Alternatives to stocking inventory for a small e-commerce company

KevinP73 · 10:09 AM

I have a chance to sell products for a rather large manufacturer located on the east coast. They are well established in the industry and being a dealer of their product will be good for me. The problem I face is that their product is very "application specific". I don't have a ton of working capital to sink into inventory so I'm looking for alternatives to stocking inventory. They say they are not fond of single item orders or drop shipping. What are my alternatives? Any suggestions ?
TIA

stomachmonkey · 05-10-2012, 10:18 AM

There is no shortage of funding groups who will front you money for things like inventory.

Their monies are collateralized by the value of the inventory as well as a personal guarantee from you.

Typically they will receive payments for items sold and you draw down from the account.

In short they own the inventory and are first in line on the money stream.

Not sure if the guys I've dealt with will work the retail side.

We use them to build inventory and wholesale to the retailer which makes setting up the payment terms easier since they are bulk orders, not single unit.

Your other options are consignment or give back some of your margin to defray the drop ship costs till you can get a better sense of how much of and which of their offerings you can move.

Groesbeck Hurricane · 05-10-2012, 10:29 AM

Can you work with your sales rep where you are stocking their inventory? In this scheme you would pay them the shipping costs to get inventory to you, provide them updates (weekly, bi-monthly, monthly) on their inventory situation, and pay them N3D0 every time you sell their inventory.

IF they would go for this type of scheme how long would it take before you could afford to buy their product directly? You should be using profits from the sales of their items to start saving to buy their items directly. Add one quarter to your estimate, show how you will transition from their assistance to standing on your own, and work with your representative to grow.

Pluses for them (YOUR sales pitch):

They can show inventory as shipped pending sale booking they have no storage costs associated

They do not pay for the shipping to get inventory to you

They have a local inventory source in your area (YOU) who can provide a point of sale to any inquiries

They get paid within three days at zero discount everytime you make a sale (you lose on this one)

They are helping a small business owner establish their mark in the local area and provide a good turn to the customer

Distributor loyalty and good faith

They can better control production on their end as they have direct view of your inventory situation

My suggestion is a similar scheme to Monkey's but makes the actual producer of the product your investor and partner. You could end up being a dumping ground or they might want to use you to store material in a specific location for other people like you. It would be a touchy relationship and would have to include a lot of trust. And yes, I am putting on a flame suit now. But you never know until you ask! I've seen stranger things done for the right person/situation.

KevinP73 · 05-10-2012, 01:50 PM

Good suggestions so far. Thanks

Zeke · 05-10-2012, 01:53 PM

Look around and see what the big picture is. Why do YOU have a "chance" at this? This is important to know. Who else has this "chance" and what is their territory vs. yours? How will you promote your e-commerce over the many others? Or will you have an exclusive?

The one thing that bothers me here is that you are the little guy and they are the "large manufacturer. It would be better if they were small and you were big and could take the advantage. I've been on the other end of that stick with it up my butt and me floating like a shrunken head at a tribal meeting.

EarlyPorsche · 05-10-2012, 02:26 PM

Get some credit cards to start and try to pay net30 60 or 90. If its too risky to put on cc for a short time then be careful getting into it I would say.

motion · 05-10-2012, 03:43 PM

I have an commerce biz and would never consider stocking and shipping. 100% of my orders are drop shipped from my manufacturers. Maybe you can just push the dropship angle harder?

EarlyPorsche · 05-10-2012, 03:54 PM

Quote:

Originally Posted by motion

I have an commerce biz and would never consider stocking and shipping. 100% of my orders are drop shipped from my manufacturers. Maybe you can just push the dropship angle harder?

That's good advice as well. Depends on your industry but are you sure it can't be leveraged through the manufacturer?

drmatera · 05-10-2012, 04:10 PM

Well I have a couple of questions.

1) does the manufacturer stock ther product or is it build to order?

2) why have they "chosen" you?

KevinP73 · 05-10-2012, 04:20 PM

Well I have a couple of questions.

Quote:

Originally Posted by drmatera

1) does the manufacturer stock there product or is it build to order?

They manufacture and warehouse. NO retail sales

Quote:

Originally Posted by drmatera

2) why have they "chosen" you?

They haven't "chosen" me. I called them, voiced an interest in selling their product on an e-commerce site and they said "Sure. We'd be happy to let you buy our product.

drmatera · 05-10-2012, 07:11 PM

Ok, I deal with a couple of manufacturers that do not sell retail. In my experience they aren't much interested in helping out because they are not in the finance business. If there are companies out there that are willing to stock my shelves at no cost to me I'm all ears. Seriously I would like to hear how other small businesses handle this dilemma. I've got enough inventory to buy a coupe GT 3's sitting I'm my warehouse