How I almost got killed by logistics and distribution!
Really this should have been the Art of the Small Start Part 3, but I figured this title was punchier.
In the last discussion, Part 1 and Part 2, we talked about the critical aspects of People, Product, Pricing, Promotion and Place (Distribution) as part of a business strategy in making successful products to sell.
A failure to consider any one aspect is a recipe for failure.
Furthermore in the Long Tail strategy, we discussed that low inventory does not mean no inventory, and there are still cost to be considered.
Yep, thats what nearly killed me. I failed to consider the cost of distribution, and the logistical cost of getting things around. I suppose, this is an area that I have very little experience as this aspect of the business I deal very little with at my day job.
Here are the things to consider which I did not!
1) Cost of shipping a product is based on exact weight. Do test runs, get a weighing scale, but you need to calculate you cost exactly. This is very important especially if your business, like mine, runs very lean. I totally miscalculated my shipping cost, barely breaking even for each T-shirt.
2) Cost of travel for you to deliver or get things done. I totally missed this. Having to lug 35 orders, approximately 60 T-shirts, to the post office is no laughing matter. Furthermore I had to make 2 trips to the post office as I had to buy packaging materials first.
3) Cost of your time. How much is your time worth? This is normally known as the “administration” cost to the lay man. What else can you be doing instead of spending this time, the opportunity cost of doing this activity?
4) Finally the cost of working in a different currency. The logistics of moving your money. Yep this was one of the contributing factors that ate into my bottom line and the cost of doing business. The strengthening Singapore dollar meant that the US dollars I was selling my iPoor T-Shirt in, was worth less. Even in small amounts, my cost for shipping grew and was not covered.
At the end of the day, I failed to make correct calculations and my bottom line was eroded. I did not have much choice, but to cover the remaining cost, I had to increase my shipping and handling cost for each T-Shirt.
Oh well as they say nothing ventured nothing gained, or nothing learned in my case!