Top 4 Retail Buying Tips for E-commerce Entrepreneurs
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Published by TOP4 Team
Smart retail buying can lead to e-commerce success and good profits. But the act of buying products to sell on an e-commerce site can be more of a challenge than one might at first imagine.
Most business to consumer (B2C) e-commerce retailers (with the possible exception of certain kinds of digital or downloadable products) buy products — apparel, knickknacks or whatever — and sell those same products.
Regardless of how you interact with vendors, you must follow these pointers from Practical Ecommerce when buying profitable inventory for your e-commerce business.
Know your customers.
Understanding what sort of things your customers want and need is crucial if you’re going to be investing in products that you hope those customers will buy. From the perspective of retail buyers, knowing your customer often means being a customer yourself. The best buyer of a product category may also be a heavy consumer of products within that category. For example, folks who buy shoes should love shoes.
As a matter of fact, e-commerce entrepreneurs often open an online shop because they’re involved or even passionate about the industry segment they want to serve.
Understand your inventory.
At the most basic level, you should know the following when you’re making new purchases:
· Current inventory levels (How much or how little is in stock?)
· Sell-through rates (How many key product units or categories are sold in a week, month or quarter? Based on that sales velocity, how many units are required?)
· Seasonal peaks (What products sell better at a particular time of the year or month? How do those peaks impact inventory requirements?)
· Gross margin (For products or categories, what’s the net sales minus the cost of goods sold?)
· Product affinity (What’s the relationships between products? Which items tend to be purchased together? Which products help sell other products?)
· Product gaps (What items should be in inventory but are not? If you sell thread, do you also have needles?)
· Cash flow (How do holding products in inventory impacts your business as a whole?)
Build relationships with your representatives.
Manufacturers’ representatives can impact your e-commerce business. These sales folks can negotiate terms, help with delivery times, adjust allocations and resolve issues. Building a good relationship with them can be your competitive advantage. Oftentimes, allocated products go only to the large retailers, but a small seller with a good relationship with these reps can buy them, too.
Measure, analyse and understand.
Although it can be something of an art to select hot and trending products before the market even realises they’re hot and trending, retail buying is more properly a science. As an e-commerce retail buyer, you should monitor how products flow through the business and look for opportunities to (a) increase profit dollars, (b) earn higher margins, (c) increase sales velocity and (d) reduce product outages.
For example, some buying professionals recommend closing out the bottom 5, 10 or 20 percent of products every year. But you’ll never know what those products are without measuring, analysing and understanding the business.