Ecommerce sales strategy for beginners in 2021

Ecommerce sales strategy for beginners is a must. Even if it sounds a bit daunting at first it’s a must have if you are planning on stepping up your sales in 2021. 

Maybe you’ve just set up your online store or you have some traction already but you know there’s room for improvement. I’ll help you understand how you can extend your online sales with additional channels and strategies you haven’t thought of. 

Let’s dive in with a favourite topic of mine:

Using new Sales Channels in your ecommerce Sales Strategy

First of all – what is a sales channel? Simply put: any method of getting products to the market so customers can purchase them. For example, your online store is a sales channel. It showcases products, it tells their price and allows customers to purchase the products.

Let’s assume that by now you have already started your online shop. Ecommerce strategy for beginner tip no.1: start an online store 🙂 . Alright, that was obvious.

The web store is up and running and customers start showing up. But the web store should not be your only sales channel. Your customers are real human beings with all sorts of habits. One day they’re browsing your store, the next they’re hanging out on Facebook and meanwhile they search product info on their mobile phone. You should be there also.

Start a live shopping session. Maybe add your products to a Facebook store. You could build a mobile app that engages customers outside your store and collects orders.

It’s not just online, either. Offline engagement shouldn’t be a taboo either. Maybe a brick and mortar showroom for your main products is not cost – effective. Especially during a global pandemic. But you could set up a pop-up shop occasionally, following health protocols and engaging your fans..

There are numerous ways you can add sales channels to increase your market reach and some are really easy to set up. Others are a bit more complicated but in the end it’s mostly about your product, your brand and of course your budget. Let’s see which are the most popular sales channels and how you could benefit from them.

Live shopping

Live shopping has taken the world by storm. It’s engaging, fun, allows you to connect to your fans and has conversion rates of up to 9%. It’s one of the most effective ways you can improve your conversion rate while also improving customer experience.

The basic concept is that you start a live video stream and present and sell products to your customers. They are watching you wither on their favourite social media or on your website (this can be done with a live commerce software). They interact with you by asking questions or one another. Through these interactions you get a sense of what the market actually needs and wants from you.

This is both an ecommerce sales strategy for beginners and big retailers. In China, for example, it’s so bug that some live shopping assistants can sell up to $140 million a day during live shows.

Call center

Out of all the sales channels you may choose there’s really just two that really fit together with your online store. One is live shopping, presented above. The other one is the call centre, which can be as simple as a phone line for customers that need more info on products. But it can also be much more than that.

Ecommerce sales strategy for beginners: the call center

(Zappos’ call center is legendary and effective. It’s both a sales and support channel.)

It can just as well be a full fledged business operation with live assistants answering calls and helping customers choose the right product, handling orders and managing complaints. It can also mean people calling prospects or indecisive potential customers or just plain cold calling sales leads. Or sending them personalized SMS’s. No matter the choices you will be making, the phone is a great connection to the customer and you should build a smooth phone support operation.

Social media

You could ask – isn’t social media more about marketing and communication, connecting and understanding your customer? Yes it is but it can work just as great as a sales channel.

For example – Facebook is betting big on ecommerce, Twitter used to test ecommerce options (they’ve since dropped it) and YouTube partnered with QVC to set up live shopping. Pinterest is huge for ecommerce and their users spend 50% more than other users on online shopping. That is great news as Pinterest is more efficient into turning views to sales than any other social network. It works awesome for industries such as travel, home-deco and fashion.

Mobile Apps

What is the device you think customers use the most throughout the day? It’s the smartphone. Mobile usage has gone through the roof lately and it’s bound to continue.

Ecommerce sales strategy for beginners: phone usage is growing
Smartphone users in the US has vastly increased in the past years. Source.

So you want to be close to your customers. Mobile apps provide a special sales channel, one that’s personal and it makes impulse buying all the more attractive.

How do you add a mobile sales channel?

There’s an app for that. Actually more:

  1. Shopgate makes it possible to turn your store into an app. It connects with Magento, Shopify, Prestashop and other ecommerce platforms to enable store owners to build mobile apps. It works on both iOS and Android operating systems and provides support for both smartphones and tablets. It also allows you to set up online to offline processes such as order online, pick up in store.
  2. Shoutem is not built specifically for eCommerce but among others it supports building mobile apps for your Shopify store. The interface is quite simple and doesn’t offer many options but it gets the job done if you happen to be a Shopify user.

Give mobile apps for your store a try. The more smartphones become a part of our daily lives, the more we will use them. Your store can benefit from it.

So that’s that for mobile sales strategy for ecommerce beginners. Let’s step up your game with …

Pop-up Shops

I know. The physical stores are dead and all. Except they’re not. People still like to see and feel products.

Pop up shops are temporarily stores, in the real world, where online store owners can showcase their products and interact with their customers. The pop-up shop sales channel has really taken off (with a bit of sudden drop during the pandemic but don’t mind that). Store owners have started adopting this online-offline connection. It’s effective, doesn’t tie you to a long, fixed cost and it allows you to get an upper hand, especially if you have a great personality. Which I bet you do.

(Adidas pop-up shop. Not exactly low-budget but hey – one can dream, right?)

Setting up a pop-up shop is a personal choice but works great if it’s posted either in a high-traffic area (such as a popular shopping center) or at an industry event. For example you could set up a pop-up shop at a home-deco event if you are a store selling home decorations. It is a great way to interact with customers and get feedback on your merchandise.

Companies such as Storefront help shop owners find retail space temporarily by connecting them with retail space owners. To help online stores they’ve put together an ebook that is free for download. I encourage you to have a look at it as it explains the main steps in setting up (pup-up) shop.

Online Marketplaces

Last but definitely not least – the marketplaces. Amazon, Ebay, Etsy, Sears, Buy.Com, NewEgg.com and more. You name them. They provide lots of options to lots of users and chances are your next customers are there shopping right now. Now more than ever as many buyers are flocking to the online marketplaces to discover things they cannot buy in store anymore.

( Ebay – the original online marketplace )

Online marketplaces are key to ecommerce strategy for beginners. The reason marketplaces are the last on potential sales channels is because I want to emphasise just how important they are. Just like the “old” shopping centers, customers go to marketplaces because diversity means options and options mean they can find what they are looking for.

Diversity drives customers. It drives sales. So you want to be there but plan ahead before you dive in.

As an online store start-up you should be looking for as much exposure as you can get but still try to focus on the right marketplace. Amazon and Ebay key parts of the ecommerce strategy for beginners but before you join them, ask yourself:

  • are these marketplaces right for me? Not all that’s great is great for you. Just because they have traffic, that doesn’t mean you will get traffic and if you do, you don’t know whether that traffic will turn to sales. The most important aspects you should be looking for are exposure and sales.
  • can my product be found? expect to have competition. If you are among the few selling the product AND your product is popular, then the answer is YES, the product will be found by the customer. If your product is also sold by hundreds of other sellers, there are thin chances you will be the one showcasing the product. Part of your ecommerce sales strategy should be to make your product stand out. That means – make it look special and attractive through copy, media and of course, price.
  • will my product be purchased? If you have indeed managed to get customers to have a look at what you are offering, you must also get them to buy. Most important things are the way you showcase the product to create urgency and scarcity. Think of this in terms of sales strategy: “A beautiful hand-crafted lamp” is … meh. “A beautiful hand-crafted lamp in LIMITED offer” creates the feeling of scarcity and therefore urgency in purchase decision. P.S. – just to seal the deal – add a sprinkle of affordability (“just $49.50“).
  • do customers trust me? Marketplaces usually have some sort of peer-review mechanism. Customers can review sellers according to their fairness. Your reviews are your digital reputation. Positive reviews mean more sales, negative reviews can mean NO sales. So try to be as fair, effective and open with your customers.

Handling orders from marketplaces.

Part of the ecommerce sales strategy for beginners is making sure you can receive and fulfil orders. Listing your products on all marketplaces can seem like the right choice but it’s usually not. Each marketplace is a sales channel itself. You should be sticking to those that work for you and improve your experience there. Until your business is large enough to allow you to handle orders from more marketplaces, focus on fulfilling orders effective and quickly.

Most marketplaces offer some form of integration with your existing store and you should use those. If not native, there should be some plugins or products that make integration possible.

Product information should be going out of your online store and orders should be synced with your order management system. This way, the order management team can have a single point of entry for orders instead of getting lost in a dozen of order management systems scattered throughout the marketplaces you are using.

The big ones will get bigger

Marketplace orders will continue to be a large part of your business. You can be sure this is a cornerstone of ecommerce strategy for beginners. Marketplaces will become so large in the future that they will dwarf those from your online store. The reason is people tend to gather and shop where they will find diverse products and retailers. Just like in the real world. Online is even more so – marketplaces get even more traffic from search engines, have more money to spend on ads and are better at keeping customers returning.

Connecting sales channels – a key part of ecommerce strategy for beginners

Each sales channel you will be adding will bring you more exposure and more sales if handled correctly. The sales channels I’ve described so far are the most popular ones right now. But they are not the only ones. As technology evolves, so will commerce. Live shopping didn’t register as a trend until two years ago. New channels will pop-up and some I haven’t mentioned here will probably increase in importance.

Think about the impact Internet of Things will have. Maybe in the future the greatest sales channel for groceries will be smart appliances. Think of a refrigerator than can place orders for customers when it’s depleted. It sure is going to be an interesting challenge to integrate those in a sales channels mix.

( Multichannel sales strategy may prove to be a winning formula)

Ecommerce marketing strategy for beginners

Marketing – used by many, done by few, deeply understood by very, very few. You need to incorporate marketing and especially digital marketing in your ecommerce sales strategy, even if you are a beginner.

Marketing means first of all communication. Talking, showing, describing products to the people most likely to buy it.

It’s that simple. The basics need to be simple.

If you are going to survive as an online store owner, you need to keep your marketing basics simple. You have a product. Hopefully a great one. There are people who want to buy that product. Most don’t know they want to buy it from you. You need to show them why they should buy the product you’re selling. You need to show them why they should buy it from you. And then, if everything I’ve shown you so far has been decently implemented, just let them buy it.

Everything else is gimmicks. If you’ve got the basics right, everything else will fall into place.

Ecommerce sales strategy for beginners: find the right market

To get people to buy your product, you need to know who these people are, what they want and how they act. Most likely not everybody will want your product. But if you’ve done even a bit of ecommerce sales strategy for beginners, you will be in the upper percentile in your market.

Targeting demographics

Yup, your customers are “the target”. Why is it called that, you ask? Well, because your communication targets them. Until the internet became the norm and we’ve started gathering more data than we can handle on customers, we used to define them through demographics. That means basic info on consumers. Age, sex, marital status, location, education … this kind of data.

( Pictured here: advertising in the 60s – the Mad Men show. Not pictured here: Google algorythms and tabacco advertising ban )

These targeting methods were made popular when mass marketing was just blooming, in the days of TV, print and outdoor ads made by the likes of Mad Men. When you ran your ad in the magazine or on national TV, you needed to know who’s going to use your product, make sure you understand their psychology and shout from the top of your lungs how cool the product is. Once the ad was approved, there was no going back. Advertising agencies would research, create and test the ad before the campaign was launched because there was no way you could change, tweak or even pull back a campaign in real time.

So demographics were the bread and butter when you would push your message to the market. But the Internet changed that into …

Ecommerce sales strategy for beginners: Targeting behaviours

Basically, if you were a mid-class urban wife with no college education in the 60’s there were slim chances you would receive ads trying to sell you repair tools for your car. Even if you were actually a mechanic. The same would hold true if you were a man and would be looking for a sewing machine to fulfil your lifelong passion of becoming a fashion designer.

You would have to find those products yourself. We’ve come a long way and thankfully, we now have the freedom to fix our own cars and sew our pants, no matter the gender. Note: we should make this better.

Big changes in sales and marketing strategies started being needed when contextual marketing (the ads you see when searching on Google), interactive advertising or behavioural marketing hit the … shelves (?).

The last one, behavioural marketing, is probably the single most important aspect in online retailing. Technology now personalizes marketing and responds to customer behaviour.

For example Amazon’s recommended products (“See what others have purchased”) is a form of behavioural marketing that is based on a complex research on previous customers behaviour before they purchased something. Simply put, when people would purchase something, their interaction trail (the products they’ve seen so far) becomes an indication that people taking the same or similar steps would most likely purchase similar products. This is called a recommender system (or recommender engine). It’s kind of a big thing in our world today.

The ads you see on Google feature a similar concept. They are shown as to answer your needs. Some ads respond better than others at what you are looking for and thus have a better chance of getting clicked. Google trusts this system so much that they invoice advertising on clicks, rather than how many people have viewed the ad.

In terms of sales and marketing strategy we went from effectively targeting people to targeting people’s behaviour. Still, demographics and customer profiles are very important and a lot of what you will be doing is to try to guess customer responses based on demographics assumptions. Such assumptions might mean you will favour ladies over men if you are selling women’s clothing (doh!) or rather more complex assumptions such as “Men over 32, employed and married are more likely to buy a family car”.

Indifferently of your assumptions, test them and always quantify your results with …

How to use analytics software in your ecommerce sales strategy?

Here you go … numbers. Charts. Estimates. Hope Miss N., your math teacher, was your favourite back in school, because this is going to be damn complex. Nah, just kidding. Most analytics software is pretty much plug and play and the numbers and charts I mentioned are usually generated on the fly and in such a manner you can easily understand.

You can’t have marketing without analytics and research. Fortunately, it is a lot easier now for a small online store than it was 40 years ago for the largest companies in the world. What is not so fortunate is that it’s easier for everybody so you’ll have to dive deep and understand what your analytics are saying. So will the competition.

Once you have installed Google Analytics or one of these other ecommerce analytics software, you will probably dive in and see what your customers are doing. What you will want to look for is patterns that lead to increased sales. Patterns are key in ecommerce sales strategy for beginners (and advanced) retailers. Special products, a certain type of copy, products featuring media versus those that don’t have media. Look for what makes your sales increase.

Targeting, knowing, marketing – the most important ecommerce marketing strategies for your online store

So you know the target, you have the analytics figures, now it’s time for the actual marketing. The web is full of resources to fine tune your online marketing understanding. I will show you which are the most effective ways of marketing so you will have a bird’s eye view on what makes an online store sell.

Search Marketing: SEO

As a startup there are really little things you can do better with smaller budgets than writing quality content and optimizing for search engines. SEO (Search Engine Optimization) is a really large concept and many people earn their living through SEO services. You will probably ask a SEO expert to help you find the perfect balance so your store will show up in search engine results. But before you do that, have a look at the basics. These are the things you will need to keep in check so Google will bring the right customers to your store:

  • content: write great and extensive content. For humans. Describe your product like you would want it described for yourself. Don’t do “keyword spamming” which is the result of cramming keywords in your description so more people would find you. It just doesn’t work that way.
  • code: your ecommerce store is visible on customers’ browsers thanks to programming languages that output information in the way we are accustomed to. Search engines index this information and if you are to have your store indexed properly, you need the right code. If you are not technically savvy, better call someone who knows what they are doing.
  • links: get other (relevant) websites to post links to your store. This must count as number one when it comes to SEO in any ecommerce sales strategy for beginners. Links are the key for search engines (aham…aham…Google) to rank your website.

Email marketing

Ask your customers to leave you their email address so you can update them on news and offers. This is a great way to get people right back on your store.

But don’t annoy them and don’t do spam! Everybody hates unsolicited email. Make sure your customers give you their permission to send them emails. You can use apps such as Mailchimp or CampaignMonitor to save customers’ emails and then send them newsletters.

Social media marketing

Where would you go if you were to market a product? The answer is fairly simple: where people gather and interact. Social media outlets such as Facebook, Twitter or Pinterest are now used by billions of people. That’s where your online store should be.

Just like interacting with friends, some things work better than others. Here are some tips on how to use social media to interact with potential and existing customers:

  1. listen first, talk later: social media is a great place to gather insights on your market, your products and even your brand. Some of those insights may not be friendly but you should pay attention to them nevertheless.
  2. focus on building strong bonds rather than gathering masses: it’s just like with your friends. It doesn’t matter if you have 10 or 10 000 friends. What matters is how strong your connection with said friends are. And probably you will not reaaaaly have 10 000 real friends. It’s better to have few, engaged fans rather than many fans that do not relate to your brand or product.
  3. find the influencers: some people wield more influence than others in their social circle. And they somehow do it naturally. You should get close to these people, develop relationships with them, show them your products and share content they might find interesting.
  4. provide value, not sales pitches: yes, your products are great but don’t bore people with constant product sales. Provide content. If you sell hats, show fans their history, tell them about the manufacturing precess, showcase famous hats. Make it interesting and valuable.
  5. be patient and constant: don’t tweet 40 times one day and than stop for a month because no one followed or retweeted you. Social media success takes time, patience and constant effort.

If your social media strategy is not going the way you’d want it to, there are always the ads. Most social networks provide ways for you to get closer to your potential customers, faster. Most people call them ads  . Facebook, Twitter and Pinterest – they all provide advertiser with the possibility of engaging fans through ads.

And speaking of ads, one of the most effective way of advertising your store and products is …

Using paid search as key driver in ecommerce sales strategy for beginners

Remember those Google ads I’ve mentioned earlier? That is Google AdWords, a very effective form of advertising that places ads on search results, ads that are directly related to your search.

For example, if you were to search for “cars”, you will be shown the natural search results AND special search ads. These ads are fuelled by advertisers that pay each time someone clicks one of their ads.

You can be one of those advertisers. By carefully analysing traffic and allocating search ad budget, you can determine with high accuracy the number of clicks you need to convert visitors to buyers. Because search ads are contextual, this means you can optimise your ads in such a way that only those interested in purchasing your product might click it.

However, paid search campaigns are usually better managed by professionals. Even though you might spend a little extra for someone to handle your ads, just leave it to the professional.

And one more thing: Google is not the only one providing the option for paid search ads. Bing does it and so does Amazon.

Performance marketing

Performance – well that sounds nice. What is it?

Performance marketing is a broad term that means advertisers pay a fee depending on how well an action is performed. This action can mean showing an ad a certain number of times or making that ad transform into a special action. The standard actions you might want to encourage are:

  • clicking
  • downloading a certain file (say a product catalog )
  • showing interest in a product (the user becomes a lead)
  • buying a product

And because marketing people happen to love acronyms, you might find the info above coded in three-letter words:

  • CPM means Cost Per Mille (that’s Latin for thousand) – one thousands being the standard minimal block of ad views you can purchase to show an ad.
  • CPA means Cost Per Action – the generic code for any action you might define with those selling the ad space. It is used for sales and therefore sometimes referred to as Cost per Acquisition.
  • CPC means Cost Per Click – the cost you will be paying whenever someone clicks on your ads
  • CPL means Cost Per Lead – the cost paid whenever a visitor shows interest in your product

Performance marketing is sometimes used interchangeably with affiliate marketing. That is  more of a misconception, as affiliate marketing, though popular, is a subset of performance marketing. It works as a shared revenue deal, where the retailer shares a portion of the revenue with the publisher (the one displaying the ad), whenever advertising turns into purchases.

Which are the major affiliate marketing sites?

Affiliate marketing is a very important part of any ecommerce sales strategy for beginners. Affiliate ads are ran through affiliate marketing services. These cover three very important aspects: they connect advertisers to publishers, they make sure all sales are registered and attributed to the right publisher and they handle transactions between advertisers and publishers.

If you decide to go along the affiliate marketing path, here are the most important affiliate networks that can help you sell your products:

  1. CJ Affiliate (formerly Conversion Junction) is the global leader in pay for performance programs. It is the home to many publishers that can help you run your ads.
  2. Rakuten Advertising is the big contender to CJ Affiliate and a fast growing one.
  3. ShareASale is a great affiliate marketing resource for retailers. Slightly smaller as it may be, it is still very effective.
  4. ClickBank works great for entrepreneurs and content creators. It is effective and easy to use.
  5. 2Checkout is another fast growing performance marketing company that’s focused on software and digital products.

Using Comparison Shopping Engines to get in front of your customers

A great way to get your product out there is to place it in comparison shopping engine. These applications gather information from more online stores and show potential customers what is the best way to shop in terms of pricing.

It basically works for those that are price competitive so before you join such a program, make sure your prices are aligned with the market.

(Shopzilla is one of the most popular comparison shopping engines)

Most comparison shopping engines are CPC based and you will pay anytime people click your products, arriving at your web store. The top four most popular are Google Shopping, Shopzilla, Shopping.com and Pricegrabber. Getting listed can draw targeted traffic and can mean a very scalable way of converting traffic to sales.

Other marketing options

So there you have it – these are the most effective ways you can market your new online store. This is the start of creating an amazing ecommerce sales strategy for beginners. But don’t stop here, don’t settle. Marketing in the digital world is usually a matter of imagination. Be curious and try new things that might be fit for your online store.

For example you can attract relevant bloggers to mention your store and review the products. You can put out press releases and talk to the media. You can  run contests and sweepstakes to increase reach and turn fans into loyal customers. Once you have the basics up and running, you will be ready to add more and more marketing options to your online store.

Testing and optimising your ecommerce sales strategy for beginners

Remember: your work is never done. If you want to keep your customers happy and sales growing, you need to constantly optimise and tweak your store. To do so you can run tests that determine what works and what does not. When testing you will be looking for either errors, bottlenecks or usability issues. Do so through:

  1. Functional testing: test your store’s functions. The navigation, user account, user login and others. Each needs to be thoroughly tested and improved
  2. Process testing: we are talking business processes here. These are things like managing orders, fulfillment, shipping or warehouse management. If your company process don’t run smooth, customers get their orders delayed, mixed or canceled.
  3. SEO testing: as I’ve mentioned previously, search engines will always be a very important factor in driving traffic to your online store. Check to see how you stand against competitors and against previous positioning.
  4. Mystery shopping: put yourself in the customer’s shoes and see how’s everything going. Place an order and see how operators behave, how long does it take for the order to arrive and more. You might find some interesting things there.
  5. Hot areas testing: some parts of your shop are more important than others. You can improve conversion rate through a careful  inspection and recurrent A/B testing of what you could call “hot areas”:
    • Homepage
    • Product page
    • Checkout cart
    • Payments
    • Forms requiring customer input
    • Mobile interfaces

Customer journey maps

A great way to see how customers interact with your company is using customer journey maps that help improve customer experience. These “maps” show your existing sales channels and how customers interact with them. Customers may find you on social media, browse products on the web store and place orders through the phone. This is a customer journey map.

When these journey maps get too complex you have to constantly test and look for signs of problems of sources of frustrations for your customers. It may be a poorly designed checkout cart or the voice of your phone operators. By understanding your target customers and their journey maps you can have a guide to testing what works and what doesn’t on your store.

Here’s some info on using Customer Journey Maps:

Testing means improving and you should strive to make your store better and better. Little improvements and constant focus on making the customer experience better turns your store into a success. So keep testing :).

This is your basic ecommerce sales strategy for beginners

Wow!  If you’ve managed to get this far I believe you are ready to start your own store. Give yourself a pat on the back for having the patience to get through all this data. It’s not easy, I know, but it is a lot easier than just starting a store and then figuring it all out along the way.

I am more than happy if I’ve managed to help you on your path to becoming an ecommerce entrepreneur. If this guide was useful to you, please refer it to someone else who may be in the need for know-how.

You’ve taken a large step ahead to running your own business and online store. You may be anxious and a bit scared but rest assured. So was Jeff Bezos when he started Amazon. Knowledge, hard work, innovation and persistence will get you far. Have a safe trip in reaching out for your dream!

Power, debt, value – why Bitcoin doesn’t matter

“Bitcoin doesn’t matter” is quite a statement when the price jumped from $37k to $44k in one week. But hear me out.

I see three things that are governing our society. It’s been the same for the whole recorded history.

This things are power, debt and value.

Power is what a nation state uses to coerce its citizens into following (fair or unfair) rules. It keeps the world in a relatively ordered state. It comes in the shape of laws and regulations, police or military action, institutions.

Debt is arguably the single biggest driver of how the economy shapes the society. It’s not the money, it’s debt. Debt owed to your bank, your government, your peers. It comes in many shapes or forms. You might find it in concepts as credit, duty, return on investment, even money.

Value is what us humans provide to other humans. It’s the product of our creativity and labour. It comes in the shape of the products, services and culture we’ve built for one another.

Power, debt and value are quantified in many ways. Usually, one is quantified in the form of another. Power earned can be exchanged for units of debt (money). Debt can be covered in units of value.

Rather recently, with the downfall of monarchy and rise of the bourgeois, value provided could be transformed into power, to a certain degree.

Power, debt and value are the concepts we all share and trade. It doesn’t matter if we quantify them in dollars, yens, favours, goats or bitcoin. What matters between all of us is how much of these things we are worth.

Power

Power is a vague and hard to define term. However, this scene in Game of Thrones might help:

What you can see above is an example of what has ruled our world for a long time. It still does. Power in the form of expressed or implied violence. Either through direct speech, as Cersei states above, institutions (“of power”) or geopolitical relations.

Debt

For a long time I believed in the idea that money emerged as a means to trade goods. When we think of the inception of money we often picture some middle ages worker, maybe a blacksmith or a shoemaker, trading goods with a farmer. One awkward negotiation might appear – how many goat skins is a pair of boots worth?

The shoemaker and the farmer go back and forth about the parity between goat skins and boots. They might settle it but what happens when a third variable enters? Like a sword made by the blacksmith. What’s the parity between swords, shoes and goat skins? What happens when you add hundreds or thousands of other wares?

Well – here’s a bright idea if you’re a 19th century economist in the British empire: people found a common denominator and traded in that. Like … gold. Or coins.

But it seems that’s not the case. In his brilliant book Debt – the first 5000 years, the late anthropologist David Graeber argues debt came long before money. Debt and credit units were the first forms of “money”. Debt made and destroyed empires, brought us slavery in its many miserable shapes.

Graeber argued we live in a world that is still ridden with indebted serfs in developing and developed countries, who’s main reason of getting up in the morning and doing a job they may hate is a form of implied or express debt and society’s pressure to fulfil this debt.

Value

However you feel about power and debt, they have indeed shaped our society. For most of our recorded history, they were the only tools you could control the world around you. They were also restricted to a select few. The nobles, the bankers, the priests.

Then came the Magna Carta outlining a world where everyone played by almost the same rules. It started as a way of making peace between an unpopular king and his barons. Still a pretty elitist thing. But it spread to include the masses and lead to the wonderful place in history we are living in now: the democracy.

The industrial revolution and protection of intellectual property handed even more rights to everyday folks that were unlucky enough to not be nobles.

You could have an idea that improved the lives of others, put it into reality and build yourself a better life than all your ancestors.

This lead to inventions, and industrial age and the rise of those that could bring better goods and services to their fellow citizens. It helped build capitalistic enterprises where the one creating value could be in no connection with networks of power or debt. It still relied on them but they were not prerequisites.

We then ended up with computers, the internet and AI and spaceships built by people that couldn’t chop off your head. These people called entrepreneurs rely on debt to finance their ideas rather than using it as an instrument of control. Because now, the value you provide to the world really matters.

Enter Bitcoin

There’s many ways you could define Bitcoin – a social perspective, an economic one, a political one. My favourite is that it is a decentralised quantifier of value.

My early childhood was spent in a communist regime, in the Eastern block of Europe. At that moment owning one dollar meant you were prone to investigation by the institutions of power of the state. Why do you have a foreign currency? Are you trying to topple our glorious economy by undermining our glorious currency? Do you not think our glorious nation is the best ever?

But the regime failed. It was not toppled. It just failed. It couldn’t provide enough value for its citizens. Its “value” was fake. It was worth whatever the central authority said it was worth. And this was bad. No central authority should tell you how much your work is worth, right?

Enter the mystical figure of Satoshi Nakamoto. Legend has it he (or she) came down from the bits and data heaven and handed us the secret to decentralised transactions. Bitcoin. The more people used it, the more valuable it was. No one controlled it, except if they owned 50% of the computing power that managed the system. Which was technically impossible.

Why bitcoin doesn’t matter?

Today, blockchain(s) hold hundreds of billions in value. They’re the next big thing. They will change the world. Those that don’t own bitcoin will starve and die a slow and painful death.

Except they wont.

Because they don’t hold formalised power. They don’t handle debt. However, they do store value.

This is what matters. If Bitcoin, or any other blockchain based currency will rule the world one day, that’s a good thing. But it probably won’t change how much power you hold, how your debt is handled and how much value you put in the world.

If you provide value, this can easily be translated into any currency.

If you own or owe debt, this will still be expressed in some form of currency. Centralised or decentralised.

And if you hold power you will most likely try to get a foothold in anything that might jeopardise your position.

So Bitcoin doesn’t matter. It’s a tool that can express value, debt or power. Tools seem to change but the pillars that shape our world stay the same. Invest in those.

Credits:

Photo by André François McKenzie 

The functional marketplace is eating the world

The marketplace has been a very influential social and economic construct for a very, very long time. It has been a central concept to commerce all over the world since the dawn of man kind. In time, the marketplace has been refined and evolved to include ever more complex structures. During the past century it morphed from temporarily trade gatherings to large permanent structures such as shopping malls and eventually it evolved into what we now know as the online marketplace. Now – it’s evolving into something else: the functional marketplace.

Simply put a functional marketplace is a combination between a marketplace and software tools that help buyers and/or sellers.

2021 update: I wrote this in 2015 and now it seems the model is spreading across multiple industries. Several examples of (newer) companies employing the functional marketplace model are Airbnb, Peloton (yes, really) or the Adobe Ecosystem, through its creative outlets (such as Behance).

Ebay, Alibaba, Etsy, Amazon and others have one thing in common – they get sellers and buyers in one place. These online marketplaces are fuelled by a business model that has seen a steep increase and proved excellent in the past years. But now, it’s time for the next step:

Functional Marketplace connecting buyers, sellers with useful tools

I believe the times they are a-changin’, like Dylan would chant. The Online Marketplace is not enough any more. The markets demand something more.

That something is the Functional Online Marketplace, a virtual hub that combines the features of a marketplace (buyers and sellers, reputation management, transaction handling) with functions that improve the lives of either sellers or buyers.

The Functional Online Marketplace goes beyond just letting online retailers and buyers trade. It helps the seller run its business better and the buyer benefit more from the product purchased.

And some of the biggest tech companies we know have created this type of Functional Marketplaces. We’ve used them and most customers love them. We just didn’t put a name on it. Have a look at some examples:

The Apple Ecosystem

Steve Jobs envisioned the PC as a digital hub, a central unit that connects the user’s digital activity. From email to web surfing, from music to pictures and more. It then proceeded to create this vision and along the way he built much more.

Apple apps ecosystem - a functional marketplace for developers and users

By launching the iPod and then the iPhone, Apple moved the digital hub inside the consumer’s pocket. With such a valuable real-estate in the reach they’ve had to build a system that shipped music, video and applications from third parties to these devices.

The iTunes Store and the AppStore were born. Apple built the platform to consume apps, the place where customers could download these apps, empowered developers to build these apps but did something else too.

It built Xcode (the development tool for iOS developers), it launched Objective C and than Swift (the programming languages used to build apps) and helped developers create useful apps.

Apple went beyond the marketplace paradigm. Yes, it allowed media and software consumers to meet developers but it also created the platform where they could be consumed and the tools to build them. It built an extraordinarily effective Functional Marketplace.

But Apple is not the only one …

The Uber-marketplace

Uber is an extraordinary successful company that connects freelance drivers to those in need of their services. It connects buyers to sellers. It is technically a digital marketplace. And more.

First of all Uber empowered a set of freelancers that didn’t know they’ve actually had a market. The driver app allows drivers to see potential riders and provides GPS-linked functionality inside a simple mobile device.

The functional side of Uber not only improves the way sellers (drivers) provide their services but actually it makes it possible.

For customers, the app makes hailing a driver an easy task, it allows direct payment on mobile phone and brings the comfort previously unattainable. The functional marketplace at its best.

Google – the biggest functional marketplace

Google is many things. Search giant, mail provider, mobile os developer and genetics researcher among others. But at its core, the business model is quite simple: Get people to pay for ads. Show ads to customers. Make people click on said ads.

Advertising accounts for 89.5% of Google’s total revenue so it’s safe to say that ads are its bread and butter.

To achieve these levels of revenue Google has to place together “The Sellers” (Advertisers) and “The Buyers” (Customers clicking on ads). Though customers don’t technically buy on Google, those that generate the company’s revenue end up as leads or buyers on advertisers’ websites.

To do this, Google built its ad market on top of its primarily function: Search. Users searching for information of interest are effectively buyers in the Google functional marketplace.

The marketplace, therefore provides functional support to buyers. The search, Gmail, Android – are all basically functions that lock in the ad-clicker and in turn generate revenue through these types of transactions.

These are just three functional marketplaces examples but they illustrate the concept. To be successful, a newly established marketplace has to provide more than just a connection between buyers and sellers. It needs to provide function beyond the commercial. By improving the lives of buyers and sellers beyond the commercial, Functional Marketplaces provide the type of lock-in and effectiveness previous models don’t.

How to build a supply chain for multichannel retail?

For a very long time, retailers used a linear approach to the supply chain. It meant that products moved in just one direction. Products would move between the manufacturer, the wholesaler, the retailer and onto the sales channel. This sales channel meant the brick and mortar store, in all its variations, for a very long time. Now it’s time to build a supply chain for multichannel retail.

Listen to this article below or continue reading:

With the internet revolution came the concept of eCommerce, where customers would place the orders on an internet store front and they would receive it at home. Medium and large retailers used the same method of silo-management to the online store.

One way supply chain

The “silo” approach meant that each new sales channel would be treated as a separate silo, independent from the other stores. Basically the in-store operations were one thing, the ecommerce operations a totally different thing. Ideally – there was no connection between them.

But this doesn’t work. The fact is that there are very few exclusive online shoppers. People like to spend time in stores, touching merchandise, they spend time on social media, get informed, place calls to ask for info and generally live in a complex world that mixes online and offline experiences.

Your customers deserve a multichannel supply channel

Customers demand new options from retailers, things such as “buy online, pick-up in store”, “order in store, receive at home” – things one might note are common sense.

If you want to build a supply chain for multichannel retail, you need to step up your game. And it’s not just marketing. Customers demand a real change in the way they are engaged. Companies such as Macy’s have invested in creating experiences that handle multiple journey maps for their customers and the results are satisfying.

Supply chain for multichannel retail / omnichannel retail

To make this work retailers adopt a thing called omnichannel supply chain. This is a supply chain built for in store and online commerce, as well as other channels (social media, live shopping etc.) .

The biggest difference between this type of approach and the previous is the fact that it is omni-directional. Whereas the classic supply chain was mostly linear, flowing from one place (manufacturer) to the other (customer), the omnichannel supply chain moves products across multiple sales channels.

How can I build a supply chain for multichannel retail?

Here’s some tips:

  • make inventory transparent across all sales channels (online, in-store, warehouses, suppliers and others)
  • clearly understand what is your customer journey (ex.: customer places a call in the call center, gets informed, places the order online, picks and pays for the order in a brick and mortar store)
  • connect your company with external suppliers to manage all potential fulfillment in your supply chain

Ecommerce fulfillment: The 2021 guide

You are an ecommerce professional, you are receiving orders from customers and you want to understand how to better fulfill orders. This guide is all about ecommerce fulfillment.

Let’s get started:

What is ecommerce fulfillment?

Good question! Although the term fulfillment is used quite a lot, not everyone has a clear grasp on the whole idea. I mean – why fulfillment? Well, it’s actually a pretty simple concept. Order fulfillment for ecommerce is anything that has to do with fulfilling your promise to the customer. That promise is you’re going to ship the products they’ve purchased, those products are going to be in good condition and they will arrive as soon as possible.

Ecommerce fulfillment also covers the reverse process (also called reverse logistics). That means getting merchandise back from the customer. That type of operations happen:

  • in case of a package return
  • when the customer refused the package
  • the shipping company was not able to deliver the goods

So basically when your ecommerce business is fulfilling an order, it is actually making good on its promise to deliver merchandise in the best way possible. Although the concept is not that really hard to grasp, making it happen is a little bit more complicated. No worries, I’ll walk you through the process.

In order to make sure your ecommerce fulfillment operations work perfectly, you’ll have to look for the answer to four very important questions:

  1. am I moving the goods in the most effective way? This is a question you will always have to be answering to. The answer is usually no. If you have answered yes too many times – you are not really trying that hard. The truth is ecommerce fulfillment operations are evolving very, very fast and there is probably always something you can do better.
  2. am I always shipping the right products? You have to understand that sometimes you will not be shipping the right products. Yup – that’s a fact. It may happen when you’re using a drop-shipping service or when your team is overwhelmed with the number of orders (say during the holidays). You have to minimize these type of mistakes and always strive to improve on the way you do business.
  3. is my team working in sync or are there any communication or operational bottlenecks? Your ecommerce business will not always run smooth. The most common reasons are either the team is not communicating properly or the IT systems are not fully connected (say your order management and inventory management tools are not synced). You have to stay alert and solve these type of issues as soon as possible.
  4. is my ecomerrce fulfillment scalable? You won’t need to ask yourself this question in the first days but eventually you will have to check if your operations are ready to scale if you’re successful. To do so – try wondering what will happen if all of a sudden you were to receive each day ten times as much orders as you’re expecting right now. How about if your sales were to increase one hundred or one thousand times? Would you be ready? How would you manage this change?

The 5 steps in ecommerce fulfillment

Fulfillment is probably the most complex and tedious part of ecommerce. It is also the one thing that is the least talked about in terms of ecommerce. It’s not flashy and it’s not cool. It’s complex, involves a lot of tweaking and a lot of work to getting it right. While most ecommerce guides will point out to the importance of picking the right shade of orange for the “Buy now” button, few will speak of how important fulfillment is.

Just to get a glimpse of how important fulfillment is – think of your car. While having the right color and the right type of leather is important, the car won’t start without an engine. Fulfillment is the engine that keeps ecommerce going.

There are just five basic steps in fulfilling ecommerce orders. Four of them are mandatory and one is optional. Hopefully you will cover this last step as few times as possible. These five very important steps are:

  1. Receiving the orders
  2. Receiving the products
  3. Processing the order
  4. Shipping the ordered products
  5. Handling order returns
Ecommerce fulfillment process

Overview of the Ecommerce Fulfillment Process (including returns)

1. Ecommerce fulfillment: Receiving the orders

Customers will place the orders through one of your sales channels. It may be your online store, on the phone or through a mobile application or a pop-up store.

There is a great variety of order management software out there. What matters from a ecommerce fulfillment standpoint is what the order info should contain. Here is the minimal information you will be needing:

  1. who is handling this order (who will be managing the order and who will actually be picking and packing the products)
  2. the customer info – usually name, address, whether the customer is a person or a company, whether the customer has already purchased from your store before
  3. special discounts or shipping conditions – this may happen when the customer has used a voucher or a special promotion and is entitled to a smaller shipping fee, a gift or a bonus product.
  4. order info – total cost, estimated shipping cost, whether the order is prepaid or paid on delivery, and where you will be shipping the products from (either internally from your warehouse or from a drop shipper)

Most of the time, you will be receiving more info from your order management tool but these are the essential blocks of information to keep in mind.

2. Ecommerce fulfillment: Receiving the products

Before moving on to the actual order fulfillment bullet points I have to make a point. You don’t HAVE to fulfill the orders yourself. Some companies outsource their fulfillment to other companies. My advice is you should keep most of your fulfillment operations within your company. You won’t be able to ship products across the globe but you can pick, pack and carefully wrap orders for your customers, especially if you are a growing ecommerce business.

When medium and large online stores are fighting each other over consumer mind share, we only see the marketing and superficial aspect of this battles. But the fact is, underneath all this visible struggles, the real battles are won in the warehouse. Your real chance for success stands in picking, packing and shipping the right products, within the timeframe you’ve promised.

It may seem hard to handle ecommerce fulfillment operations and it sure is. But because it is hard, you have to master it before the competition does. Walmart and Amazon, two of the largest retailers in the world, have also two of the best supply chains in the world. It’s not that these companies have developed spectacular fulfillment operations because of their huge sales but the other way around.

Glad we’ve got that out of the way. Now – what’s the best way you can receive products in your inventory?

It all starts with an order to your supplier. It is usually called a “Purchase Order” as you are placing an order to purchase products. We will assume that you have already set up an agreement with your suppliers and they will ship the products. You will probably pay as you place your order, when the order arrives or at a given time after the order has arrived, if you have agreed as such with your supplier.

How to check the products received from my supplier?

Once the products have arrived at your warehouse you will need to:

  1. verify their integrity – check whether the goods are damaged and if so return those that are damaged
  2. count the number of products – check if the supplier has indeed shipped the correct number of products
  3. check if the product cost is the one agreed upon – if you have agreed to either pay on delivery or at a given deadline you will probably receive an invoice with individual costs split. Check to see whether these costs are those you have agreed upon when placing the order
  4. add the product SKU’s to your inventory management – Standard Keeping Unit or simply SKU is what retailers use to define unique types of products that can be sold. They are used to track goods movement through inventory. The SKU is not to be confused with the product model no, although this can be included. The SKU code is formed using product characteristics (such as manufacturer, size, color etc.) and it is usually used as a barcode or QR code so it can be tracked easily using bar code readers.
  5. add bar codes corespondent to the SKU’s you’ve just issued for the products. You can do this using special bar code printers and special stickers that will be attached to the product package.
  6. once the product is received and marked it will be sent to your storage unit (or warehouse) where it will be placed in a way that it can later be easily picked and packed.
Receiving products from suppliers - checklist

( Basic check list when receiving products from the supplier )

Placing the products in the inventory is a very important part in receiving the products. The better you keep track of where the products are, the less time and effort you will need when picking and packing the products.

How should I store products for ecommerce fulfillment?

When placing the products in storage you need to keep in mind some very important aspects:

  1. not all products are equal: products should be placed according to how popular you expect them to be. Some products will be sold faster and they need to be easier to reach. Either closer to the packing unit or lower on the shelves so they can be easily picked.
  2. however, all products have to have their position in stock clearly assigned and saved. Each SKU should have a clear position in the warehouse. You will probably develop your own warehouse numbering system but you will probably have to add things such as aisles, sections, levels and positions to keep product identification easy and scalable.

Hopefully at this point you have managed to get the products in your inventory, they are correctly marked and stored and you are ready to pick said products for the orders you are going to be shipping.

3. Ecommerce fulfillment: Processing the orders

Once you have the products in the inventory and orders are coming in, it’s time to process these orders.

Order processing for ecommerce stores

Order processing is split between four main areas:

  1. picking
  2. packing
  3. quality control
  4. movement to appropriate shipping station

What is the best way to pick products from inventory

Picking is probably the most time consuming part of order processing. It also gets a lot more complicated as your business grows and it may be prone to errors. Having more products in your inventory will increase the complexity of picking the right products in the fastest way possible.

If you’ve managed to place the products in the right spots (as stated in the step above – receiving products) your chances of correctly processing orders increase big time. The reason is it will be easier for picking staff to move fast through the aisles and pick the right products.

How does product picking work?

To have a streamlined picking process that works just as well with 10 orders per day or 1000 orders per day you have to decrease the chances for errors. To do so, your picking staff will cycle through these steps:

  1. Receive a pick list – the pick list is a … well … list of items to be picked from the inventory. It may vary depending on how you run your fulfillment operations and what kind of software you are using but it usually contains:
    1. Product location (section A, aisle 3, level 3 etc.)
    2. Product code (usually the SKU)
    3. Quantity to be picked
    4. Product description and image (for quicker identification)
    5. Barcode (usually used to confirm product picking directly into the inventory management system)
    6. Product bin
  2. Create the optimum route to pick products: usually picking staff will collect more orders to improve efficiency and gather all the products in one trip. This route is usually generated by the inventory management software based upon the warehouse layout.
  3. Pick products and place them either in separate bins based on ordered items or a general items to be sorted later at quality control or packing stations.
  4. Bring products to the Packing Station, where they will be sorted, placed into the right packages, and so on.
Picking list example

( A basic example for a picking list )

How to pack ecommerce orders?

Packing is the next step in the fulfillment operation. Once the products have been picked from the corresponding aisle, shelf or bin, they are sent to the packing station where they will be split into orders and prepared for shipping.

The packing operation is usually split into these further steps:

  1. Choosing the right package – depending on the products shipped, they will be placed into special packages, according to specific needs. For example a wine bottle will be shipped in a different package than say, a dress or a cardigan.
  2. Scanning and marking the package – after the products are placed into the right package, products are usually marked with specific documents, usually used by the shipping company so their transport progres can be tracked. They are also scanned so the inventory management software will register said products as getting ready for shipment.
  3. Adding invoices, product slips or other documents and / or marketing prints – this step includes placing needed orders information or documents (warranty certificate or invoice), as well as marketing materials that should reach the customer (say a discount voucher or a bonus product).
  4. Preparing the package for quality control and shipping

Quality control for ecommerce fulfillment

Once the products are placed in the right package, a quality control station will check for any errors that may happen.

Quality control personnel will usually check for one of the following errors that may appear:

  1. Wrong products: products may sometimes get mixed or the wrong information has been sent somewhere along the order management process. The most important aspect is that quality control will make sure the customer gets what he or she ordered.
  2. Wrong address / customer: sometimes orders get mixed and orders are sent to the wrong customers.
  3. Wrong payment information: there is a multitude of payment options and you do not want to ask your customer to pay something that was already paid for.
  4. Shipping options: maybe the customer opted for a quick delivery option. Quality control needs to make sure the product gets to the customer in the specified time frame. Another shipping mistake happens when online stores work with multiple shipping partners (say one for internal shipping and one for overseas shipping). It is important for the order to be routed to the right shipping partner to avoid delays or extra costs.
  5. Specific order information: quality control also needs to check for specific demands such as gift wrapping or a specific timeframe to be shipped at.

4. Ecommerce fulfillment: Shipping orders

Once the products have been picked, packed and quality control made sure there were no errors in the order management process, the package is ready for shipping.

Online stores usually partner with one or more shipping companies to deliver the goods. The shipping station will check the package weight and direct it to the right shipping partner.

Most shipping companies will provide you with a general framework on how to handle packing and preparing for shipping. Here are the most popular ones:

When these companies (and others) will charge you for their shipping services they will take into account some (or all) of the following variables:

  • package weight and size
  • departing country and arrival country
  • departing city and arrival city
  • shipping insurance
  • tracking services (now most of these companies offer this service bundled with others)

Once the orders are picked by the shipping company, the order status is constantly updated so customers and the online store knows where the packages are at the moment.

When the products are delivered the status is updated and the order is confirmed. After this point the product is in the customer’s ownership and any reverse process wil be treated as a return.

5. Ecommerce fulfillment: Handling ecommerce returns

Oh, returns – can’t live with them, can’t live without them. Just kidding. A clear and friendly return policy is what sets the likes of Zappos.com apart from the competition. They will let you return the products you’ve purchased within 365 days, free of charge and as their return centers will check the products you will be credited within 7 days with the money you’ve spent.

Great, right?

Ecommerce customers love a great return policy and you need to be ready to handle one. The logistics involved in such a return process are usually dubbed reverse logistics. This means you will reverse the steps mentioned above.

Basically you will unship the products, unpack, unpick and un-order everything.

If you offer free shipping, you will have to handle the shipping costs from the customer to your return center (for small and medium companies, the return centers are the same as the fulfillment facilities).

Now, the big problem when getting information on handling returns is that most of the resources out there are either

  • irrelevant (usually stating how important return policies are or how to market your return policy) or
  • boring (usually a bunch of text mixed by logistics experts that have no need to explain how reverse logistics work)

What will follow will hopefully be a bit more relevant and a bit less boring. The big idea you have to keep in mind is returns are the reverse process of everything you have read so far.

You will have to tailor the following concepts to your specific company structure, accounting, IT systems and processes.

That being said there are three main areas you need to focus:

1. Getting the products from the customer and into your fulfillment center.

There are usually three main options to do this:

  • using your shipping partner: most shipping companies offer return services. What they will do is go to the customer, pick up the package and send it back to you. Either you or the customer have to pay for these services. Companies offering free returns also include a special options for customers to use within a certain timeframe, in order to ship products back. This is usually a special voucher the shipping company will then use to charge you instead of the customer.
  • using your own network of brick and mortar stores: if you also have a network of stores (either classic or pop-up stores) you can direct the customers to these stores to save on shipping costs

2. Getting the products back into inventory

Once the products are back at the fulfillment center you will have to get them back into inventory. The process is similar to what you would do if you were to receive goods from your supplier. The main differences are:

  • in terms of accounting this operation will be treated differently
  • products need to be checked for damage or missing items
  • instead of paying your supplier, you will either credit the customer

3. Returning payments to the customers

Once the products have been checked and returned to the inventory, you will need to issue a refund to the customer and inform said customer of these changes.

And … that’s it.

It may seem complicated right now but keep in mind that thousands of online store owners are doing all these things. Now that you’ve got the basics, you will be able to deal with most of the operation challenges you will face. If there is anything else you need to know – just ask in the comments sections bellow.

The live shopping assistant is replacing the store associate

2020 saw the emergence of a new breed of commerce – the live shopping experience. In this type of experience customers would interact with a live shopping influencer, watch products in real time and when ready, purchase the products directly in stream. At the center of it sits a very important person: the live shopping assistant or influencer.

We’ll see an increasing number of people switching to this kind of job in 2021.

The live shopping assistant as a new job

As the marketing industry would point out the influencers already do this on the likes of Instagram and Snapchat. I see a new breed of “influencer”. The one who knows a product category very well, is well trained (practice makes perfect) in speaking with customers and … needs a more fulfilling job. A store associate in the age of live: the live shopping assistant.

Can live shopping create jobs for the laid-off retail workers?

In 2020 2 million retail workers lost their jobs to the changes brought in by the pandemic. Many of them had to quickly find alternatives when their stores were closed.

Now live shopping will hopefully bring back some hope and more fulfilling, better paid jobs and gigs. Unlike the traditional store associate job, the live shopping assistant/influencer has the potential to become a real superstar.

In more established live shopping markets, such as China, live shopping streamers such as Viya are gathering millions of customers in their live shows and selling brands such as Tesla, Procter and Gamble. Fun fact – she even sold a package sent to outer space for $6 million.

Listen to “Is the live shopping assistant the future of retail jobs?” below:

Why the store associate as we knew it is not a viable career path anymore?

For a very long time the store associate has been at the heart of brick and mortar stores. Store associates would greet customers, respond to queries, help find products and generally help customers with their purchases.

However, the emergence of digital tools and especially smartphones has rendered store associates almost obsolete. But that may change with live stream shopping and they may become the leading actors in the age of live shopping.

In a recent study by MillwardBrown that focused on customers purchasing athletic footwear we can see just how useful a store associate is these days.

Of those that chose to shop in store, only 12% listed the sales person as one of the reason to purchase offline. Most (88%) chose to try on the product before purchasing.

It’s not just sports shoes. A study by Deloitte Digital shows that customers would rather receive help from an interactive kiosk or their own smartphone rather than a store associate.

As you can see above the willingness to use a smartphone rather than discuss with a sales associate is almost double. Even an impersonal unmanned device such as an interactive kiosk would fare better than a store associate.

How to find the best dropshipping suppliers in 2021?

Dropshipping suppliers are those businesses or individuals that are willing to send your customers the products they purchased and paid to you. For each product sold and shipped they will bill you.

One thing to keep in mind – these suppliers need to have a cost that makes your business operate at a profit. Dropshipping is hard as many people are doing it today so you need to understand how it works so you can find your edge.

How does dropshipping work?

So how do you find the best dropshipping suppliers? Well say you’ve started your ecommerce business and you will be selling plain t-shirts. You know you can buy those t-shirts for $20 at the closest store. If you do buy t-shirts in that store, you will be buying them at end consumer value. You are the end consumer. Because you cannot price them at a higher level you are basically stuck with them – hence the “end” in end consumer.

What you need to do is go find yourself some dropshipping suppliers that are willing to sell you those t-shirts for less than $20. Why would they do that, you say?

Some companies just work this way. They manufacture the products or sell them in bulk and let other companies sell directly to the end consumer. They then send the products to the customer (like what Dropshipping Supplier A does below)

Using dropshipping suppliers to fulfil orders

( This example combines dropshipping suppliers with your own operations )

How do I negotiate with dropshipping suppliers?

When dealing with dropshipping suppliers in 2021 you usually work together towards a commitment before you start doing business together. This commitment can come in many forms but usually it’s one of the following:

  1. commit to a target and pricing: maybe you are not willing to buy 50 plain t-shirts from your dropshipping suppliers, because you don’t know what your potential customers are willing to buy. You are, however, confident they are willing to buy something. So you commit to a monthly, quarterly or yearly sales agreement. The dropship supplier will then give you a startup discount for purchased products or some good terms, like white-labeling the shipping packages . This discount can increase as you sell more and more merchandise. You can list the products on your online store, stock as little inventory as possible and ship and restock when orders arrive.
  2. buy products in bulk: say you are willing to buy 50 of those plain t-shirts. You can negotiate your purchase price down to $15. Willing to buy another 50? Maybe the price can go even lower, to $10 and so on. The thing you have to remember here is that although bulk buying can be a potentially great deal in terms of price discounts, you also have to sell those products. If you get stuck with $500 worth of t-shirts that you are not able to sell, you have just wasted your money. It doesn’t matter how much you saved purchasing said products. What matters is making a profit and making your customers happy.

Once you’ve made a deal with one or more suppliers you will be selling your products right on your store. When the orders start pouring in (or maybe just trickle in the beginning) you have to make sure customers receive the products they’ve paid for. This part is called “fulfillment” as in fulfilling your promise to send the product to the customer in exchange for the payment you have received.

What is fulfilment in dropshipping ecommerce?

Fulfillment means any task done inside or outside the company that assures the right products are shipped to the customer. Usually this means:

  1. order management: checking order information (customer info, address, number of products etc) and forwarding order details to the right fulfilment center to be completed. If you are a startup this may mean you will be checking the customer details, maybe confirming the order and then planning on where to get the products from.
  2. pick and pack: this is the usual term for picking products from the warehouse shelf and packing them to make sure they are ready for shipment. With dropshipping suppliers, they are the ones doing this.
  3. shipping the products: once products are picked, packed and ready to go, they have to actually leave your supplier (if you’re doing dropshipping) or your warehouse. This happens through company specialized in shipping (such as FedEx or UPS) to do so.

How to work with dropshipping suppliers to send ecommerce orders?

Fulfillment can be done either within your company, by the dropshipping supplier or as a mix between the two. Let’s have a look at these scenarios:

  1. fulfilment is externalised as suppliers “dropship” orders:  this means you can just showcase products on your store and orders are shipped by your dropshipping supplier. Rather than stock on products, you can just forward orders to your product supplier and that company will take care of the shipment. The individual product is then shipped to the end consumer and you are invoiced for said product. You profit from the difference between the retail price (the price you posted on your website) and the price you’re paying to the supplier.
  2. fulfil orders within the company: this is the way most medium to large companies fulfil their orders. They build inventory for most of the products they’re selling (especially popular items), stock them in warehouses and when orders arrive, employees in the warehouses fulfill these orders. This process implies a rather large inventory and it can be an ineffective way to handle orders for startups. That’s why most ecommerce startups require another form of collaboration with suppliers:

Usually, most online retailers (such as yourself) choose a combination between the two and maybe some other processes.

Using dropshipping suppliers to fulfil orders

( This example combines dropshipping suppliers with your own operations )

For example, let’s say you partnered with two suppliers (see figure above). Supplier A will provide you with plain t-shirts. Supplier B brings in sneakers. After you start your store you receive two orders. Customer X is asking for 2 plain t-shirts. Customer Y is asking for a plain t-shirt and a pair of sneakers.

This is what happens when you are NOT using a dropshipping supplier:

How to work with suppliers

You will have to treat these orders differently. Order number one, the one where customer X paid for 2 plain t-shirts is forwarded to Supplier A and he will dropship these items and then invoice you for the products.

Order number two is a bit more complicated. You will have to ask supplier A to send you one plain t-shirt (if you don’t already have it on your inventory) and Supplier B will send you a pair of sneakers. You will be invoiced on those products and once you have them in your warehouse you can pack and ship them to the customer.

You can also choose to work with external fulfillment services, such as ShipBob or Fulfillment by Amazon. These services relieve you of the burden of picking, packing and shipping your orders. For a cost.

By building and interlinking separate operations such as those mentioned above, you are actually building what is called a supply chain. The supply chain means any interlinked process that enables you to move products from the manufacturers or wholesalers to the consumer.

The supply chain is not a static structure. It can and it will change as your online store evolves. As you partner with new suppliers, your ability to distribute products to consumers will increase and so will your revenue. But speaking of adding suppliers to the supply chain …

How do I find Dropshipping Suppliers for my Store?

Yeah, how DO you find dropshipping suppliers for the online store? Now that you’ve got a sense of why you need suppliers, how to negotiate and deal with them, let’s have a look at how to actually find them. When you’re looking for merchandise suppliers you’ll see that you have two big options when choosing, each with its pros and cons. These two options are domestic suppliers and overseas suppliers.

Assuming you are in the US, using domestic suppliers will be a very viable option but you should also consider the second. Overseas suppliers can be a great addition to your ecommerce business. They can be used when in need of additional product options or lower prices. Let’s have a look at the pros and cons of using these two types of suppliers.

Why should I choose US-based ecommerce and dropshipping suppliers?

Pros:

  • (usually) higher manufacturing standards
  • improved shipping time
  • intellectual property protection (might be really important if you design your own products)
  • no cultural or communication barriers
  • no import taxes
  • safer business relationship
  • easier to check references for reputable manufacturers or wholesalers
  • lower minimum level ordered quantities

Cons:

  • higher prices
  • less products to choose from (not few, just less)

US based ecommerce and dropshipping retailers you can work with in 2021:

Here are some of the US based ecommerce and dropshipping suppliers you can work with:

Suppliers marketplaces operating in the US

( Directories providing links to domestic US suppliers )

Overseas ecommerce and dropshipping retailers you can work with in 2021:

The most important thing you need to remember when dealing with overseas dropshipping suppliers in 2021 is that you have to be diligent in working with them. If you are inexperienced, you should ask for professional advice on how to get the best deals and protect yourself from fraud. Also – if you do find yourself in need of doing business with overseas ecommerce and dropshipping suppliers, choose to contact those that provide a local sales office or agent or order using established marketplaces that provide escrow payment options.

Pros:

  • (usually) lower prices
  • ability to deliver unique items to your customers through dropshipping
  • a wide array of ecommerce and dropshipping suppliers you can choose from
  • established online marketplaces provide an one-stop shop for retailers
  • innovative products

Cons:

  • you will have to deal with customs, local taxes and special conditions when importing
  • problems with supply chains being disrupted by the coronavirus outbreak which lead to longer shipping times
  • cultural and communication problems
  • harder to check for supplier references

Overseas ecommerce and dropshipping retailers you can work with in 2021:

Here are some of the US based ecommerce and dropshipping suppliers you can work with:

Ecommerce supplier marketplaces that operate overseas.

( The most reliable services that connect you to B2B dropshipping suppliers overseas in 2021)

Although the services mentioned above are a great way to find the right suppliers, you can also do your own digging and search for independent manufacturers or wholesalers.

How do I find independent dropshipping suppliers in 2021 ?

There is no standard way of doing this but some tips may help you get closer to your ideal suppliers:

  1. Contact the manufacturer directly: saw some product you’d like to have? Probably your customers would also. Have a look at the label and contact the manufacturer. They must at least have a name and using that, you can use Google to find out more about them.
  2. Speaking of Google: try going deeper in your search results. B2B traders and manufacturers are not really great at marketing (that is the retailer’s job) so their websites scream “so 90’s” and they are not really optimised for search engines. That’s why you should click further than you’re usually used to in order to find a hidden gem.
  3. Trade fairs: yeah, people still do that, while a lot of them are online this year, given the pandemic. You can find a starting list here.

So hopefully you now know a thing or two about finding dropshipping suppliers and in 2021 you’re going to get the best deal possible. Great! What’s next? Oh, yeah, prices:

How do I set the Price for ecommerce Products when working with dropshipping suppliers in 2021?

When it comes to pricing, you have two rather simple concepts to always keep in mind:

  1. Cost of goods sold (COGS): this is the cost you have paid for the goods plus any costs associated to getting the goods in your inventory and ready for sale. This includes, but is not limited to: shipping, handling or customs taxes.
  2. Operating expenses: this is the total cost associated with running your business. This includes rent, utilities, wages, marketing costs and others.

Basically, the prices of sold products have to cover the sum of these expenses. The bottom line is always the same: Profit = Revenue – Costs.

Your company will report a gross revenue by selling products. Profits come when you are selling enough merchandise, at the right price, to cover your costs.

Of course, it’s a bit more complicated than this but you get the picture. You have to price your sold products where you can be profitable. However, prices need to stay competitive to the market. This means that there’s a balance you have to keep. Prices should be big enough to keep you in business but small enough to be competitive with other online retailers.

What are the best pricing strategies when working with dropshipping suppliers?

1. Markup on cost means you add a certain percentage to he cost associated with the product. It is usually a standard percentage somewhere between 15% and 40%, enough to keep you profitable and your prices competitive.

The formula works like this:

Item cost + (Item cost x Markup Percentage) = Price

Say for example we are selling plain t-shirts, with a cost of $20. We’ve set the markup at 30%. The the price would be:

$20 (Item cost) + ($20 x 30%) = $26

2. Manufacturer suggested retail price (MSRP) is another way small businesses can set their prices in such a way that they are profitable but not too expensive. MSRP is the price the manufacturer recommends to resellers so they don’t start price wars that can benefit no one. This type of price setting leaves out a lot of options for the online store owner and should not be a general rule in the long run.

Above are just two of the simpler ways prices can be set to attract the consumers. We will get into a lot more details in the “Marketing your store” part of this guide so stay tuned.

For now, this concludes part two of the “How to Start an Online Store” Complete Guide. Part three will focus on building your fulfillment operation (picking, packing, shipping and returns) and how to build a brand identity and the actual store front. See you soon!

How do I register my ecommerce business in 2021?

You are now ready to start your online store but you’re asking yourself – “How do I register my ecommerce business”? This short guide will show you how to register your business and how to build the operations basics . At the end of this article you’ll find a link to an article that shows how you can find ecommerce dropshipping partners, suppliers and how you can integrate with those suppliers.

How do I register my online store as a business in the US?

Note: This part of the guide is intended to work as a guide mainly for readers that want to register an ecommerce business in the US. That’s why some of the acronyms and type of companies you’ll find in here are going to be aimed at those of you registering your ecommerce business in the US.

That being set, most of the information you’ll be reading here is in essence applicable in other countries or regions. Even though business structures may have different names and have slightly different usage in different parts of the world, their purpose remains pretty much the same, as globalization tends to level the playing field.

First off: why do I want to register my ecommerce store as a business?

Sure, planning and building your business is a great way to spend your time and effort. But you also need to work as a legal entity.

There are basically two ways you can register your business:

  • as an un-incorporated business (solely owned or owned by a partnership) or …
  • an incorporated business.

How do I register my ecommerce business as unincorporated?

You can start as a Sole Proprietorship (the most popular type of business for ecommerce entrepreneurs) and move to other forms of businesses as your chances of success increase.

If you are the sole owner of an online business, the Sole Proprietorship (also known as DBA – “Doing Business As“) is the easiest form to register and manage your business. So if you ask yourself – how do i register my ecommerce business  if I’ll only work myself on it – this is a good choice. It actually works as an alias for the individual doing the business.

Do note that the owner is personally liable for the company. That means that all debt is imputable to the owner. However, as Sole Proprietorships are usually low-liability businesses, a lot of startups work under this type of legal entity.

The second big option in starting an un-incorporated business is the General Partnership. In Partnerships, more individuals get together to start some kind of business. This is a great answer if you’re asking yourself – how do i register my ecommerce business with someone else. Just like the Sole Proprietorship, Partnerships are easy to set up and manage and because partners share equal control on the company, the liability and profits are also shared.

how do i register my ecommerce business - unincorporated

How do I register my ecommerce business as a corporation?

Like I’ve mentioned above, the second category of companies falls under the “corporate” model. When you’re incorporating your company you don’t become a corporate behomoth and you don’t automatically get billions in revenue, as one might expect. It just means you’re operating under a different set of rules. Plus you get to do a bit more paperwork.

Why should I incorporate my ecommerce business?

Let’s say you might think – how do i register my ecommerce business as a corporation and why?

The most important reasons to incorporate your company as an entrepreneur are liability protection and documenting deals with partners.

By far liability protection is the most important reason to incorporate your company. Under a corporate structure, your business is treated as a separate legal entity. If things go awry in your registered ecommerce business (and sometimes they do) the company is liable for paying all debtors, not you. That, of course, if you have been operating your business in a legal manner.

Basically, registering as a corporation will keep your assets (house, car, golf clubs) protected from any issue that might arise operating the business.

The second important reason to incorporate your company is documenting a business deal with partners. Whether you are raising money from investors or selling shares in your company, you need a corporate structure to do this.

Cons of incorporating my ecommerce business

You may hear other reasons why you should incorporate your company, things such as tax benefits, business credit and transferable ownership. But don’t rush to register your corporation just yet. Most entrepreneurs are doing just great running un-incorporated business in the beginning. Tax benefits are usually tangible when your company is already successful enough. So if you are just a startup, you can probably forget about tax benefits.

Building business credit means companies are evaluated independently from their owners but that doesn’t necessarily have to be a good thing. If you are a startup with no cash in the bank, no sales and no clear plan, that fresh business credit won’t be of help much.

Finally, saying an incorporated ecommerce company is a lot easier to transfer to other individuals or companies leaves out a very important aspect. Before transferring your company (hopefully selling it for lots of cash) you need to build this ecommerce company. So again – this won’t help you that much either.

But the biggest disadvantage small ecommerce businesses that incorporate have to face is paperwork. Lots of paperwork. You will have to fill in state reports, organize annual meeting and deal with involved bureaucracy.

Then there’s the fees. You’ll be paying fees for legal council, tax filling and others. Professional help is not cheap. Plus you get the minimum franchise taxes and others. These amount to thousands of dollars in fees, which is a bit much for small business owners.

So incorporating a company is no easy feat. Or better said – it’s not easy to manage an incorporated company if you are a small ecommerce business owner working alone or with a small team.

But if you do find yourself in need of incorporating the business, here are the most important type of corporations you can choose:

LLC – Limited Liability Company

You have probably heard one thing or two about LLC (Limited Liability Company). It’s the most popular form of business among small and medium businesses, including online store owners. It combines what is called pass-through taxation for its members with the limited liability corporations provide.

Although not technically a corporation, it is a great choice for those that want to join a limited liability partnership. It basically works as partnership or sole proprietorship in terms of taxation. This means the owners (called members) pay taxes on the LLC’s profit directly. The company doesn’t fill taxes separately, which makes things a lot easier to manage.

This types of businesses are actually pretty young as a commercial concept. The LLC structure was first formed in 1977 and now it’s accepted in all US states and a throughout most of the world.

At the heart of LLC stands the “Operating Agreement“, a document signed by all members, setting the rules under which the company will be managed. It covers things such as profits sharing, company management, adding or removing members and more.

The LLC is the most popular choice in the world right now for forming partnership, usually chosen by groups of up to 5 members.

Although starting and managing a LLC is less complicated than a corporation, it is still more complicated than starting and managing a sole proprietorship or a partnership. You will probably have to hire a legal counselor to help you with the set up and operating the company.

The Regular Corporation (C-Corporation)

The Regular Corporation is … well … the corporation. A company organized as a corporation is a separate legal entity from its owners (called shareholders). The company can thus protect owners from liability issues or company debt.

The corporation provides advantages such as:

  • easier capital inflow (through stock sales),
  • ownership can easily be transferred through stock transfer
  • being a separate entity it can and will act independently from its owners. This means it can sue and get sued, it can own property and it will be taxed independently from its owners
  • tax advantages can be substantial (a lot more business expenses can be deducted)

Once the corporation is set up, it will pay taxes separately from its owners. This can lead to double taxation as companies are taxed on profits and once those profits are distributed, shareholders will also have to pay income taxes. The double taxation problem is solved by incorporating as a S Corporation (see below).

Corporations are not necessarily ran by its owners. The shareholders own company stock. This gives them the ability to elect Directors, organized under a board of directors. Once this board of directors is set up, they appoint Officers (CEO – Chief Executive Office, CFO – Chief Financial Officer etc.), which are the people that actually run the company on a daily baisis. Of course, if you own 100% of stock, you can appoint yourself as the one and only director, be the officer and run the company.

On the other hand, if your company will be owned by more individuals, the Board of Directors and the Officers will run the company. Both the Board of Directors and The Officers have to abide to an internal company document called “Corporate Bylaws“. This document sets the rules on operating the company and can be extended or modified as the company evolves.

The Corporation is a lot more formal than the LLC and of course, the Partnership or the Sole Proprietorship. The records have to be carefully maintained, there is a mandatory yearly Directors and Shareholders meeting and every decision has to be documented and reported.

Although the corporation is harder to form and maintain, it is the oldest and most reputable form of business organization.

Registering as a S-Corporation

When registering as a corporation, you should take into account the S-Corporation. By filling in the appropriate tax election form to the Internal Revenue Service, the company will be taxed as a Sole Proprietorship or a Partnership.

The main advantage for you and your partners is that income and profit is passed through to the shareholders, thus solving the double taxation problem mentioned above.

Even though you’ve solved the double taxation issue – you’re still stuck with the paperwork and specific regulation, which can be a burden for online retail startups.

To wrap things up, here is a rundown of the main types of incorporated business structure you can choose, each with its own pros and cons:

How do I register ecommerce business as a corporation

Once you have decided on whether you’re registering your business as a sole proprietorship or incorporating it you can check the specific regulations for your state here and start the registration process.

Product distribution in 2021 – 3 things that are changing

Why is product distribution so important? Because it’s a big chunk of the cost of shipping a physical product. How so? Well – a very important part of retail is pricing. The most important part of pricing is the cost. To get a complete view of how much a product would cost, retailers think in terms of net landed cost.

Listen to this article below:

What is net landed cost?

The net landed cost is the sum of costs associated with manufacturing and distribution. When thinking in terms of net landed cost you have a better chance of understanding your total cost.

Net landed cost = Costs(Product manufacturing + Product distribution)

A common fallacy is thinking of costs just in terms of manufacturing, either from a purchase only point of view (how much you pay your supplier for a given product) or a more inclusive manufacturing point of view. The manufacturing point of view assumes that even if you are not manufacturing the product yourself, you still have the liberty to choose another supplier or change merchandising altogether.

The most important advancements in retail, in terms of supply and cost effectiveness, have focused largely on manufacturing costs in the past decades. This has lead to increasingly efficient production lines, a more competitive manufacturing market, shifting manufacturing overseas and many others.

Traditional product distribution - large stores where buyers can buy the product
A key to Walmart’s success is selecting suppliers with an optimum manufacturing cost / quality

This manufacturing improvement trend has had beneficial results on the customers life through more accessible, more diversified merchandise. It also meant companies managed to sell more, to more people. Companies such as Walmart have grown to their existing magnitude thanks to a wide network of suppliers, providing them with products manufactured at the best possible cost.

Product distribution lagged behind for a long time. Explosion of ecommerce is changing this.

Lots of retailers improved their ties to manufacturing but there was one part that has been left mostly untouched. That was the product distribution. Distribution costs have decreased but not dropped.

To get a better view of why, get a glimpse of what are the factors that weigh in the distribution costs basket. Here you have costs associated with getting a product from the manufacturer to the customer. This includes freight, stocking, customs, costs associated with store development and maintenance, marketing costs, customer support and others. This is a very large area and a lot of work to be done. And  it happens on a very wide area (globally) and in many un-optimized industries. Freight is still in the 20th century in many parts of the world.

Product distribution and delivery is changed by technology, data and omnichannel retailing

Today, distribution is changing, and it’s changing fast. As a result, the associated costs will follow.

At the forefront of this change we have several factors, one of which is omnichannel retail. Omnichannel means working with product delivery across all channels. The other two key game changers are technology data. This is how they weigh in and these are the areas that will be soon transformed:

Improving merchandise distribution by improving logistics

Logistics have not been fully transformed by technology. For example, freight has been virtually unchanged in the past decades. Think about it this way: cargo ships are still loaded after excel files are checked, faxes are sent and handshakes seal deals. For a large part, the industry is archaic and it’s but a question of time until it will be transformed. There is a lot of room for disruption and companies such as Freightos have challenged the status-quo and promise 10-17x ROI. In weeks.

And it’s not just freight. Fleets of small vans contractors have taken up the Uber model and are now roaming the streets of Hong Kong to deliver goods the likes of DHL and UPS can’t.

Product distribution company GoGoVan
GoGoVan is a Smart Logistics company, connecting individual contractors to larger companies in need of their services

Working with shipping hubs + local stores decreases product distribution costs

Working with a combination of warehouses and local distribution centers (such as local stores) makes possible and desirable a few things that previous retail models couldn’t. First of all it allows for a better inventory transparency and improved shipping effectiveness.

In the past customers would otherwise expect orders placed online to be shipped at home with larger costs and delayed shipping. Now they can just pick up orders in store. The 2020 Covid-19 outbreak accelerated this trend.

Even more: they can have the closest store ship their purchases shipped at home, instead of mixing the order in a large, central warehouse.

Omnichannel retail means selling online, in-store and distributing products from multiple hubs in a way that makes it cheaper, faster and more reliable. It also makes possible having just a limited number of products in store and keep the most either in the warehouse to be shipped when convenient or with a supplier. By reducing store footprint companies can reduce fixed costs associated with marketing and distribution of products, thus decreasing costs.

Better product distribution through better data improves marketing and advertising

John Wanamaker was a retail innovator. He is credited with the fixed price and money back guarantee marketing concepts. Wanamaker was one of the pioneers of the department store and loved advertising. He is also credited with the famous saying :

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

Good thing that was more than a century ago.

“Show me your budget.”

Marketing is now changing rapidly and unfortunately for some advertising agencies, long gone are the days when the Mad Men of advertising charged millions for concepts that could or could not work.

With the rise of digital commerce and omnichannel retail and the smartphone to bridge the gaps, data is all around. Marketing is now data driven and the half of budget Wanamaker complained about can now be easily tracked.

Advertising is data driven and marketing costs are constantly improving.

By improving distribution and decreasing distribution costs we have two very important things happening. The first is that companies engaged in improving this area will be more profitable and more inclined to continue on this path.

The second thing is that lower distribution costs mean better prices for the consumers, therefore an improved appetite for consumption. Improved profitability and decreased prices – these are two very strong forces that will shape tomorrow’s retail. And it’s happening today.

How to start an Online Store Without Inventory: The 2021 Guide

Are you thinking about how to start an online store without inventory? Do you want to understand how such a business works and how to be on top of your game? I wrote this guide to help new ecommerce entrepreneurs get started with an online store without inventory in 2021.

My name is Mike Dragan and for the past 17 years I’ve worked with some of the largest consumer brands in the world to build and improve on their ecommerce strategy. If you ever get stuck or have some questions, do shoot me line and I’ll try to answer.

In this guide you’ll get an understanding of what makes an ecommerce business work. You’ll notice that, just like a car, the things that make an online store are usually under the hood. How you present them is obviously very important and I’ll guide you through the best apps you can use to showcase and sell your products.

As you’re starting your journey into entrepreneurship and starting a new online store the first thing you might ask yourself is – how do I start an online store without an inventory? Given the fact that you are probably low on capital this is a very important question and I’ll help you understand how to navigate this issue through finding suppliers, developing a “supply chain” and making sure you are able to fulfill your orders in a timely manner.

Here are the 3 chapters I’ll guide you through. At the end of this guide you’ll be able to start selling like a pro:

How to start an online store without inventory
How to start an online store without inventory in 2021

10 steps to start an online store without inventory:

Basically there are ten main areas you need to focus on when starting an online store without inventory. These are:

  1. Finding your niche and understanding your market. Building a go-to-market plan;
  2. Finding the right business model (how will you make money?);
  3. Registering your business;
  4. Finding suppliers, developing a supply chain, pricing the products;
  5. Developing a fulfilment operation (understanding how you or your staff will pick, pack, ship and handle product returns) and preparing for customer care;
  6. Building a brand identity and building your web store;
  7. Posting products and adding relevant content;
  8. Adding sales channels to your business;
  9. Marketing your store;
  10. Testing and fine tuning;

That’s a whole lot of bullet points but don’t worry. An online store is still a business and businesses are built by entrepreneurs just like you.

But keep in mind…

Starting your online store without inventory is hard work but you can do it.

This guide will work as a framework for you have to do to maximize your chances for success. Depending on where you are and the type of products you will be selling you may need to adapt as you go but you can rely on this framework to guide you through building your store.

So let’s dive in:

1. How to find a niche market for my online store?

“I’ll sell everything” is not going to work. You will need to find the right market you are going to sell products in. Especially if you have no inventory, your online store needs to be optimized for a specific type of product and consumer. This is called “product-market fit”. Basically making sure that what you sell has a potential group of consumers that will buy it from you.

There are three very important things to take into account when starting your online store and discovering your market:

  1. what value do you provide for other people?
  2. what type of value do you provide that other companies don’t?
  3. are there enough people interested in the products you are going to sell?

The first thing you have to understand is that your business has to provide value for other people.  Just as people do, businesses strive for purpose. Without providing value in a clear and straightforward way, you cannot expect your business to be successful.

Find out what people need or want. A combination of both is great but if you have to choose, go for need – it is way better in the long run. Find out how you can supply these products or services. This is the value.

The second thing you have to take into account is that other online stores may provide the same kind of product. Do your research. Google the type of products you want to sell. Check Google Trends to see how the terms for your products have evolved throughout the years. Compare the number of product searches with the number of companies providing the same type of value you’re planning on offering.

There is a dynamic between demand and supply that you cannot ignore. You are looking for a market that is booming but there are not many competitors. And that’s were the third point comes in: your online store has to provide value for lots of people.

You may like hoodies for cats very much. Hence the question – how to start an online store without inventory for my passion. Is hoodies for cats such a good idea? You are addressing people in your country (don’t think you’re going international just yet), who own cats, who think that dressing up cats is a good idea and who like hoodies. A pretty small market, don’t you think?

The lower the market size, the lower your chances for success.

To start an online store without inventory you need a large market you can make a dent in. The higher the market size, the higher are your chances at building a great business.

See the graph below on where you’d want to place your business in:

how to choose the market for your online store
Try to build an online store in the lower right section – few competitors, many potential customers means larger chances to success

So there are two great combinations that you can choose. Both need as many customers as possible. You should strive for a market where there are plenty of people ready to buy your product.

The best place to start an online store without inventory  is the one in the lower right corner – few competitors, many potential customers. That’s where few companies will compete with you and there are plenty of customers willing to buy your products.

To position your online shop there, you need to identify a need before the competition and quickly get as much market share as possible.

The other option to start an online store without inventory is the market where there are a lot of competitors and a lot customers. This means this is an established market and you’re more likely to succeed if you prove yourself better than the competition.

If you make small changes in the way you sell products you will be able to compete with established leaders. Later on in this guide you’ll see how to create innovative business models for your ecommerce store.

How to create a plan for my online store?

Once you have discovered the kind of product(s) you will be selling it’s time to start planning on how you’ll start your online store with no inventory. You will notice that I’m using the term “plan” – not business plan. That is because this is your plan. It has to come as a natural idea and set of targets you want to accomplish in the future with the business you’re building.

There are nine important questions you need to answer when planning your future online store. Try to be as clear as possible when answering these questions. It helps a lot when thinking about how to start an online store without inventory.

9 things to think about when building an online store without inventory:

  1. What products will I be selling on my online store?

  2. Who are my competitors?

  3. Who is my customer?

  4. How do I convince the customer to buy my products?

  5. I don’t want to hold inventory. Who will be supplying my products and how?

  6. How much will my products cost and what profit am I making?

  7. What are the costs I expect to have when running my online store?

  8. How am I going to cover the costs?

  9. How much revenue am I expecting in the first 3-5 years?

Answering these questions will get you thinking and preparing for the future. You will notice that these are actually the questions you need to figure out the answers to when building a business plan as well.

However, take your time to think through these questions. Find information to support your expectations. Question your own assumptions because the market will surely do so. If you’ve taken into account all these questions you basically know how to start an online store without inventory. Planning is an important part of building your online store.

2. How to find the right business model and make money with my online store?

You’re probably thinking the ecommerce business model is pretty straight forward. You post some goods online, someone orders them, you ship them and collect the big bucks.

Well, that is why you need to know that even if the logistics and operations may look the same in all ecommerce business, the differences can have a huge impact on how you’re building yours.

I’ll walk you through the 5 ways on ways you can make money with an online store without holding an inventory. Afterwards we’ll look through different implementations of the B2C model (business to consumer), the one you’re probably aiming for.

How to start an online store without inventory – the 5 business models I should consider

B2C online store

B2C Ecommerce is the most popular form of commerce online. The B2C stands for Business to Consumer and that’s exactly what it means.

Online stores (aka “The Business”) will deliver goods (either from their own inventory or from a supplier), post them online and sell directly to the customer (“The Consumer“). The Consumer browses an online store and hopefully buys the items posted online. When this happens, the online store team is notified. They wither contact the supplier to receive goods or they will pick the merchandise from the warehouse shelf, pack it and ship it to the consumer.

Most of the online stores you are familiar with are focused on this type of ecommerce business model. Some examples you might be familiar with are Walmart.comTarget.com or HomeDepot.com. The big difference between them and your future store you are asking the question – how to start an online store without inventory. They hold inventory and you will probably not.

But B2C is not just for the big players. Many ecommerce startups employ this type of business model. For example Bonobos.com and WarbyParker.com are doing just great selling directly to the consumer.

Bonobos is a fashion ecommerce retailer for men. The company manufactures and sells its own line of men wear and its main selling point is it makes shopping easier. How it does that? You’ll find out later in this guide.

WarbyParker.com sells stylish eyeglasses and sunglasses directly to the consumer. It is a great example of finding the right type of product at the right time and packaging it with the right type of social activism twist. When you buy a pair of glasses from them, a social mechanism makes sure that part of the money you’ve paid go to those in need of eyewear in the developing world.

But wait, isn’t Amazon a B2C ecommerce site, you might ask? Glad that came up. See, Amazon has started as a B2C online shop but since then it evolved past a single model. Most of its sales are still directed at the end consumer but Amazon also ships items to businesses (B2B ecommerce) through its Amazon Supply outlet. It also brings other sellers (businesses and consumers) in contact with its own customer database. This means Amazon is indeed the largest online retailer in the world, but it’s not just a B2C ecommerce website.

B2B online store

Another business model that works great is the B2B Ecommerce model. In this model Businesses sell merchandise to other Businesses through an online shop.

You might wonder why even mention this model. I mean, couldn’t those listed above just allow businesses to buy from their shops? Of course they could and most do. But here, I’m talking about a different type of companies, different type of products and most of all – different number of items purchased and different pricing.

how to start an online store for businesses
B2B ecommerce model

Say you’re a company manufacturing hoodies for cats. Supposedly your market is not as popular as the smartphone market and your factory can ship 1000 beautiful cat hoodies every year. You could, of course, open an online store and ship these hoodies directly to the consumer. But you’ll find out that it implies development costs, marketing costs, customer service costs and you just want to be in the factory all day, trying to finally manufacture the perfect cat hoodie.

Along come Business A and Business B. These companies are probably retailers and have an established commerce operation, with a huge database of customers and they think they can sell 500 hoodies this year. And they want everything you manufacture.

How to start a B2B online store and decrease marketing costs?

Before these companies came along you’ve done the math and thought: “My cost for each manufactured hoodie is 10$. I’ll sell these hoodies for 20$ and make a nice profit.” But then you went on and started selling on your own and saw that including marketing, shipping and other expenses your cost rose up to 18$ and you’re actually making only 2$. Not that much, is it?

But now both Business A and Business B decide they can offer you 15$ for each hoodie and they are going to buy everything you manufacture. On one hand they are offering you less than your asking price but in the end your earning 5$ instead of 2$ so you decide you’re better off selling directly to Businesses.

This simplified scenario is the basis of the B2B ecommerce business model. It means that businesses (either manufacturers or wholesalers) sell directly to businesses and offer incentives to those that buy in bulk. The usual incentives are lower prices, extended payment conditions, free shipping or custom manufacturing.

Some of the most popular B2B ecommerce sites are Quill.com, AmazonSupply.com and of course AliBaba.com, the largest B2B marketplace, connecting businesses in China to buyers all over the world.

By the way – if you are asking yourself how to start an online store without inventory – the sites above will become your go-to source to find suppliers that will send products to consumers when you receive orders. This is called a dropshipping model for ecommerce.

B2B2C online store

B2B2C ecommerce
Business to business to consumer ecommerce model

This is a rather new type of ecommerce business model. It stands for Business To Business To Consumer.

How does B2B2C ecommerce work?

Say you have your own stocks and you’re selling your cat hoodies through your very own ecommerce website and it works pretty well. But you’re thinking – why not sell more?

So you think of new sales channels, the type of opportunities where your cat hoodies can sell even better if exposed to a larger number of customers. Kinda like Amazon or eBay.

Larger retailers, such as Amazon, offer you the possibility of selling on their own website. You supply the goods and post them on the Amazon Marketplace, for example, and next thing you know -bam! – your cat hoodies can be purchased by Amazon’s customers. Same thing happens with an Etsy shop. Depending on your decision you can either fulfill orders on your own (receive orders from Amazon, pick, pack and ship yourself) or just let them handle the logistics, through their Fulfillment by Amazon program.

C2C online store

So we’ve covered businesses selling to customers and other businesses. Shouldn’t consumers sell to other consumers too? But they do and this area is actually booming.

Consumers usually meet other consumers through online marketplaces. By far, the most popular is eBay.com, the place where anyone can sell and buy anything. Even though eBay hosts businesses also, we will focus on the individuals selling their items through these type of systems.

C2C ecommerce model
Consumer to Consumer ecommerce model

The online marketplaces enabling C2C ecommerce help sellers post their goods online and buyers to find them.

There are many mechanisms in place to handle these transactions, things such as product showcasing, selling, payment and feedback. But if we were to look at what makes C2C marketplaces work this has to be the network effect and peer review. The network effect means that the more people engage in trading goods in a marketplace, the more people will come and more successful the marketplace will be. This effect also ensures seller and buyer lock-in: the more people are buying or selling, the harder it is for someone to leave the marketplace. The reason – where else will this person find so many customers or merchants?

The second big feature that defines C2C marketplaces is peer review. When you’re buying or selling through this type of systems, you really don’t know who’s on the other end. And because relying on luck and having faith in the good character of people is not the most efficient solution, marketplaces introduced peer review.

When someone buys from a merchant and they get what they asked for, they offer a positive review. When they don’t, and things take a turn for the worse, they slap the merchant with a negative review so others know the merchant is not to be trusted.

The same goes for the merchant. If the customer doesn’t pay up or somehow tricks the merchant – there’s always a bad review at hand to get things leveled.

Once these reviews start pilling up, they start working as a certificate of good standing (or bad standing). If you are a honest merchant or customer, you won’t leave the marketplace that stores this certificate. That’s because reviews are a valuable asset that help members trade in better conditions.

Why mention all these? Because building a C2C marketplace is really, really hard and expensive. For example eBay lost $100 million trying to enter the Chinese market before giving up to AliBaba. It’s that kind of expensive so I would rather advise against building a general C2C marketplace if you’re a startup.

You could, however find a niche where individuals are willing to trade with one another and cater to that specific niche.

For example: Etsy.com is famous for building the biggest handcrafted C2C ecommerce community. Uber and Lyft bring individuals in need of transportation in contact with those able to provide these type of services. In fact, Andreessen Horowitz, one of the leading Venture Capital firms lists Online Marketplaces as one of the most promissing directions for startups.

C2B online store

Yes, C2B (Consumer to Business) eCommerce is a thing. It might look a little off but there are great ways to start an C2B ecommerce business. There are also some great established services that help connect individuals to the businesses in need of their products or service.

C2B ecommerce model
Consumer to business ecommerce model

An example of Consumer to Business ecommerce model

Reverse auctions are a great way for individuals to post how much are they willing to pay for a certain product or service. A C2B Ecommerce site can collect these auctions and forward them to companies willing to fulfill them. For example – the basic model behind the likes of Groupon.com or LivingSocial.com is a combination between B2C and C2B. Companies post their offers but the consumers have to vote by purchasing these offers. If the minimal number of offers is not met, the offers are not activated.

Another great example of the C2B ecommerce model is Elance.com. The website is one of the first businesses that connected freelancers to potential contractors (usually businesses). Freelancers would go online, post their capabilities and those in need of their services would hire them for a limited time or project based.

Monster.com is another great C2B example. Yes, people posting their resumes and getting recruited is a type of commerce where The Individual is pitching The Business to buy his services (aka hiring).

If you’re an one-woman or man startup, this can be a great way to setup something quickly. In fact, most freelance developers or graphic designers practice this type of commerce. Either through large marketplaces such as Elance.com or just by posting their resume and portfolio online and getting orders through a simple contact page.

How to start an online store without inventory and sell to the government

The models above are the most popular ways to start an online store without inventory but they are not all. There is a separate class of ecommerce business models that has to do with the government. When the government wants to buy products or services from businesses it will post the tenders on a G2B (Government to Business) portal that handles auctions and offers.

If the businesses want to market their their offers to the government, they will employ a B2G business model. See that? G2B vs B2G – pretty simple stuff.

A final model is G2C – government to citizen. Using this model, government authorities can auction goods directly to the consumer. It also works as a way of connecting citizens directly to the authorities and decrease bureaucracy when issuing documents or collecting taxes.

Six innovative business to consumer ways to start an online store without inventory

Let’s say you’ve studied all these great ways of starting an ecommerce business and you finally decided on one of them. The vast majority of online shop startups are built on top of the B2C business model so the next part of this guide will focus on a few innovative ways of implementing an online shop.

The basics all stay the same. You are still an online shop owner trying to attract the right kind of consumers and provide them with products they will love. But how about some inspiration from the most innovative business models out there?

1. The right fit

Remember Bonobos.com we’ve talked about earlier? Well their whole selling point goes something like this: most men don’t really like shopping. They like to wear clothes that make them look good, without spending too much time choosing. We can make this happen.

That is especially hard when you’re an online store and your customer can’t see, touch or try on the product your selling. But it can be done. To make it happen, Bonobos mixed its great designs with few things to keep the customers happy and relaxed:

  • Ninjas. What? Well, not real ninjas but some pretty great customer service representatives that are willing and happy to walk customers through buying the right piece of clothing.
  • 365 days return. Not the right fit? Maybe the customer is too busy to return the merchandise within the standard 30 days. Why not extend that to  365 days?
  • Free shipping and free returns. This means the customer has no reason to drive up to a brick and mortar store to try on the products. Shipping and returns are free so basically everyone can try on their new chinos at home. If they don’t like them, they send them back.
  • Try on everything. Bonobos has a special kind of store – the one that lets customers schedule a “try on everything and if you are happy with what you find, you get your stuff shipped home” session. Also – preferences are saved so next time the customers wants to click-shop, he knows exactly what’s the right size.

The key take away is if you’re building an online store, it has to solve a problem. Bonobos solves the “shopping for clothes is boring” men problem and promises the right fit without the headaches of chasing a pair of pants all day.

2. Flash Sales

There’s a whole post on Netonomy dedicated to Flash Sales. Basically, these type of online shops sell discounted merchandise to registered members.

Take for example Ruelala (pic above). Customers have to provide the shop with their email address to register as a member. This means that basically anyone who enters the website is also subscribing to an email newsletter.

In exchange customers get discounted, usually designer or brand name products. If you like to know more about this ecommerce model, please click here.

3. The subscription pack

Most online shops have thousands of products listed. This is a great advantage over brick and mortar stores which have to actually stock on all those products. Online shops can stock on the minimal amount and later on deal with orders through supplier dropshipping but more on that later.

A new trend emerged that deals with showing just the right amount of products customers need in a given period and ship those products in a subscription based model.

Take Manpacks.com for example:

What Manpacks does is list just the minimum amount of products men need in any given month. Customers setup their pack and receive it every month, based on a subscription.

There are many advantage in starting such an online shop:

  • Predictability: because your revenue is subscription based, you can estimate your monthly, quarterly and annual revenue accurately. This way you can plan for the future and balance your company.
  • Economy of scales: having few products on sale and lots of customers means you can negotiate with suppliers better prices for the products you’re selling. This means you can also profit more and sell your products cheaper.
  • Marketing is easier: with few products in your offer you can simplify your marketing and communication and improve your customer acquisition (again – more on this later).

4. Community designed products

Are you familiar with the term crowd sourcing? It basically means asking lots of people to do something for you or your company. In this case, we’re talking about designing products.

What Threadless.com did was build a community around the concept of designing t-shirts. Designers would submit their designs and the community would choose what t-shirts were sold. In exchange, the website shared revenue with said designers.

Of course, going against Threadless now is probably not a great idea but you can always build a business by channeling people’s passion towards a commercial goal.

Key takeaways:

  • Community: build and stand by your community. It is the key to creating a lasting brand.
  • Share and save: hiring designers is a costly thing but if you can take independent designers’ ideas and turn them into products you can save a lot on fixed costs. But you have to be willing to share.

5. Customising for the masses

Mass customizations is an ecommerce segment that’s growing really fast. Customers want to express their creativity and they are ready to pay for this.

This type of online sales are technologically advanced and need three really important things to function:

  • a store that can handle customisation input for the customers
  • a system that transforms this input to a set of instructions to a production line
  • a operational structure that can customize products in an automated manner so costs are kept in check

For example Nike launched Nike by you, a great way to customize their products. After a successful trial period, the program extended to many of the company’s products.

If you’d like to find out more about mass customization, you can get more info at “Is Mass Customization the Future of eCommerce?

6. 3D printing

The final innovation I think you should take into account is 3D printing. Using specially designed machines you can build 3D objects and sell them to customers.

3D printing is a technology that is actually yet to take off but it sounds really promising. For certain products it can mean a reinvention of manufacturing and commerce. Imagine having your customers build the product in your store and having this product instantly printed and shipped. Imagination is the only thing that could limit what can be done with such technology.

Shapeways for example, started in 2007 as a marketplace for 3D Designers willing to design and sell their ideas. In 2012 it has passed the 1 million products sold threshold so there really is a market out there.

Because it is connecting designers to buyers, Shapeways is a C2C marketplace but probably the future will show 3D printing is not restricted to individual designers so B2C online shops might also leverage the trend.

This was the last of the six innovative ecommerce trends you could use to spark the right idea for your future shop. This ends part one of this guide. To wrap things up let’s walk through what you’ve learned here. First – the importance of finding the right niche and how you cult do that. Next, you’ve learned about the necessity of building your Plan when starting an online shop and the questions you need to answer when building said plan.

Last but certainly not least, you’ve discovered the main business models you can use to build your shop and six of the most innovative B2C ecommerce models. Pretty good for a day’s work.

See Part 2 of “How To Start an Online Store“: Registering your business, finding suppliers, integrating suppliers in your business and choosing the right product prices >>

Featured image source.