Eccommerce Startup Question
September 28, 2012 6:51 AM   Subscribe

I have grand ideas for an ecommerce web site and am curious about how to get where I need from an inventory perspective.

If you look at some of the larger online ecommerce companies:
  1. How did these companies really decide which inventory would initially sell (knowing that they would have to spend a lot of money)? (do your best guess and go with it - sounds risky)
  2. When they started up did they just buy a ton of whatever inventory they decided would sell. (Sounds risky)
  3. Do they all (most) just have a giant warehouse full of inventory sitting there waiting to sell? Or do most drop ship or use consignment
  4. Thanks for your feedback!
When answering the question please keep in mind these seem like larger Ecommerce sites i'm referring to. Thanks for all the help!
posted by kmurray24 to Computers & Internet (8 answers total) 6 users marked this as a favorite
The people I know who have set up large e-commerce sites have avoided the costs and other complications of inventory management by using Drop Shipping.
posted by alms at 6:54 AM on September 28, 2012

A lot of them started by selling something online that they were already selling offline.
posted by chesty_a_arthur at 6:56 AM on September 28, 2012 [2 favorites]

Some questions that will help answer your questions. You don't have to have the answers to them, but eventually answering them will help answer the questions you posed:

Will this be retail or wholesale?

What sort of quantities do your vendors expect you to buy?

Will you be producing what you're selling or re-selling ready-made products?

What sort of quantities do you expect to move? Is the average order going to be one piece, a dozen, or a gross? What kind of margins are you looking at? (You don't have to know exactly, but there's a big difference between selling pencils and selling pianos.)
posted by griphus at 6:58 AM on September 28, 2012

Its terribly difficult to answer these questions in generalities.

How much startup capital do you have?
How long does it take to get the product from your wholesaler?
What is the expectation for delivery time?
What kind of credit line does your supplier provide? (Note a lot of initial inventory is frequently bought on credit from the supplier)
Is Drop Shipping available?

A lot of times even for large ecommerce sites, the answers can be different on a product by product basis. Some smaller operators frequently sell inventory they don't yet have and keep standing orders open.
posted by bitdamaged at 8:32 AM on September 28, 2012

I don't have a lot of expertise on this, but regarding #1, my understanding is that Amazon chose to start out with selling books because there are literally millions of different books, but brick and mortar stores can obviously hold only a limited number of them. This would give an online marketplace a distinct advantage over traditional bookstores from an inventory perspective.
posted by halseyaa at 8:40 AM on September 28, 2012

For many products, there are lists of what sells well. Amazon started with books, and could use the NYTimes Bestseller list, and others, as well as extended data from wholesalers. Not surprisingly, for products that have well-documented data on sales, there are many online sellers. Books are very specific; if you want a specific translation of Death in Venice, another book will not do.

For many goods, say, a pair of black shoes, there will be many options. Zappos seems to maintain a large inventory; I'll bet they have very frequent shipping from many producers. Zappos isn't always the price leader, but they have excellent search capability, lots of pictures, their pages load pretty fast, in addition to a large inventory and very good customer service.

Archie McPhee had a reasonably successful catalog and brick-n-mortar store. They were perfectly poised to go online. Because they had a store, they already had inventory.

There are products I hate to shop for online. Lighting. I may want to buy an industrial wall sconce. I'll have to plow through many slow-loading sites with crappy navigation. There's an opportunity there. Reading glasses. For some reason, there is no Zappos for cheap & moderately priced reading glasses. They load slowly, have wretched tags and wretched navigation. (Since I end up looking at 40+ pages, 20 units at a time, could you please, please, not list each color separately? please?) I'll bet there are many markets, not just niche markets, where a really usable online store could do very well.
posted by theora55 at 9:35 AM on September 28, 2012

Some wholesale distributors drop ship in the name of resellers, thus serving as an online reseller's virtual warehouse. For example, Ingram Micro does this technology products. As other commentators have stated, very hard to give any advice without having more information from you.
posted by Dansaman at 9:48 AM on September 28, 2012

I heard when Zappos started, they actually bought the shoes at retail until they proved it would work.

Drop shipping or negotiating with an existing retailer would probably be your best bet. There's a common feeling in ecommerce today, if you're selling something with a UPC code, it's almost impossible to compete with Amazon.

Bessemer is a venture capital firm with tons of successful ecommerce businesses in their portfolio, their Bessemer’s Top 10 Laws of E-Commerce (pdf) is worth a read.
posted by dripdripdrop at 10:15 AM on September 28, 2012 [1 favorite]

« Older How can I ship perfume, nail polish etc abroad...   |   How do I help my fine artist friend? Newer »
This thread is closed to new comments.