fulfilment / back end strategy with ecommerce business

[bostonyear]

I have a new ecommerce concept that I am excited to develop. Due to my web marketing experience, I have a pretty good handle on the front end of the concept (website, branding, marketing, product offerings, etc.). For now, I will use BigCommerce as my ecommerce platform. This seems like a good fit at this stage.

My concern is on the backend (fulfillment, inventory, accounting, customer service, etc.). At this point, it is just me. I may bring on a partner at a later date. I have a part time staffer than can help me out on the admin side, but my staffing resources are limited. This is the area I need assistance with. I think fulfillment houses can help, but I am afraid outsourcing everything will eat up my margins. Plus, this part of the concept seems overwhelming to me, but I know this is a crucial element to make an ecommerce venture successful.

Any suggestions on how I should tackle the back end? I am very bullish on this concept, but it may be a bigger task for just a one man shop. I need to be smart on how I proceed with this, but I most definitely want to give this a shot.

[Planet13]

Are you expecting lots of orders with small margins? Or are you expecting smaller numbers of orders with large margins?

And when you look at your business model, what is your competitive advantage? Is it that the people who currently sell the items have terrible marketing / sales skills, and yours are better?

Or is your advantage that you can source the items cheaper than they can?

If it is just that they have terrible marketing / sales presence, then using a fulfillment house might be the best bet.

If it is your ability to source for cheaper / better quality, then maybe you consider doing the fulfillment yourself?

[bostonyear]

My advantage will be on the sales and marketing end. I have found a niche in the industry that isn't being marketed well, so that will be my advantage, not that I can source it cheaper. I am not sure about my volume at this early stage. My concern that I won't be able to do the fulfilment on my own, at least to the level I am envisioning.

[Planet13]

Well, in general, then maybe you have to look at what it would "cost" in terms of doing each job?

Say it would cost you $30 an hour to hire someone to do marketing instead of you?

Would it cost more than that for someone to do fulfillment for you?

My guess is that it probably you would be better off devoting more time to marketing and less time to fulfillment, but I think you just have to do the math to figure out what the fulfillment "costs" per hour.

[cliffud]

I suggest starting off in your garage first and then seeing if sales get to the point where you spend more time shipping than doing other more productive things. This assumes you have enough margin to cover the fulfillment costs.

I use a fulfillment company and they charge $4 per package. Not bad since average ticket is $400.

[cliffud]

Let me just add that there is obviously a point where you'll want to do the shipping in-house. If you're shipping 2,000 orders a month, you could obviously save by hiring an employee for $3k a month.

[votrechien]

If you're planning on offering a few SKUs (under 20 or so) either ship them yourself at first or use a 'pick and pack' warehouse. As Cliffud mentioned, you'll pay around $4/package (very negotiable depending on volume). Amazon has an excellent program called FBA which provides exactly these services.

I've yet to find any effective ways to outsource customer service. You can outsource order taking, but any customer service that requires any technical knowledge of the product will really required someone who is trained by you (and until you have the money to hire and train someone, the best substitute is you).

[jrockfl]

I'm pretty much a one man shop.

I'm the purchasing department, receiving department, customer service, sending out packages, etc.

My wife does help out at times, but for the most part it is just me.

We have started off in our garage and there is a good chance we will be moving to a new location next year. Sales have been growing each month and we are starting to run out of room.

Try to do as much as you can without having to pay someone.

For Feb, we sent out over 1100 orders.
I also have a full time job not including this! :)

[raijen]

I think order fulfillment is a good deal, if you find the right company to work with. We found one that has good monthly storage rates and, most importantly, no fulfillment minimums. It's worth the $25 storage rate to not have inventory filling my garage and I love not having to spend time boxing orders and waiting on the UPS driver every day. Sure makes vacations easier, too.

[cliffud]

jrockfl - good job man!

At 1,100 orders, what's stopping you from hiring someone hourly to do the packing and shipping?

The volume of the shipping didn't necessarily deter me from doing the job myself. I just didn't want to standing in my garage packing anymore.

Because I was able to outsource the fulfillment, I'm actually posting this from another continent than where my business is located... :)

[jrockfl]

I prefer to have control over it. It does make taking vacation a little harder. If we take a short vacation, then I don't notify our customers. But, if we take a week vacation, I post on the web that the shipping department is closed and will resume shipping on such and such date.

cliffud,
Thank you! Since, it is still a home based business I would prefer not to hire someone. They would have to drive to my house, open the garage door, etc. I think it would just be a little awkward.

1,100 orders was a record for us, this month it will be about half that. That tells me it is too early to move out of the garage. One we are consistently sending 1500 orders per month, I will feel more comfortable finding a small warehouse and hiring an employee.
I have to go pack some packages now, before my full time job starts haha

[JackieBlue]

At some point you need to let go if you want to grow. You cannot do it all yourself. I started hiring fulfillment employees in year two (we are in year five now). It is hard to give up control and they will make more mistakes than you will. The key is to put in processes to limit the mistake. We are getting ready to implement a new inventory and shipping system that will require scanning each item before packing an shipping. Same for receiving inventory. Inventory management has been our biggest issue over the years and I wish we had done this years ago.

[jrockfl]

@JackieBlue,

I meant have control in house than hire a company to fulfill our orders our outsource. This is year 2 for us, next year it is something I want to do.
I dont want to be the one doing all of the packaging forever, haha

Tell me more about your process to limit mistakes. Are you developing this inventory system with scanning in house?
I know I have made mistakes by sending the wrong product, and I hate when that happens and I have to resend the correct one. Do you currently have a QA process in place?

I do want to grow and move out of the garage. How hard was it to find good fulfillment employees?

[JackieBlue]

@jrockfl - yes, we do this in-house. I do not like outsource of fulfillment. It is too expensive and no quality control. We are developing our process and software in house using a combination of myself (I'm a former developer), purchased software, and additional interfaces that I hired free lance programmers to write.

Good employees are always hard to find but all employees make mistakes and they do not have (most of the time) the caring for the business that you will. I am big believer in improving processes to create quality. Quality guru Edwards Deming (who's practices where implemented in Japan) always said that quality control is always in the process.

[jrockfl]

@JackieBlue

I'm a developer too, .net developer. Now I can program for myself and be the customer :)

Yes, I agree quality control is very important.
For inventory management, are you going to bar code all of the products and then scan each product as the order is filled?

[JackieBlue]

@jrockfl - Most of our products are already barcoded but those that are not we will barcode on arrival of new stock. We will scan incoming inventory as well as scan all items going out. If a customer orders 3 of an item, there will need to be 3 scans of the item to print the shipping.