Back in December a friend and I decided to try our hand at a simple e-commerce business. Drop-shipping lighters from China. We built a brand and website to sell the lighters and created ad campaigns and managed to sell about a dozen lighters in the lead up to Christmas.
That first dozen sales lead to quite a few important insights.
- Drop-shipping is a terrible way to build a sustainable business. It’s so easy to do, that the barriers to entry are low enough for anyone to find and undercut you with ease. Shipping times are unacceptably slow and out of your control. Quality is hard to assess.
- People really dislike slow shipping. About 50% of our sales resulted in hands on customer support to calm nerves. Getting abusive and insulting emails is disheartening and not fun.
- Running ads on Facebook is subtly difficult. Even with what seems like great margins on the product itself, we found ourselves spending $50 in ads to sell a $30 lighter.
But in an effort to continue to improve and crack this nut of e-commerce we took a break to assess the situation.
To fix the problems with drop shipping business model we decided to do a custom product. We designed a lighter and found a manufacturer in China with the molds for a lighter and the ability to mass produce a couple hundred lighters for us. Bulk ordering like this cut our per-unit cost in half, which was a nice bonus.
A couple months later and I got a couple hundred lighters delivered to my house. This was the second thing to improve on. Shipping from within North America will help to remove the bottleneck at the border and by doing the fulfillment myself I have the option of easily doing pack-ins, and testing shipping options. Solving the shipping issues should alleviate our biggest customer support problem.
Finally, advertising is critical, and it unfortunately just requires copious amounts of testing and fine tuning to discover the ads that work with landing pages that convert. This will continue to be an avenue to learn more on and continue to do better with. But with several hundred lighters ready to ship sitting on the floor in my office, there is now a definite source of motivation to sell these lighters profitably.
For those interested in seeing the result of all this, and in keeping with my space themed branding, you can find my Space Lighter at spacelighters.com