As eCommerce becomes a bigger and bigger chunk of the global retail market, and COVID-19 forces millions of consumers to become more online-fluent, entrepreneurs are striving to build businesses to catch the wave. The U.S. eCommerce market, of course, is one of the biggest in the world.
In this post, an excerpt from the AndMakers “Get in the Home and Garden eCommerce Game: A Startup Guide,” we’ll break down the three primary options available to manufacturers looking to break into the U.S. market. Those are:
- Build your own webstore
- Sell on huge retail properties (like Amazon FBA) that take care of demand and fulfillment
- Find other third-party retailers who can feature and sell your products.
Each option has its pros and cons, which we’ll discuss now.
Building Your Own Webstore
When most manufacturers think about eCommerce, they think of starting their own webstore. This means you’ll have to:
- Sign up with an eCommerce platform (e.g. Shopify, BigCommerce) to set up your store.
- Buy an online domain.
- Design the store.
- Set up your product merchandising: product descriptions, specs, pictures, and pricing.
- Design a marketing plan (Facebook ads, Google ads, display ads, etc.), with lots of testing and budgeting adjustments to increase engagement on your site.
- Set up your logistics, whether building your own order processing and fulfillment system or finding a 3PL (third-party logistics company) to ship your products.
The pros of this approach: It’s all within your control. You set the pricing, you control the orders and shipping (or at least find your own 3PL), you cut out the middleman (and thereby a layer of fees).
The cons of this approach: It takes a lot of skills to succeed. Most manufacturers don’t have experience in digital marketing, product merchandising, and logistics, and building an in-house team to handle the full set of skills and responsibilities is costly, especially when there are bills to pay before online orders start flowing in. If you’re doing your own shipping, that means you’re paying for a warehouse/storage space as well. The potential payoff is big, but the upfront costs are much higher than your other options.
Selling on Amazon
On the other end of the spectrum, Amazon FBA (Fulfillment by Amazon) provides easy entry into the U.S. eCommerce market without a lot of upfront costs – or a lot of control on your end.
Amazon FBA is a well-established program that walks you through product placement and merchandising and provides warehousing – all at a cost.
The pros of this approach: You save a ton of money on upfront costs of hiring, warehousing, etc. You open up your products to Amazon’s massive customer base (Amazon represents almost 40% of the U.S. eCommerce market). It’s a plug-and-play system that allows you to get up and running quickly and see sales start to come in without worrying about shipping, returns, customs, or storage.
The cons of this approach: Amazon’s scale can work against you; you’re only a number in their huge system and will not get much, if any, personal service. Amazon FBA charges you a monthly fee and takes a big cut of your revenue, and if your products aren’t moving out of their warehouse, they’ll keep charging you storage fees. Not only that, but storage fees increase during peak seasons, which leaves you doubly vulnerable to extra charges.
Dropshipping on Other Third-party Retailers
The third option is selling through drop-ship retailers that aren’t Amazon; leading vendors for home goods and furniture include Wayfair, Overstock.com, The Home Depot, Macy’s.com, and Houzz.
Getting on these sites isn’t as easy as signing up for FBA; you need to establish partnerships with drop-retailers, which often requires dedicated sales people. But, once you’re up and running with these retailers, you’re in a sweet spot between doing everything yourself and being one of millions of numbers in the FBA system.
The pros of this approach: You don’t need to have in-depth marketing knowledge since the retailers can market your products for you (as on Amazon or your own webstore, you’ll need to supply product descriptions, specs, and images). You can choose to ship your products on your own or find your own 3PL – preferably one with more flexibility and partnership resources than FBA. Pricing is also straightforward; you get the wholesale price when your product is sold, and the third-party vendor gets the rest. And you should have a dedicated contact with each retailer, which means you have a resource to discuss things like pricing, merchandising, returns, etc.
The cons of this approach: There is a bit of a barrier to entry – namely, finding contacts at your desired drop-ship retailers. Overseas manufacturers especially don’t come equipped with knowledge of the U.S. market or built-in connections that can help you break in. And the more retailers you work with, the more time you’ll need to spend on data entry; each retailer has a different system for entering product information, so unless you work with a partner like AndMakers who can automatically integrate your data across systems, you’ll need to dedicate lots of hours to update and upload product data.
Many manufacturers go for a hybrid approach to test the waters of the different options. If you’re looking for guidance as to which option(s) will work best with your business model, feel free to reach out and start a conversation with the experts at AndMakers.
this article was originally published by Payability on 17th July 2020.