Space for a growing business is always an issue.
One of the main Routes to Market for many of the Start Up Loan businesses we work with is selling their products on-line, either via their own e-commerce website or on other marketplaces.
These on-line boutiques are often run from home, to keep overheads to a minimum, and technology has made it possible to be a global brand from your bedroom. However, as a business becomes successful and orders increase, it may well become impractical to manage the distribution from home as additional space and staff may be required to accommodate stock and order processing.
This can be a critical point for the business as it may be doing well, but taking on premises and staff is another ball game. The extra financial commitment can easily turn a company making a small profit in to one making a loss.
|courtesy of www.saderose.com|
Luckily there are ways to manage this growth spurt without taking on large overheads. There are now an increasing number of order fulfilment houses that are set up to take in your stock from the manufacturer and distribute to your customers on your behalf. Traditionally these distribution warehouses only wanted to work with high volumes of stock and deliver to business premises. They were used mainly by large brands delivering to retailers, but the experiential growth of on-line sales has led to many offering a menu of services to smaller web based retailers including pick and pack distribution, re-processing and customer service.
Obviously there are fees attached to these services, which will need to be included in to your cost prices, but this can be a cost effective way of managing growth. There are many fulfilment warehouses to choose from including Intermail and Amazon offer this service for goods not even sold on their site.
As ever, you’ll need to do your research to check out the comparative costs between companies offering these services. You should find out who else they work for, if they have minimum quantities, where they can distribute to (national and international?), what level of service they can offer you ect. You'll need to manage the relationship carefully and brief them on how to respond to customers and how your goods should be packed as it is important they maintain your standards and reflect your brand in a positive way. Mystery shopping can be a good tool to monitor their effectiveness and check if they are following your brief.
If your brand continues to grow there will come a point where the critical mass could mean it is better to take on premises and staff to bring the distribution back in-house, but by that time hopefully the business will be in a stronger position to take that next step.
If you want to find out more, our practical Routes to Market workshop will inspire you and further information on access to funding and free mentoring is on our Start Up Loan page.
If you'd like to share your experiences with fulfilment houses and have any recommendations for our community, we'd love to hear from you.
By Alison Lewy