You as an ecommerce owner, face many challenges.
Whether you have been trading for years or you are just starting out, there always are obstacles to deal with. Start-ups find the journey to an ecommerce world particularly challenging.
One of the biggest difficulties is sourcing the right products. If you are on a small budget, you can’t often afford the bulk orders, as required by major wholesalers.
How can you have a good selection of products in store without spending a hefty sum up-front?
I have been running online shops since 2007 and my first business, selling alternative clothing, has been launched with no investment at all.
I’ll show you how to do it too and start selling online on a shoe string.
Each niche and stock is different, but clothing is particularly tricky – you cannot offer just one size or one color of the item – you will be losing customers who want different size or prefer other colors. You have to offer least 3 basic sizes [Small, Medium and Large] and possibly few colors as well.
Let’s say you want to sell skinny jeans, but you don’t know which ones to pick: plain black, denim blue, red or maybe zebra print? Are you going to shoot in the dark and buy one size of each color? Or maybe have a full selection of sizes in just one color? Which approach is more likely to bring you sales?
When you are starting out and have a limited budget, these are the choices you have to make.
Find Small Supplier with No Minimum Order
What helped me to overcome this problem was to buy in small quantities from relatively unknown brands that didn’t require large orders. It meant I didn’t need to spend £500 just to get a stock for sale.
My first order was from a skinny jeans manufacturer based in Leeds, UK – who became my regular supplier for all the years to come.
I was able to order 2-3 sizes of each style and start with only few designs. As I was new to the type of fashion I was offering [remember Scene Emo?], I wasn’t 100% sure if I was picking the items that would sell, but that’s the risk with every business.
Agree To Return the Products That Don’t Sell
Buying new merchandise involves a possibility it won’t appeal to your customers, but you need to do it anyway to keep expanding your collection and stay fresh. Helpful tip: agree with a supplier you can return the stock if it doesn’t sell and swap it for a different style.
It means you won’t need to store unpopular items but swap them for different ones that might make you money. Bear in mind not all wholesalers will agree for the swap, and you should respect it. We all have a business to look after.
Ask For Express Delivery
Make sure to ask for an express delivery. You can then offer the products you don’t physically have in stock, just to get the money in and have a positive cash flow – very important in business, more on this later.
As soon as you get the sale in your store, order the item from the distributor [again, no minimum order comes in handy here] – if he can ship it the same day, you get the item the next day, ready to send to your customer. Perfect! Finding the supplier who is located close by is a bonus.
Don’t Store Your Products
When I launched my Emo clothing business, I was living in a tiny flat in Plymouth and I kept all of my merchandise in the big storage boxes – in my bedroom!
The boxes were taking a lot of space, limiting the number of items I could store. I had 7 boxes filled with skinny jeans, T-shirts, accessories and so on.
To make this business profitable, I had to find creative ways to offer plenty of items for sale, without storing them in my flat.
This was also a reason I couldn’t buy from big brands offering only pre-packed bundles, like one T-shirt with six different sizes in a pack.
Right now, the dropshipping business model is widely used and profitable, and I recommend taking full advantage of it when starting out.
According to a SmartLittleMan.com, “In order to start with dropshipping you must be associated with at least one dropshipper. There are services for this. By far the best is SaleHoo where you will find a large number dropshippers and " wholesalers " available. As soon as you've got a foot inside here is the great opportunity to start making money.”
Is there a way to attract big brands when on a budget? Yes, but you have to start small and be choosy with your products. Often when I was talking to popular brands, such as Cupcake Cult, FLY or Criminal Damage, they wanted to know what other labels I already offer.
They wanted to assess if their brand will look good in my store and not hurt their reputation. They worked hard on their brand perception and knew if they began to appear in lesser online stores, their status would suffer. Therefore, I needed to be selective with my stock from the very beginning.
During my first 2 years of trading, I was driven to buy only the cheapest items [of course I didn’t have the funds to afford better brands], at no minimum order.
I used to buy from this particular wholesaler based in London, selling printed T-shirts and Hoodies. The products were pretty cheap - ladies t-shirts were £0.80, a man’s t-shirts £1.25, hoodies were about £5. They became my only supplier – and that was another mistake, which I’m going to analyse later.
But sticking to the cheap brands has got its limitations.
You see, customers don’t buy on the price alone – people want a great style, design and quality products that will last a long time. So by selling cheap clothing that fades and gets misshapen after a first wash [come one, what can you expect from a T-shirt for 80p?] you alienate your customers.
Selling Cheap Items Isn’t Profitable
When selling cheap products, it’s harder to make a profit.
Each time I sold a £5.00 T-shirt, which cost me 80 pence, I made £4.20 profit. There was also a shipping fee – yet I charged for it separately. It was to cover the cost of packing and sending the product.
But, each month I had certain expenses involved with running an online store: a website hosting fee – I was with EKM Powershop back then – email hosting, payment gateway, merchant bank account and probably few other charges I do not remember now. Let’s say it accounted to £1.00 in total off each item sold.
Now, with these costs in mind, see below how different a profit can be when selling premium brands.
Work Smarter, Not Harder
Let’s say I bought a hoodie from wholesaler for £20 and sold it for £60. Suddenly the gross profits jumps up to £40, and let’s not forget the running costs are still the same.
After taking away £1.00 as we did earlier, I’d make £39 net profit – more satisfying amount for the same amount of work, isn’t it? Even if I sold fewer premium Hoodies than cheaper T-shirts, I would still make more profit, while having more time to grow my business, promote it, research new suppliers, instead of spending hours each day packing, labelling and shipping products.
This is one benefit of selling items that are more expensive.
Keep Growing Your Company
Many business analysts will agree that by stocking cheaper merchandise you limit your chances of attracting brands that are more desired. Remember how I mentioned that labels are picky where they want to see their products being sold?
By stocking only cheap un-known labels, you damage your chances for growth. I’m not saying you shouldn’t do it at all, but don’t treat it as a long-term tactic. Make sure to move forward and attract better brands and finer stock. How can you approach popular labels when on a budget? Let me show you.
Best Place to Find New Suppliers
Trade shows are a perfect place to make new connections. These happen twice a year on average and attract manufacturers and wholesalers in a particular field. If you’re in fashion, you should find few shows suitable for your specific niche.
Back when I was selling alternative clothing, great spots were London Edge and Pure London – a latter for more mainstream labels.
For more ideas where to find a fashion trade show right for you, check this StartUp Fashion trade show directory.
Best Time to Approach a Wholesaler?
Trade show gives you a chance to strike a deal with a clothing label you want. One thing to remember, don’t do it on a first day.
Discount is one of the possibilities, but, if you are on a shoe string and can only order small quantities, the wholesaler won’t be likely to give you a discount. Another tactic is to approach the supplier you want, and ask if they can lower their minimum order requirements.
If you are nice, understanding and persistent, they will agree.
Split a Bundle
Another thing I found useful is to ask to break the pre-packed bundles – this might not be to their liking though, so thread carefully.
What are pre-packed bundles?
Let’s say you order red t-shirt. Some suppliers pack a selection of sizes in a bundle to give you a full set: 1 x-Small, 2 small, 2 medium, 1 large and 1 x-large. That’s already 7 t-shirts in a pack. While it’s great to have a full selection, it also means you have to order in bulk – not your cup of tea when on a budget.
General rule of thumb in retail is that the most popular sizes are small and medium [hence there’s more of them in a pack]. You can ask if the wholesaler is willing to break up the pack so you can order only 1 x small and 1 x medium to test the design in your store first, before ordering a bigger pack. After all, you do not want to buy 7 t-shirts just to find this style doesn’t sell.
Some suppliers will be ok [more likely on a last day of the trade show], but some will be less willing to do it, as they would be left with less popular sizes. That’s ok, and you need to understand.
If they say no, do not insist. Just move on. If you really like their clothing, approach them the next season or maybe next year when your cash flow is better and you can buy in bulk.
As you can see, finding quality stock on a budget is tricky, but possible. You just need to search long enough to see a crack in the door. Then push it and step with one foot forward! Don’t be afraid you will come too forceful, wholesalers are not shrinking violets, they are used to clients driving a hard bargain.
Avoid a ‘Single Supplier’ Trap
Another thing to be aware of when starting out is relying on a single supplier. This thing alone drove more companies out of business than you can imagine.
Why is it so damaging?
If you buy all your stock from only one source, and grow dependent on it, you rely on their good will.
What if they put their prices up? Maybe the cost of the materials has gone up, or there’s been an accident in a factory in India and they had to shut it down? What then?
Would you continue buying the same products for twice the price and lose the chunk of your profit? What if they can no longer supply your bestselling items, your ‘bread & butter’ stock you rely on?
After a while, you learn on your mistakes, but in the beginning, it can be very discouraging.
Keep Looking for New Traders
My tip: secure a supplier as soon as you can, but don’t feel complacent. Never stop going forward.
Reach to find another one, and then another, even if you end up ordering only few pieces from each. You never know where they will be in few years’ time; they might grow their collection and offer some sought after designs. By that time, you will be their regular client and be on more favourable terms.
Golden Rule when Buying New Stock
By selling various designs, you add depth to your stock and can cater to more tastes. That’s also important from your customer point of view. What I learned along the way is to follow a simple rule when buying products:
What do I mean by a rare design? A cyber techno jacket with spikes and ultra-long sleeves is a great example – an item your customer would wear to a theme party or a show, but not on an everyday basis.
By sticking to the rule above, you’ll find it easier to pick the right merchandise.
After a while, you will discover which of the items are your ‘bread & butter’, which to continue ordering and source similar styles from new traders.
Don’t Believe the ‘Shortcut to Riches’ Hype
Most important lesson I have learned when trading on a shoe string, is that there is no short cut to riches.
Do not believe the hype, shared by the business management consultants and bloggers like Better Lemonade Stand, that someone started selling successfully within 24 hours from launching the website.
It’s impossible, unless he asked his all family and friends to purchase all at once.
I see so many businesses expecting instant results without an effort.
Don’t make this mistake; it’s very easy to get discouraged once you realize the process is long and arduous. Make sure to be prepared for hard work, disappointment, discouragement and losing hope. Just keep going.