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|Making money but exhausted|
Am I selling the wrong product?
| 3:23 pm on Apr 25, 2007 (gmt 0)|
After 5 years and thousands of products, I am exhausted. We sell parts for machinery. The amount of phone calls to help troubleshoot their products problem is endless. We support about 20 different manufacturers but we are unable to stock everything that we sell. We have to drop ship some items and then order in others (due to minimum order amount required from our vendors) and then ship them out later. This generates a mass of phone calls and e-mails. I am starting to hate my business. We need more personnel, yet we really can't afford them. Our products are so technical, we can't just hire data entry people to write the description of each item, because either they don't understand our technical product or the people who do, don't want to sit in front of a computer all day. I am thinking that we should just build a wholesale site that sells to people who know what the heck we are selling and don't need hand holding. The general public tries to fix their equipment, calls us up and spends 20 minutes on the phone for free advice, then may or may not buy the $14 part needed. UGH! We will top 1 million dollars in sales this year, but we have spent major money this year on a new server, mail order software, printers, computers, scales, etc., etc.
HELP! Are there e-commerce businesses like mine that one should stay away from because they will eat you alive?
| 5:37 pm on May 8, 2007 (gmt 0)|
I think reducing service level or selection makes sense. Don't be afraid to end the call quickly if you think its a search for free technical support or not profitable. I get so many inquiries about driver downloads, its not even funny. If a customer wants to order a $3 part, I tell him or her to order it online. If the part is not ordered online, I am losing money. A fulfillment house will charge $3 to take a phone order. I factor that same cost for handling the service internally.
Some industries are extremely price sensitive, so raising your prices may or may not make sense for you. If it does not, you can alternatively discontinue SKUs that are below a certain price point. It sounds like for you the $14 item may not be worth carrying. You can save a lot of money by not having to ship low dollar items from the supplier to you due to minimum costs. I'm sure you have dead weight inventory because you had to pad your order total just to meet the minimum. I would either negotiate a lower minimum order total from your supplier or only carry items that you can have drop shipped from the supplier.
I also suggest exploring suppliers with item complementary to your product line. Your profit margin percentage can remain the same, but if you carry high dollar items you will be more profitable.
Remember, you can't offer champagne and caviar service if your profit margin only allow you to offer beer and nut service.
| 6:41 pm on May 8, 2007 (gmt 0)|
|I'm sure you have dead weight inventory because you had to pad your order total just to meet the minimum. I would either negotiate a lower minimum order total from your supplier or only carry items that you can have drop shipped from the supplier. |
This may be critical.
In a way, suppliers/manufacturers, who only deliver low-cost-items in packages of 5,10 or 20, or who have a minimum order total of a few hundred dollars, are a good protection for niche-online-businesses.
Anything beyond 50 $$, which might be drop-shipped, is bound to be swallowed by some affiliate program one day, and then -bingo- you'll have many many competitors from one day to the next. On the other hand it is really hard for a newbie to start an online business without any prior product-knowledge of items that come along in such packages or with supplieres, who have a high minimum order total. So if you managed to move such an established B&M business online, you are relatively save with current growth rates, as long as you keep your homework as a salesperson done.
| 6:42 pm on May 8, 2007 (gmt 0)|
I've been in a very similar business to skatingtoolman for the past 7 years, selling parts for different kinds of widgitizers, and I can sympathize with him. We've been in exactly the same situation as his, and here are some of the things we've done to make things more profitable. While some of them are mentioned in this thread already, at least you'll have some confirmation of what works.
Troubleshooting over the phone: We stopped cold turkey on phone support. We couldn't remain profitable giving it and our customers weren't willing to pay for it. Our phone reps now say without hesitation that they "are not technicians and can only process an order. Would you like to place an order?" If not, they recommend looking at the information on the website and politely end the call. If you can figure out a way to make the phone support work, then you could revolutionize call centers. We weren't able to give support and remain profitable.
There is an excellent case to be made for putting all information on the site for a kind of limited self-support. It's great searchbait and linkbait. And while your employees might not be excited about doing the work to put the information up, they might do it if they believed it would reduce their phone support activity.
Special orders: Other than ordering for our local B&M customers, we no longer accept special orders. They generate too many follow-up questions while the part is on order. We now only sell what we stock. Phone traffic dropped off dramatically, while sales actually went up since we could spend more time improving sales on our stock items.
Wholesale: Dealing with wholesale is a mixed bag. We're still doing it as there are some opportunities, but don't count on your wholesale customers being more educated and self-sufficient than your retail customers. Anyone with a level of knowledge that won't generate questions is probably one of your competitors.
Minimum shipping charge: We have a high minimum shipping charge that makes the cheap items tolerable to carry. A few customers balk at the total price of their order, but that's OK. We're not willing to sell something if we're taking a loss on the labor required to handle the order.
Manufacturers: Don't count on the manufacturers to handle support. They don't want the support calls any more than you do. And since you're selling the customer the part, they're going to see you as the support source. We've had a few particularly difficult manufacturers who send impossible calls to us, and we've dropped them. (As an aside to others in this thread, often a retailer needs to become an authorized service center to get the really good pricing on parts. And if you're a service center, the manufacturer absolutely won't handle support issues. After all, you're the one who has contracted with them to handle service.)
As far as withdrawing from the business, there is money to be made if you stick with it and work on profitability. Keep in mind that your customers are already highly motivated to buy which makes your sales way easier than other retail areas.
| 8:42 am on May 10, 2007 (gmt 0)|
Everyone has given you some great ideas, and ideas that should/may/will increase your bottom line.
That's fine, if the bottom line is your main concern.
I'm going to come at this from a different angle, and here's why...
Thanks to this wonderful world of ecomm, I now had money - what I no longer had was time.
My biz was filling over 10,000 orders every year, and we're members of the Better Business Bureau - have a nice certificate for going an entire calendar year without having a single complaint filed. (Most ever filed in a year were two, and every time the issue had been resolved before the BBB got the paperwork to us.)
2 years ago, after 8 years of ecomm, here's basically what I did.
(1) Outsource everything that is humanly possible.
Tech stuff like a shopping cart, for example. Sure you can purchase one, but why not just pay 20 or 30 bucks a month and let someone else deal with all the upgrades, etc.
Same with employees, but that's another issue.
Your job is to teach/oversee/dream, not 'DO'.
(2) I let about 30% of my products 'go'. After shipping/ phone support/etc., they simply were not profitable - they were a break even. The funny thing was, in my industry, these were some of the sales that my competitors kill each other to get.
I let them have them.
More power to them. I'm sure they are happy that their 'gross sales' are higher, but THEY now have all the problems.
Keep in mind we are talking about thousands of orders a year. Even if YOU do everything right, you are still going to have orders lost/damaged/etc, meaning not only are you NOT making money, but this stuff is taking away from the time you COULD be doing something else to make money.
(3) Treat it like a job, not the all consuming part of your life. Set your goals and hours, work them, then walk away and quit trying to be superman.
I've learned that what a customer/employee may think is an emergency is not something 'I' consider an emergency, where I have to drop whatever I'm doing (even in my personal life) at that very moment to handle.
I threatened to do these things 3 years before I did. Everyone told me I was crazy.
Last year at tax time, my CPA looked at me and said, "Hey, do you realize that your sales were down 30% last year but you actually made MORE money?"
....Yes, I did. I also now have a life outside of work.
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