A Primer on Sourcing

What sets a successful production run apart from the rest is a company’s initiative to engage with a manufacturer while maintaining their relationship. If you’ve been looking to start producing your products overseas, it’s about time you tried. What are you waiting for!

Nathan Resnick has written an excellent piece on sourcing goods from China that can be applied to any business (regardless of sourcing country).

Go to A Better Lemonade Stand to read more.

Nasty Gal Bankruptcy Ecommerce Takeaways

A shocking story to outsiders but perhaps less shocking to people in the know, Nasty Gal, the poster child of Fashion Ecommerce to many has filed for bankruptcy protection. The full story is here and it’s worth reading to consider what this – and the many other ecommerce failures – teach us today.

1) Firstly, it’s a rocketship. Nasty Gal like most Ecommerce success stories had grown like crazy from a small Ebay store to ‘International’ retailer. This growth is not typically experienced with other businesses. It means they hired aggresively, built structures and systems as well as financed the venture all at extreme speed. Ultimately, this contributed to their downfall.

2) Fast growing revenues don’t equal fast growing profits. In fact, the opposite is usually true and losses are deep for a long-time..even perpetually. The model of ecommerce as pioneered by B2C giants like Amazon, JD.com etc is all based on two things; scale, and secondly, ways to make money other than shipping merchandise i.e marketplaces, payments, digital goods and so-on.

3) You need all the channels. Ecommerce, at least stand-alone, is not viable. We’ve seen time and time again pure play ecommerce companies go out of business. Who is winning in ecommerce? It’s multi-channel. That means you have to integrate stores and other channels to maximise your customer retention (stickyness) and sales. That’s hard.

4) Really consider your goals. Nasty Gal was a founder led business that was quote ‘successful’ ie they had real revenue, real customers and a real brand. But that still wasn’t enough to save it. Perhaps if the company didn’t take venture funding or had grown at a more realistic speed then it would still be on track. When you’re starting, you should consider your goals. Not everyone can be lucky but you can be good.

Have you learned any Ecommerce lessons you’d like to share? Let us know in the comments.

Yup, Ecommerce is Hard

WSJ reports Walmart is in talks with Jet.com, the barely one year old ecommerce startup:

For Jet, a takeover by an old-line retailer would demonstrate the challenges of attempting to go it alone in the hypercompetitive e-commerce market.

This business is capital intensive, heavily reliant on brand and a massive slice of luck..

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AI and Discovery

Watch Amazon’s David Limp explain more about Alexa – the voice based device and shopping service – and their use of AI in commerce.

Alexa is a ‘computer in the cloud’ and could change the face of ecommerce due to the fact it really hits on the discovery rather than typical mission based approach of ecommerce today.

The World is Flat…and Fast

The Economist has a good piece on why the world is getting flatter and faster. This is to the detriment of large companies, particularly those in the FMCG space. They note:

Yet these advantages are not what they once were. Consolidating factories has made companies more vulnerable to the swing of a particular currency, points out Nik Modi of RBC Capital Markets, a bank. The impact of television adverts is fading, as consumers learn about products on social media and from online reviews. At the same time, barriers to entry are falling for small firms. They can outsource production and advertise online. Distribution is getting easier, too: a young brand may prove itself with online sales, then move into big stores. Financing mirrors the same trend: last year investors poured $3.3 billion into private CPG firms, according to CB Insights, a data firm—up by 58% from 2014 and a whopping 638% since 2011.

If you’ve got a good product, it’s never been easier to get it out there.

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B2W

Clothing Finally Largest Ecommerce Category

The inevitable has happened – clothing is the number one ecommerce category by sales according to ComScore.

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As we all know I’m sure, Consumer Electronics has long been the King among stuff sold online, in part because of the early adopters of the Internet where more inclined to buy this stuff (read: geeks). Nevertheless, what’s perhaps more surprising is how long clothing has taken to surpass electronics.

There are three reasons for this I believe. The first is the aforementioned change in the makeup of consumers aka now everyone buys online, not just those geeks. Secondly, the smartphone has both consumed the entire electronics category – the PC, Laptop, Home Audio, TV, Camera, Camcorder and other devices are now largely mobile devices. Lastly, retailers are finally accepting folks want to buy clothes wherever – at home, in the office and not all in store anymore.

This is profound change and as always there will be winners and losers. Free shipping and returns – a standard for clothes where people often try before they buy – will put further pressure on bricks and mortar retailers. Brands will also begin participating in more direct to consumer stuff i.e why give a retailer margin when you can sell direct?

All in all, the brands stand to win and off course consumers will win. But what about both offline and online merchants?  They have to suck it up.