The manufacturing, logistics and distribution of a bricks and mortar sales business:
This is a summary of what I learned about business in the 8 years I have been an Entrepreneur, and a Managing Member of a small business that sold office machines, office supplies and installations.
Understanding a business and all of its facets requires a great deal of “due diligence” however; the most important contribution that I can offer is a reference theory behind an idiom “KISS” (Keep It Simple Stupid) FOCUS. Focus on exactly what it is your business offers. If you sell widgets, you have to buy the materials to manufacture or purchase the widget and then you have to sell the widget.
“Know a little about a lot.”
Trying to take in everything is just too time consuming. Instead we found that networking and being able to locate specific information about a product by understanding exactly what our customer was asking, was more essential than trying to retain it all.
You will never be able to know more about the product or its importance than the consumer already knows. Remember wanting that special toy when you were a kid. You knew all there was to know about that toy. You knew if it was the real one or a fake look-alike and where to get the real one cheapest. The same concept applies here. Your target consumer is also a shopper. A savvy shopper will question you forever about your products, however this is also very time consuming. You may feel that you are offering the best deal in town to the consumer for that item. The long and short of it is, the consumer may take your offer to your competitor only to sell your target consumer for five cents less. Then you did all the home-work and all the leg work for that customer, who just took all of your valuable time and gave your sale to a competitor.
If you sell widgets, know your widget, perform some good due diligence in knowing all there is to know about your widget. Stay informed about your widget’s competitors. Know their widget as well. This cuts to the chase quick. If you aren’t selling the real widget, you’ll need to defend your widget with its price point more frequently. Try not to sell too many types of widgets, the more types of widgets you sell, the more information you will have to retain, hence (“KISS”). This can be a daunting task, as technology is moving at such a fast pace, the new improved widget is two seconds behind. Only stock what you can sell, it is always better to be in demand of something by the consumer than to have a surplus of it. If you are a bricks and mortar, your floor space is expensive real-estate.
Strategy:
Offering a service such as consulting, IT, repair or installations of equipment and combining that service with sales of drop shipments worked best. There is very little need to stock anything and your customers will appreciate someone who they can trust and see. The key to a positive steady cash flow is to sell something to them they truly need. If you sell something that your customer’s need, and sell it at a rock bottom cost such as a 10% markup instead of the standard 35% markup on supplies like paper, ink or toner (under a contract); now you have a built in cash flow and a loyal customer who will build a lasting relationship with you. Offering a quality affordable service will go a long way. Don’t ever under estimate the power of “Word Of Mouth” referrals, this opens several doors and gives you important lead generation. Over time you can increase the prices back to the initial 35% markup as your customer is a creature of habit, most people despise change. Think about switching cellular or television services. Most people hate to switch unless they absolutely will have grass greener on the other side. Your customer will also feel loyal and obligated to use your services. This process will also provide you leverage to reduce prices on any item your client is thinking about ordering in question? (I.e. “If you would like to purchase that item through us, I can offer you a 10% discount today”.) Giving something to your client free occasionally also goes a long way, giving you an excellent PR image.
The Matrix:
It will never hurt to know a little bit about logistics, not the movie, but a grid for distribution. How products are mass produced by major manufacturers and distributed to the markets they target being fed through a supply chain.
The manufacturer designs a prototype and announces a press release. The media then releases news of their product to be made, flooding the stock market with hype. The manufacturers start to rake in the profits before the first one has even been built or sold. Manufacturers then accept bids from major packaging companies. They figure out how they can best fit the product into a box with its 3,000 screws parts and instructions. Then build a machine to package the product on an assembly line, this saves them money on time and labor. The product in the package is then weighed it and sized to fit as many as they can in a cube sized shipping storage unit or truck with pallets and shrink-wrapping, then place the MSRP on the product. Distribution warehouses then stock the products and sell them to vendors, resellers and retail stores. Distributors also arrange for the logistic transportation of that product across the entire United States or world for that matter. From approximately only six (6) locations in the entire USA, the best dispersing method is chosen.
The “end user” is a business in the commercial enterprise industry; midsized/small business or the individual consumer. Once the product is bought by the “end user”, it is now used goods, bought by wholesale as used equipment, auctioned or sold at a yard-sale, donated or trash. Whatever product you may use, or whatever category your business or industry fits into, you are unfortunately a part of the same life cycle.
The Truth About Consumers:
All consumers “end users” buy products for either commercial enterprise business, midsized/ small business or the individual consumer. By comparison shopping, the “end user” searches for a store or business to get a better price. In each market there is a business that uses a 35% markup on any given product they may sell, at any given store. Stores may fluctuate 5%, depending on volume and time on the floor of which they use that 35% to leverage a huge sale. The consumers fight to save maybe $5.00 on a $1,000.00 item. They probably used more gas and electricity, driving and surfing the net to save that $5.00, then to have paid for it in the first place. The end user will spend for shipping, handling and or tax on their already taxed dollar. After they pay for that great deal, wait for the rebate to come in the mail after filling out these four (4) different receipts for rebates with your personal information; that the company will probably say they keep confidential and sell off to a company for your name phone and shipping information.
A savvy large company will often send a letter stating that while transporting all those CONFIDENTIAL documents the diskette somehow was lost, as it fell out of a bag between the facility and being transported to another location. The rebate money sits in a bank, making a mint in compounded interest for sixty (60) days before the stated return date.
Think about paper clips, if you bought only one (1) box, what is the cost? You go to the local stationary shop for that box of paper clips, you thought were a great price at $2.00 for the box of 100 clips. To find out it may have only cost $.35 to package, ship and place that item on the shelf. Now think about that as your project is due for review tomorrow. You impulsively buy the clips, figuring who cares, it’s only some change. You pay for the paper clips on a credit card at 9.9% APR. At the end of the month you wonder why you cannot get ahead.
Consumers are getting smarter and more informed about the products they purchase.
The most effective way we found to profit from our consumers was to have a flattened market approach. Put your business in the center of the circle and sell to all three (3) “vertical markets” instead of one (1) at the cheapest rate price, regardless of market. Use a flat rate percentage for pricing to cover expenses, bank fees and a small profit… Most businesses charge a flat 35% over cost as a conventional bricks and mortar. However we have found that by simply leveraging our price for drop shipped sales to be only 10% above cost; we are able to sell to all three markets without change in our price points. Keeping shipping expenses separate from the product price and not charging anything extra. Some companies will inflate shipping costs, as it is a growing trend. Shipping is usually about the same cost regardless of company. Savvy shoppers will know the difference. Our concept flattens the “vertical market” into a circle cut into markets as thirds and puts your business in the center; your business will have the opportunity to make 35% revenue on its services and a 10% positive residual cash flow. Your automation process and accounting will also be so much easier when you stick to the basics and run with a lean accounting method.
In 2002, Ronald Simons decided to start a business as an entrepreneur around what he knows and loves; computers, the Internet and shopping for the best deal in town. He began to research by questioning friends, surf the Internet, find information on business fundamentals and performing due diligence. What are the best products? Who makes them? Who packages them? Why do people have to pay what they do? The hardest question to answer was: How can I profit from such an exploited and competitive market already? He opened A A A PC TECH in 2003 and became a successful IT and ecommerce internet based drop shipping company. Ronald later grew the company by dispatching sub-contracted Purchasing Agents who also would retain a customer base through contracts of supplies.