E-commerce just like any retail business exists to fill consumer demand for quality merchandise. Selling online is a great option if you want to start a business with no money. E-commerce can be a lucrative business venture for those entrepreneurs willing to put in the work.
It is a business of acquiring products in bulk from a manufacturer and reselling them for a profit. Depending on where the products are sourced, overseas or locally, the operational costs to maintain the business varies.
Most e-commerce businesses run on an inflated operational budget which cut into the bottom line. Examine all aspects of the current business model to figure out how and where to save money. Take a closer at the supply chain of your business. Saving money on the whole process of acquiring products will permanently create an even better profit margin for the company.
Quality Check
Ordering products in bulk from manufacturers located overseas are standard in any retail business. Business owners trust the manufacturers to deliver the products intact and free from any damage. If no one is able to double check on the products before they are shipped out, there is likely to be some products that are defective.
Some sellers don’t have the time to manually check and test each product before it is shipped out to the customer. Failure to check each product that is sent out to a customer can result in the customer receiving a defective product.
Customers wait for their order to arrive and then once they receive it find out the product does not even work. The customer may immediately write a bad review which will negatively affect the business and seller rating of the store.
If they call customer service for a replacement or refund before they write the review, then that is a lucky break. The seller then has the chance to resolve the situation before it blooms into a bad review. When a seller processes a return, they once again have to pay for shipping to the customer of the replacement product, and they are also out the cost of an entire unit as well.
The best way to avoid defective units is to create a set of quality assurance guidelines with the manufacturer of the product. The manufacturer will need to carefully adhere to each quality requirement for the product they have been commissioned to manufacture.
Write a contract that requires the manufacturer to make products from specific materials and follow quality guidelines. The factory has their own quality inspection team that can filter the production line for any defects as well.
Another option is to perform quality inspection of each unit at the factory before it is shipped out. Manually inspecting each bulk order is a difficult task when the manufacturer is located overseas.
The best option is to hire a certified product inspector to go to the factory and inspect each unit on your behalf. For a modest fee, the product inspector can check on the quantity, conformity, workmanship, function and overall contract product quality of the bulk order.
Maintain Good Inventory Health
Ordering too many products with no solid marketing plan or sales projection report to justify the bulk order can be a bad idea. Some seller would often get too excited when they think they found the next best thing and decide to buy vast quantities of the product blindly.
Before committing to bulk order, it is best to test the market first. Order around three hundred units and see how fast those can sell before buying products in the thousands. That sales data can be used to create a sales projection for the product.
Most e-commerce websites come with inventory management software that can help sellers with these decisions. Sellers on Amazon are lucky because Amazon provides their sellers with the tools they need to efficiently manage their Amazon inventory.
It is essential to take the lead times of a bulk product order into account when processing an order. The lead time is the time it takes for a bulk order to be manufactured and shipped from the factory to the warehouse or office of the seller.
Knowing product lead times is critical to avoid out of stock scenarios and avoidable shortage costs. Shortage costs are an extra expense because if the seller runs out of stock of the product, then they would be forced to make a rush order.
Getting a manufacturer to complete a rush order will cost more than the regular rate of acquiring products. The manufacturer will charge more per unit for the rush order. The shipping fee will also cost more because since the order will be sent via airmail instead of the regular cargo freighter.
To help avoid out of stock scenarios, set inventory minimums. Sometimes sales reports can be inaccurate especially during peak seasons. Setting inventory minimums will act as an alert and let the seller know that it is time to order more products.
Consider Selling Wholesale
This option is ideal for companies that have already built an extensive network of consistent clients. Sellers that regularly work with the same customers that own their own retail businesses would be the perfect candidate to start selling wholesale.
Starting a new venture to sell products wholesale will be profitable even if the B2B network has not yet been established. That is something that can be built and worked on. If an e-commerce business buys products in greater quantity from their manufacturers, they are going to get a better rate for the cost of each unit.
Getting into the wholesale market would also mean that the seller will be able to post products for sale in more marketplaces than ever before. They can check which platforms generate customers without the danger of running out of products. In case they cannot be sold via those marketplaces then the products can still be sold through a wholesale deal.
Logistics Options
Manually preparing and processing orders takes a good chunk of time. Some business owners prefer to prepare orders themselves, and that is possible only if there are a couple of orders a day. What if the orders are in the tens or even hundreds.
Time is a valuable resource and the time of a business owner is better spent on more productive endeavours than processing orders. One can hire in-house for order clerks to pick the product, prepare the packaging to ship it to the right customer.
Depending on the sales volume, hiring someone locally to do just prepare orders can be cost-effective. Other than the cost of the employee, there are storage costs to contend with as well. If that does not seem appealing, then consider hiring a 3PL(3rd Party Logistics) company.
For sellers on Amazon, 3PL companies work the exact same way Amazon FBA does. The only difference being 3PL companies are independent of Amazon. Research the best 3PL company, review their rates and services to choose the best one.
Conclusion
Streamlining the supply chain to make it more efficient is a fantastic way to cut costs and boost company revenue. Create comprehensive quality guidelines for the manufacturer and consider using a certified product inspector from time to time to ensure the best quality products. Think about adding more sales channels to your e-commerce business. Explore more cost-effective options for order fulfilment.
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