.

I will make the larger purchase order and see what happens.
 

stealth09

Contributor
Read Millionaire Fastlane
Aug 3, 2016
50
46
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Canada
This is a pretty important concept to learn... Entrepreneurship is lonely. You need to create your own confidence in your own decisions. You need to be able to take the leap knowing that you understand the forces at play and are willing to accept those terms. Remember you are the leader, you are the ceo, you are the boss, and the business goes where you steer it.

As far as your question is concerned there is not really a right answer, you could play both options into the ground or do well with either. The only right answer to this question is... It’s up to you.

I fully agree with you. I currently am a manager in the Oil & Gas field and make multi million dollar decisions daily on my own, but I guess you could say this is a new playing ground for me.
 

Bishop

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So I am starting a e-commerce business for a niche that I am well aware of.

Now I am just starting out, and I am looking at spending $1000 into my first order from my wholesaler for a few products. Just to test the waters and see if the business is viable.

But that puts the cost of my main product at $17.83 CAD landed. My competitor is selling at $17.99 (on sale)

Now if I bump up my order to $2000, the main product that I am selling drops down to $11 CAD landed.

Would you guys recommend starting out first just testing the waters, and taking a loss on your first shipment of products, or would you double up your initial order to make sure you are making a profit?

Now spending the extra $1000 is not an issue for me, I just would hate to be stuck with a lot of product that I cannot move if for some reason the business does not take off.

What are your thoughts?

So you are going to sell a "me too" product? Are you going to change it at all? There are a ton of variables here. Did you try to source from a manufacturer?
 

stealth09

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Aug 3, 2016
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So you are going to sell a "me too" product? Are you going to change it at all? There are a ton of variables here. Did you try to source from a manufacturer?

It is not a me too product. Like I said one of the main products is a consumable. You use it and your done, then you buy more. There are well established brands that people only use, and I would be bringing it to them at a cheaper price.

The other products are a brand name "utensil".

Basically I am running a retail business to bring products to a market, that does not have a lot of choices for reasonably priced products.

Eventually I will start bringing my own brand of "non-consumable" "tools" to sell to the market.

Without giving away the niche, think of it like the vape market. Would someone buy my e-juice, when they can get a well respected brand for the same price? Essentially I am bringing them the e-juice at a great price, and eventually will start selling side products such as cotton, coils, etc.
 

Walter Hay

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It is not a me too product. Like I said one of the main products is a consumable. You use it and your done, then you buy more. There are well established brands that people only use, and I would be bringing it to them at a cheaper price.

The other products are a brand name "utensil".

Basically I am running a retail business to bring products to a market, that does not have a lot of choices for reasonably priced products.

Eventually I will start bringing my own brand of "non-consumable" "tools" to sell to the market.

Without giving away the niche, think of it like the vape market. Would someone buy my e-juice, when they can get a well respected brand for the same price? Essentially I am bringing them the e-juice at a great price, and eventually will start selling side products such as cotton, coils, etc.
Basing your business on a USP of having the lowest price is rarely a good business model. Competitors tend to protect their turf by reducing prices and you finish up in a race to the bottom.

Walter
 

stealth09

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Aug 3, 2016
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I 100% agree with you @Walter Hay and actually have thought of business ideas before that I did not execute based on this very reason.

I believe (hopefully) that this niche is so tight that it does not become a race to the bottom. I only really have one major competitor in Canada right now.

As always thanks for the insight and knowledge.
 

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