Here’s what to consider when you have a potential bestseller on your hands…
Concerned about making the leap from purchasing small amounts of stock to placing larger orders with your supplier?
So here’s the scenario: you’re a new online seller, you’ve purchased a sample of a product, checked its quality is up to scratch and ordered another 10 of that product initially just to test the market. Those 10 items have all sold and you’ve purchased a further 20 – and sold those too.
Things are looking good! But when do you make the leap from purchasing small amounts of stock to placing larger orders with your supplier?
I know from emails I receive daily that often there’s that small niggling feeling that whispers in your ear “but what if I buy lots of stock, and then it doesn’t sell?”
I do understand this and it’s particularly frightening for you if you are new to selling online. So what’s the best approach to this? Do you bite the bullet, order 1000 units and patiently wait for them to sell? Or do you order in smaller increments of say 50, 100, 200 or 500?
Or do you continue ordering little and often – in 10’s and 20’s to play safe?
Well, I’m sorry to say that this is a bit of a ‘how long is a piece of string’ question, simply because there is more than just one factor involved, so what might be right for you, may not necessarily be right for someone else.
First let’s consider the reasoning behind buying up stock of for example 1000 units.
However, there must be a balance between purchasing in large quantities to secure a discount and the worry that you won’t sell enough, quickly enough to ensure you haven’t got huge amounts of money tied up in stock, because you are simply burying all your capital.
So, first of all you need to ask yourself this; is the discount for purchasing 1000 units actually worth it?
Will it make a significant difference to your profit margin? If the discount being offered is only marginal then there is no point in tying up that extra money in stock just to make an extra few pence per sale, instead up the order to perhaps 50 units, or 100 – you may still receive a small discount.
And don’t forget that if you jump in with both feet and order 1000, your supplier will very likely be expecting you to continue in that vein for the future too. You will have set a precedent.
So, next you need to look at the timescale in which your initial products sold out. Let’s say you sold your initial order of 10 over two days and your second order of 10 over another two days. From this you can work out that you are selling on average 5 of the product per day. This means that over 30 days you could potentially have shifted stock of 150 units.
Again, this allows you to up your order to approximately 150 or 200 units and you know that you’ll be prepared for the month whilst not tying up too much money in stock.
By placing an order that covers your potential sales one month at a time, you won’t need to constantly be re-ordering every week and you’ll free up time that can be far better spent researching new products, rather than dealing with deliveries.
So far, the argument as to whether to purchase stock in the thousands, hundreds or tens is somewhat in the middle – the hundreds. But I mentioned earlier that by purchasing all remaining stock – for example if a supplier only has 1000 units left of a particular product – you can stop competitors snaffling it.
This should only be done if you are absolutely certain that you have a top seller on your hands (i.e. you have sold many more at a good margin and in a small timescale) and of course you have the money to invest – you should never risk more money than you could afford to lose.
If a product is selling well, particularly if it’s a limited line, then bump up your stock as there is nothing worse than having your listing end due to no stock!
You also need to take into account your ‘order to delivery’ times. If your supplier is UK based it’s unlikely that so long as the product is in stock it won’t take more than a day or two to reach you. If you are ordering from overseas or your product needs to be manufactured and branded then lead times will be much longer, so it could be advantageous (and will in fact almost always be necessary) to order in the thousands.
Finally, remember that seasons can wreck your data! If you are seeing huge sales with paddling pools for example and it also happens to be August and the middle of an unprecedented heatwave, you are bound to see more sales.
But what happens in September when the sun disappears? If you have ordered 1000 paddling pools on a whim in August because you’ve made great sales whilst the suns been out, just think about what will happen to those paddling pools if the weather turns…
Like I said earlier, there are many factors to consider when deciding when to up your orders – and some of these will be personal to you – so there is no one straight answer for all.
In general though you do need to strike a balance and importantly to understand the pattern of your sales and to know your own business. There are no hard and fast rules but a certain amount of common sense is required!
Test first, then move to a slightly larger order quantity, then once you have collated your sales data for 30 days or more you’ll be able to work out how many of a product you are selling on average per day – and that’s when you can start increasing your quantities and taking advantage of potential discounts.
For new sellers, only deviate from this if you know for sure that the product is likely to be discontinued and you need to secure remaining stock, or the bulk quantity discount is impressive!
As always I wish you the best of success,
- You are very likely to get a good discount on a bulk order, potentially giving you a healthier profit margin
- You free up the time spent constantly placing orders and taking deliveries.
- You may guarantee that you buy up the last remaining stock of this product and so stop competitors buying it.
- If ordering from overseas, order to delivery times can be long and not guaranteed. More stock at hand allows you to rest easy, knowing there is no danger of you running out of stock unexpectedly in the near future