How do e-commerce startups like One Kings Lane, Manpacks, and Dollar Shave Club handle the inventory fulfillment side of their business?
One of the biggest operational hurdles for any small commerce business is sourcing the products, managing inventory, shipping products, accepting returns, etc. Without a lot of initial investment, how can small start-ups take on this challenges to build subscription-based commerce models? Are there specific drop-ship suppliers they work with? Or do they reach out to manufactures outside of the US directly?.
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Customer Narratives: Before you launch the site, you need to spend loads of time walking around and taking pictures of customers at retail / restaurants / bars to have an selection of 15 - 20 customers that your e-commerce store is going to sell to - basically the narrative is the story of who your target market is, what they do, and how you resonate with them. Know your damn market.
A Live E-Commerce Site: Start with a basic site built on Shopify or Magento - it does not need to be amazing or perfect. Don’t worry that you don’t look like Gilt Groupe, get your site off the ground and start making some money - but you need a live site to make this process work.
Demand Generation Model: This is the most, insanely challenging process in all of online retail - she who has the customers makes the rules. Understanding demand generation is a 20-page article in and of itself, so we’ll just assume that you understand the basic idea of social engagement & demand generation (getting people on your site, following your shop, and subscribed to the newsletter).
A Live E-Commerce Site: Start with a basic site built on Shopify or Magento - it does not need to be amazing or perfect. Don’t worry that you don’t look like Gilt Groupe, get your site off the ground and start making some money - but you need a live site to make this process work.
Demand Generation Model: This is the most, insanely challenging process in all of online retail - she who has the customers makes the rules. Understanding demand generation is a 20-page article in and of itself, so we’ll just assume that you understand the basic idea of social engagement & demand generation (getting people on your site, following your shop, and subscribed to the newsletter).
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Drop Shipping:
This should round out the answer to the question - it’s going to be short & sweet.
Matthew Carroll's answer to Dropshipping: Zappos started with drop shipping. Is this the best way to bootstrap an E-commerce company?
Let’s start out by getting a good general definition of drop shipping to make sure that we are all on the same page:
Drop shipping is an inventory management technique that enables a retailer to sell a product for which the retailer is not currently holding in inventory. The retailer is able to do this because they have have setup a drop ship arrangement that allows the retailer from the product manufacturer's inventory of Available To Sell products.
There are three primary drivers for employing this methodology are:
- Positive Cash Flow: Once the drop shipping agreement has been arranged, the retailer is in a prime spot - they have product to sell, but they are notfinancially obligated to purchase any of it. When a customer places an order, the retailer receives the cash for the transaction and then enters into a financially binding relationship with the brand / manufacturer / supplier for transferring ownership rights of the product.
- Reduces Inventory Risk: We all remember how scary and painful the Great Recession was and it actually becomes one of the most significant driving forces to widespread adoption of this technique. Drop shipping provides the cash flow flexibility to the retailer (only paying for what you sell) without the shackles of inventory from pre-packs or case-packs (pre-defined assortments that most of the time sticks the retailer with odd sizes or odd colors). Additionally, the manufacturer retains ownership of the product, so it reduces much of the apprehension and risk from consigning goods.
- Reduces Transportation Expenses: The theory of drop shipping is brilliant because it cuts out the retailer’s Inbound Shipping (the amortized cost for the shipment from the brand’s / manufacturer’s store to the retail shop) - this figure is about 2.75% to 4.25% of Retail Price ( for a $100 Retail Price item).
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Matthew Carroll's answer to Dropshipping: Zappos started with drop shipping. Is this the best way to bootstrap an E-commerce company?
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