Your opinion on my new business idea

Jackos17

Hi,

I've recently been exploring a new business idea and I could do with a broader opinion on whether people(you) think it is a viable business and if you would actually buy from us.

Basically it's an ecommerce site, very similar to made.com, sourcing a wide variety of goods from China, Taiwan etc and retailing them online. We would list products such as furniture, bicycles etc on our website and place an order with the manufacturer once a week or when we meet their minimum order quantity. We would group orders for the same manufacturer and have them shipped together to our wear house where orders can be processed and then shipped to customers.

With this business model we could cut down on both the capital needed to start and the storage facility's needed for thousands of products.

The upside would be great prices on quality goods but there would be quite a long time to wait to receive most orders.

I have experience with dealing with foreign manufacturers and I believe through strict quality testing we could bring high quality goods to the market at an unbeatable price.

Let me know what you guys think and if you have any questions please let me know.

Thanks
Jack.

longhalloween

Are you looking at businesses or individuals as customers?

Jackos17

longhalloween wrote: »

Are you looking at businesses or individuals as customers?

Individual customers.

Graham

My initial questions would be:

How would you reach minimum order quantity, especially at the start.
What sort of lead/delivery time would you envisage, particularly for bulky products?
How would you manage faulty goods, guarantees/warranties etc?

pedronomix

The theory behind this idea is quite sound, in practical terms it is quite daft and demonstrates a complete lack of understanding of consumer behavior and expectations. The operating costs would be off the wall with admin/import charges/freight/local distribution, not mention marketing and promotion. I can see you negotiating great prices from manufacturers for one green man's bike, a my little pony pink trike and a BMX!!

Bonkers!

Jackos17

Graham wrote: »

My initial questions would be:

How would you reach minimum order quantity, especially at the start.
What sort of lead/delivery time would you envisage, particularly for bulky products?
How would you manage faulty goods, guarantees/warranties etc?

Hi,

To my surprise I have actually been quite successful in my negotiations with suppliers and getting their MOQs down to just one piece. I know I won't be able to do this with every supplier but they seem to appreciate the fact that the business will depend on low MOQs and fast lead times for it to work.

Delivery time would vairy massively from 3 days to 3 months. It all depends on the individual company's, the product and their shipping methods.

The warrantys was the part I was unsure about, I'll have to talk with some suppliers and see what they usually do.

Thanks
Jack.

Jackos17

pedronomix wrote: »

The theory behind this idea is quite sound, in practical terms it is quite daft and demonstrates a complete lack of understanding of consumer behavior and expectations. The operating costs would be off the wall with admin/import charges/freight/local distribution, not mention marketing and promotion. I can see you negotiating great prices from manufacturers for one green man's bike, a my little pony pink trike and a BMX!!

Bonkers!

Hi,

I realise that local distribution would be expensive but I don't agree with you on your other points. Prices would be worked out using a formula something like this. Product price - bulk discount(if any) + % of shipping container used + taxes and duties + local shipping shipping + 10% profit = selling price.

Profit margins and the likes are yet to be determined but that's somthing along the lines on how I plan on pricing it.

pedronomix

10% markup!! That is even more bonkers than your idea, you really need to study the basics of business before wasting your time on such daft projects. You have a very serious deficit in this area! This is the best advice you will get today!

MRTULES

Have you tested your formula yet? Could you post up a few examples, let's say a piece of furniture, a bike an one other item. Put down all the costs from manufacturer to a customers door and we'll see how the prices compare. If you haven't done this yet it would be a good exercise. If you have then maybe we could spot any obvious flaws.
Thanks

Jackos17

pedronomix wrote: »

10% markup!! That is even more bonkers than your idea, you really need to study the basics of business before wasting your time on such daft projects. You have a very serious deficit in this area! This is the best advice you will get today!

I pretty clearly stated that I was yet to work out what sort of markup we would have. In reality, most of the products I sell have a mark up of about 200% but I would see that as being completely different because of the amount of capital I would need to make the initial order. With this there is none so much less pressure to make a high return.

I value your opinion but not if it's just unhelpful and seemingly uninformed.

GoodBridge

I'd say it'd be an extremely hectic thing to manage.

Correct me if I'm wrong, but it's basically a co-op/groupon kind of thing without the transparency?

The big problem I'd have with it, as a customer, is the unknown lead time. You could try and combat that by giving estimates but if these fall through then you could find customers back out as time-frame no longer suits. Do you take money upfront or when shipping? If there's a problem with a product, you're going to have to accept returns and people are going to want a replacement or money back asap. I can't see them taking too kindly to being asked to wait a few months for the replacement (rightfully so).

It's an efficient idea in one way but, in practical terms, it seems like it'd be fraught with logistical and consumer problems.

OU812

Although you don't feel the need for a high return, you should be looking for the highest you can realistically achieve. You can always have discounts but it's very hard to raise prices.

pedronomix

You are the one seeking the advice and seeking critique, just because you don't like my contributions make them neither uninformed or unhelpful, quite the opposite!

golfnut1

I think you could be on to a good idea if tweaked a little.

Firstly I would only deal with large commercial orders. I'm thinking hotels, government buildings, hospitals, schools, Large venues that are either new builds or upgrading.

Offer a service to completely custom fit for whatever their needs are, then manufacture same in china and ship direct to customer when needed. No need for warehouse. repairs/ faulty goods are returned direct to manufactured and replaced.

Jackos17

Jackos17 wrote: »

I pretty clearly stated that I was yet to work out what sort of markup we would have.


I value your opinion but not if it's just unhelpful and seemingly uninformed.

Well when you do work out your markup and factor in all the costs you'll soon realise that you can't compete with anyone on price and that the poster is more informed then you might think

Jackos17

GoodBridge wrote: »

I'd say it'd be an extremely hectic thing to manage.

Correct me if I'm wrong, but it's basically a co-op/groupon kind of thing without the transparency?

The big problem I'd have with it, as a customer, is the unknown lead time. You could try and combat that by giving estimates but if these fall through then you could find customers back out as time-frame no longer suits. Do you take money upfront or when shipping? If there's a problem with a product, you're going to have to accept returns and people are going to want a replacement or money back asap. I can't see them taking too kindly to being asked to wait a few months for the replacement (rightfully so).

It's an efficient idea in one way but, in practical terms, it seems like it'd be fraught with logistical and consumer problems.

Hi,

Sorry I should have specified that I will be giving a pretty close estimate to the lead time. Some company's will have the product already made so that would be ready for shipping immediately while others may take 40 days to produce the good. Delivery to me can range from 6 weeks on the seat to next day via DHL express. I will know the specifics for each supplier and state that on the listing of each product.

Yeah I will take the money up front, I know from experience that people are somewhat less willing to pay a few weeks later.

Yes I will accept returns but for replacements I'm not too sure what I'll do yet. I am working with suppliers at the moment to see what they suggest.

longhalloween

So do you choose which products go on your site or are they submitted by users?

The problem I see is this: Someone sees a product they like on the site and they add their name to the order. Now at that point, how do you know what your buying price is and how do you calculate your selling price?

Is the selling price advertised at that time or do you wait until you've gotten your required amount of orders, then approach the manufacturer for the best price?

If it's the former, then the customer has to pay for a product they may not even get (if no one else puts their name down for it) or may wait months to get. The price they pay may be higher or lower than the best price you get from the manufacturer when you eventually place the order.

If it's the latter, then by the time you've gotten your required orders, you'll have to work out your selling price, then chase down everyone on the list for money before the order can be placed.

Jackos17

longhalloween wrote: »

So do you choose which products go on your site or are they submitted by users?

The problem I see is this: Someone sees a product they like on the site and they add their name to the order. Now at that point, how do you know what your buying price is and how do you calculate your selling price?

Is the selling price advertised at that time or do you wait until you've gotten your required amount of orders, then approach the manufacturer for the best price?

If it's the former, then the customer has to pay for a product they may not even get (if no one else puts their name down for it) or may wait months to get. The price they pay may be higher or lower than the best price you get from the manufacturer when you eventually place the order.

If it's the latter, then by the time you've gotten your required orders, you'll have to work out your selling price, then chase down everyone on the list for money before the order can be placed.

Yeah the selling price will be advertised and the same for every customer. I guess the discount I would be receiving would just be going towards increasing our profits and not decreasing the selling price. I'll already know the standard unit price per item so I won't have to worry about needing to increase prices if there are very few orders placed.

We would have a system in place where the customer is automatically refunded after a period of their own choice, if the order hasn't been placed with the supplier.

Also, all items will be chosen and tested by ourselves.

Jackos17

golfnut1 wrote: »

I think you could be on to a good idea if tweaked a little.

Firstly I would only deal with large commercial orders. I'm thinking hotels, government buildings, hospitals, schools, Large venues that are either new builds or upgrading.

Offer a service to completely custom fit for whatever their needs are, then manufacture same in china and ship direct to customer when needed. No need for warehouse. repairs/ faulty goods are returned direct to manufactured and replaced.

My plan was to firstly offer products B2C and then later expand into also offering B2B office fit outs.

relaxed

Jackos17 wrote: »

Hi,

Sorry I should have specified that I will be giving a pretty close estimate to the lead time. Some company's will have the product already made so that would be ready for shipping immediately while others may take 40 days to produce the good. Delivery to me can range from 6 weeks on the seat to next day via DHL express. I will know the specifics for each supplier and state that on the listing of each product.

Yeah I will take the money up front, I know from experience that people are somewhat less willing to pay a few weeks later.

Yes I will accept returns but for replacements I'm not too sure what I'll do yet. I am working with suppliers at the moment to see what they suggest.

Bonkers describes this plan quite well.

Firstly your delivery time won't be 6 weeks by sea, it will be closer to 10.

LCL freight generally attracts about 30% extra in freight cost over FCL.

Then the handling costs in Dublin for getting 1 pallet to your premises, import documents, customs paperwork etc. are nearly the same as LCL V FCL

People who are expected to wait 10 weeks will want a substantial discount to the shop that can provide it off the shelf.

Take a bike for example. Halfords probably buy 10000 bikes a year (wild guess) they will get a huge discount on purchase price versus your small batch order. They will get discounts on freight, haulage and so on. They will be buying in 40' high cube FCL's which is way cheaper than your freight cost base.

And the guy that has his bike stolen today won't wait 10 weeks for something he needs tomorrow.

Nobody will want to give you more than a small deposit upfront either, so you will need to tie up a lot of capital.

Take another example, a barbeque or patio set, if its hot and sunny next week nobody will want to wait 10 weeks for one.

Then the all important Christmas market, very few want to buy a product off you in August and pay for it now and hope it gets here for Christmas.

Jackos17

MRTULES wrote: »

Have you tested your formula yet? Could you post up a few examples, let's say a piece of furniture, a bike an one other item. Put down all the costs from manufacturer to a customers door and we'll see how the prices compare. If you haven't done this yet it would be a good exercise. If you have then maybe we could spot any obvious flaws.
Thanks

I'll start with a bicycle -
Price per unit(FOB) - €65
Freight per unit - €8.5
Import duties - €11
Local deliveries - €22
VAT - 24.5
Total - €131

The average retail price for this bike would be about 3-400 with no company selling it for less than €220.

I think that leaves space for a decent mark up?

Jackos17

relaxed wrote: »

Bonkers describes this plan quite well.

Firstly your delivery time won't be 6 weeks by sea, it will be closer to 10.

LCL freight generally attracts about 30% extra in freight cost over FCL.

Then the handling costs in Dublin for getting 1 pallet to your premises, import documents, customs paperwork etc. are nearly the same as LCL V FCL

People who are expected to wait 10 weeks will want a substantial discount to the shop that can provide it off the shelf.

Take a bike for example. Halfords probably buy 10000 bikes a year (wild guess) they will get a huge discount on purchase price versus your small batch order. They will get discounts on freight, haulage and so on. They will be buying in 40' high cube FCL's which is way cheaper than your freight cost base.

And the guy that has his bike stolen today won't wait 10 weeks for something he needs tomorrow.

Nobody will want to give you more than a small deposit upfront either, so you will need to tie up a lot of capital.

Take another example, a barbeque or patio set, if its hot and sunny next week nobody will want to wait 10 weeks for one.

Then the all important Christmas market, very few want to buy a product off you in August and pay for it now and hope it gets here for Christmas.

Thanks for that, that's the type of answer I was looking for when I asked the question. Whether people would be willing to wait that long for their order.

Bandara

Jackos17 wrote: »

I'll start with a bicycle -
Price per unit(FOB) - €65
Freight per unit - €8.5
Import duties - €11
Local deliveries - €22
VAT - 24.5
Total - €131

The average retail price for this bike would be about 3-400 with no company selling it for less than €220.

I think that leaves space for a decent mark up?

You forgot the 50k at least that you'll need to market your site in even the smallest way. And you'll go through a 50k advertising budget like water in the desert

Your going to have a possibly insurmountable hurdle getting credibility for the site. Unless you have incredibly deep pockets.

A more realistic start out would be an eBay store or amazon store where you trial the idea on smaller items maybe €50 or less. Perfect the supply chain stuff, utilise dropshipping etc etc

If that works and you have 1000 positive ratings on eBay then you can look to ramp it up

Good luck with it

longhalloween

Jackos17 wrote: »

Thanks for that, that's the type of answer I was looking for when I asked the question. Whether people would be willing to wait that long for their order.

I dont know whether people pay for a product, then wait an unspecified amount of time until the required orders are filled, then 6-10 weeks for the order to be delivered.

Its a big ask.

relaxed

Jackos17 wrote: »

Freight per unit - €8.5

If you only buy a small lot, call it 20 bikes (how long will it take for you to get 20 people to come along and pay for it this far in advance) you will get hit with a lot of customs entry, agent fee terminal handling, container unloading, transport to your warehouse etc. It would probably be more like €30-€40 in freight (ballpark for 20 units)

As I said a FCL works out miles cheaper in freight and that's what your competitors like Halfords and smiths toys will be doing.

MrMike

Hi Jackos. There may very well be something here. Obviously you are not at a point where you have your concept ready to launch and will have to spend months working on this.

I think alot of people are focusing on the bike and saying how noone will wait 2 months for their bike to save €50. This is absolutely correct. However there are many products that this concept may work for.

I am sure you are aware of the websites Madeinchina.com and Alibaba.com? These are each worth billions and so the people that are saying that you are "bonkers" are essentially saying these sites are "bonkers" also. If people are buying through MadeinChina.com and Alibaba.com, you need to see what products are being bought through these. I doubt anyone is buying a single bike from these sites. With these sites you are buying FOB, you need to arrange all customs and excise not to mention freight. So if these sites are offering a FOB price you are essentially doing the same except on a CIFFO basis.

If I was you I would see exactly what is being bought on these sites and by who. Is MadeinChina.com and Alibaba.com mainly B2B or B2C? If you can make a profit by selling these products on a CIFFO basis then surely anyone who buys off these 2 sites would buy off you? Reduce the headache of dealing with suppliers and simply collect the product at the port or pay for delivery to their door?

There is plenty you need to work out here and you will not figure it all out tomorrow. Best of luck!

smemon

you need to establish a demand for such a service otherwise it's all just one big gamble...

prove people want or would use this or would be prepared to wait 'x' days for 'y' savings...

imo you should pick a certain product / niche and focus on that temporarily to see how difficult it's going to be to get customers / make sales...