Forums: Discussions for entrepreneurs and small business.

I understand some basics:
1.Buy products cheap and get enough "turns" out of them to recycle profits into more inventory

2. Get manufacturer/vendor to provide fullfillment to my customers or order on demand so I can potentially accept orders and then buy from my vendor who then ships directly to my customers.

3. Pre-sale a whole lot of products and use profit to purchase inventory

 

My situation:

I am upgrading my e-commerce store, I have been selling a book and now wish to add 30 industry related products to my store. I can only purchase 10 of each product on my credit card but trully imagine selling hundreds of each my first month. Right now I plan on selling out what I have and possibly creating a backorder for my customers for the quantities I sell beyond my inventory. Customers don`t like backorders because they don`t want to wait so I thought of not telling them and just using all collected money to order more products immediately and then sending them their products. But this creates integrity issues along with bad customer service by my customers still having to wait 2 weeks for their products. Does anyone know of a proven system to build inventory or have any other advice, I`m sure I`m not the only one who has ever had to face this.

 

 I am losing sleep on this situation and any words of support from the Startupnation family would be extremely helpful. Thanks, Josh.

First, don`t buy all your inventory at one time.  It reduces your profit margin and ties up all your available operating capital until you sell the product.  You also pay higher holding cost ( warehousing costs ).

 

Heres an example of what I mean.  Let`s say you have $15,000 available to buy 1000 do-dads.  You will sell all 1000 do-dads over a two month period and realize $3,000 profit on an initial investment of $15,000.  But, you also have to find a place to store 1000 units until they sell. 

 

Now let`s change this a little.  You will still sell all 1000 do-dads over a two month period.  But instead of investing all $15,000 at one time, you invest $7,500 and buy 500 do-dads.  Just before you run out of inventory, you take $7,500 from the sales you`ve already made and buy another 500 do-dads.  You then sell all of these as well.  You still realize a $3,000 profit.  But now you are realizing a $3,000 profit on an initial investment of $7,500 instead of an initial investment of $15,000.  You also still have $7,500 in the bank and can reduce your holding cost buy having a smaller inventory. 

 

As far as being able to fill customer orders, you will need to determine a realistic delivery schedule to customers.