How to purchase products for an online store with no inventory? Explaining the process leading up to sales
When starting a new online store, the risks that can arise are "inventory" and "start-up capital." If you have a large amount of inventory, there is a risk that it will become dead stock if the products remain unsold, and if you spend a large amount of startup capital, if you cannot recover it, it will lead to a deterioration in cash flow. Starting an online store without inventory is attracting attention as a way to solve both problems.
In this article, we will thoroughly explain the advantages and disadvantages of starting an online store without inventory, how to purchase products during operation, and points to differentiate from competitors. At the end, we will also introduce ASP services that allow you to build an EC site for free and come with many convenient functions as standard, so if you are considering starting an online store, please refer to this.
Advantages and disadvantages of operating an inventory-free online store
Excess inventory is one of the risks when starting an online store. Not only does it require a lot of effort to manage and store, but it can also become dead stock and lead to a deterioration in cash flow. Here, we will introduce the advantages and disadvantages of operating an inventory-free online store, which is attracting attention as a way to avoid inventory risks.
What is an inventory-free online shop?
An inventory-free online shop is an e-commerce site that can be operated without purchasing products or managing inventory. This business model is called inventory-free sales or drop shipping, and the shop owner lists products without inventory. Then, when the product is purchased, the shop owner requests the order and shipping from the external manufacturer, wholesaler, or wholesale site that will be the supplier. There are also online shops that list products as completely made-to-order or made-to-order products and do not have inventory. The advantage of completely made-to-order products is that the product is manufactured after an order is placed, so there is no need to hold inventory, and basically there is no risk of running out of stock.
An inventory-free online shop does not require you to carry out procedures associated with ordering or manage inventory yourself. It is an ideal way to start selling products that are difficult for individuals to handle, such as large furniture or high-priced items, as well as if you are worried about holding inventory.
Advantages and Disadvantages of Inventory-Free Online Stores
Advantages
An advantage of inventory-free online stores is that they can reduce labor costs by outsourcing inventory management, packaging, shipping, inspection, and other tasks to purchasing sites and wholesalers. They are suitable for cases where the income from online sales is low and it is difficult to hire employees, or when there is no know-how regarding inventory management or shipping.
Another advantage of inventory-free online stores is that they can minimize the risk of holding inventory. This is because the seller does not manage the inventory, but manufacturers and wholesalers directly ship products to the buyer. There is no need to worry about a deterioration in cash flow due to dead stock or prepare storage space for inventory, so you can operate your site with peace of mind.
In addition, while inventory-based sales require you to secure a certain amount of inventory before listing your products, inventory-free online stores do not require this, making it easier to start your business with minimal initial costs. This is a convenient sales method when you want to run a product sales business with minimal capital as a side job, or when it is difficult to prepare abundant capital.
Another advantage of inventory-free sales is that you can focus on attracting customers and coming up with campaigns, as there is no need for tasks such as inventory management, shipping, and returns. If you can attract more users, it will also lead to maximizing profits and increasing motivation.
Disadvantages
It is important to note that inventory-free sales only support a limited number of items, making it difficult to differentiate from rival stores that sell similar products. If you want to stand out as unique, you will need to be creative and sell original products that are made to order, or print your shop's logo on general products.
Another disadvantage of inventory-free online stores is that the time from order to shipping depends on the supplier, so you may not be able to respond quickly, such as same-day shipping. In some cases, the supplier is not domestic but overseas, and if it takes a long time for the product to arrive in the user's hands, this may be a reason to purchase from another shop.
Furthermore, since inventory management is outsourced, it is difficult to receive large orders, and the profit margin may be lower than with in-stock sales. It is important to introduce a logistics management system so that you can check the inventory status at any time.
In addition, there may be cases where it is difficult for the seller to answer detailed inquiries from users because the seller does not have the products on hand. Giving vague answers may lead to potential customers abandoning the store or complaints.
How to purchase products for an inventory-free online store
When opening an inventory-free online store, you need to be aware of some differences from general online stores, even from the product procurement stage. Here are three ways to procure products for inventory-free online stores.
Contract with a DSP (Drop Shipping Service Provider)
DSP refers to an agency that handles a large number of products that can be sold on the Internet. When an order is placed at an online store, the specified product is shipped from the DSP. While affiliates receive advertising fees and referral fees for products, drop shipping differs in that the seller is free to set the price and receives the difference with the wholesale price as revenue. The seller does not need to manage inventory, and even if the product does not sell, there is no profit, but it does not result in a large loss, so it is easy to start inventory-free sales.
Contract directly with a business partner
To open an inventory-free online store, you can enter into a drop shipping contract with an existing business partner. If you want to sell products from a specific manufacturer or wholesaler without inventory, you can negotiate directly with the specific company. Although it takes time, it is an effective method when you want to sell highly unique products offered by companies other than DSPs.
However, for shops that have just opened and are not well known or have low sales, the benefits for the company are small and it is unlikely that they will accept the contract. In such cases, it is a good idea to use a purchasing site. A purchasing site is a service that acts as an intermediary for transactions with wholesalers and manufacturers online, and products that are displayed as "Available for order after sale" can be listed on an inventory-free online shop.
Make order-made production of original goods
By using a service that will manufacture and ship original goods based on your own design images, you can sell original products without having to hold inventory. There are various items that are supported, but smartphone cases, mugs, T-shirts, etc. tend to have well-established manufacturing lines and are easy to be contracted for. This service is suitable for those who want to sell items using original illustrations and photographs, and the appeal is that it is made to order, so the risk of running out of stock can be avoided.
The process from purchasing to selling in an inventory-free online store
Operating an inventory-free online store can be made more successful by using services and tools that are suited to the products and scale of the store. Here, we will introduce the process from purchasing to selling in an inventory-free online store and tips on choosing a service in three steps.
STEP 1: Decide on the purchasing method
First, decide on the products you will handle, the supplier, and the purchasing method. It is common to consider products to sell from existing items, highly original items, completely original goods, etc. Once you have decided on the products you will handle, proceed with the procedures for the contract details with external suppliers, such as inventory management, shipping agency, cancellation response, and costs including shipping.
STEP 2: Build an online store
The next step is to build a platform to sell products. There are various ways to build an online shop, such as EC malls and open source, but using an ASP (Application Service Provider) service is recommended because it makes it easy to set up an online shop without any hassle. ASP services are services that use apps to open a shop, and many of them have a wide range of design formats, so you can create a highly original shop page. Some services have a wide range of free plan features, so it is the best way to create a shop if you want to keep initial costs down.
STEP 3: Start operating your online shop
Once the site is built, open your online shop and promote customer acquisition measures. If you can spend a certain amount of money on attracting customers, it is important to choose the best method according to your management policy and sense of cost, such as strengthening online advertising and SEO, or operating SNS if it is difficult to spend money.
Some ASPs have services that support customer acquisition measures such as linking online shops with SNS and SEO. If you already have a physical store or a mall-type EC, it is a good idea to choose an ASP with a wide range of external linking functions.
In addition, for inventory-free online stores, it is important to clearly communicate the delivery time to users when they purchase the product. This is because in the case of inventory-free sales, it may take longer than it takes for the online store manager to ship the product. Take measures to avoid problems after purchase, such as listing the estimated shipping date on the product page.
Points to remember when running an inventory-free online store
Inventory-free online stores are popular with people who want to open an online store with a small amount of capital, as they allow you to sell products with reduced inventory risk. In order to differentiate yourself from stores with a similar concept, keep the following two points in mind.
Conduct thorough competitor research
When selling products using the drop shipping business model, there are many competitors selling similar items. Therefore, if you do not take any measures, your products may be lost among rival stores, or even if customers purchase your products, they may not become repeat customers.
It is important to thoroughly compare the product lineup and prices of your items with those of your competitors, and purchase and price items that are more likely to be supported by users. However, since there is a risk of falling into a price war, you also need to pay attention to differentiation such as your brand concept, services, and the usability of your online store. It is a good idea to use frameworks such as STP, 3C, and 4P to build a competitive advantage for your online store.
STP is an abbreviation for "Segmentation Targeting Positioning," and is an analytical method that segments the market according to your company's business content and clarifies the market you should target and your position relative to your competitors. 3C refers to a method of developing your business more advantageously by analyzing the three Cs: "Customer, Competitor, and Company." 4P analysis is a method to develop strategies in four directions: Product, Price, Place, and Promotion, and to use it for marketing.
Consider purchasing items with potential needs
To make your shop more attractive, it is a good idea to consider purchasing items that are likely to become popular in untapped markets. Rather than purchasing only popular and well-known products, it is easier to establish your own originality, and you can expect to gain new customers and increase repeat customers.
When purchasing untapped items, it is important to analyze the online behavior of your target users. Refer to opinions on social media and reviews on product pages. Also, if you operate a social media account for your shop, you can use the survey function to help with product development.
Perfect for running an inventory-free online shop! "EEGMALL" allows you to start with no initial cost.
"EEGMALL" is an ASP (Application Service Provider) service with no initial cost, no monthly fee, and no sales commission. The initial cost burden is greatly reduced with only commission fees according to the payment method, so it is suitable for those who want to start a small online shop business or those who are considering opening an EC site as a personal side job.
"EEGMALL" allows you to register an unlimited number of products and product images, allowing you to line up a wide range of products in your shop. EEGMALL is used by a wide variety of shops, including apparel stores that have a large number of products and quickly change their products to match the trends, general stores that sometimes handle imported goods from overseas, and cosmetics stores that require a wide variety of products. The quality of product photos affects users' purchasing motivation, so it is best to take photos with a single-lens reflex camera or leave it to a professional.
In addition, EEGMALL has a wide range of design formats, so you can create a shop page with a high level of design even for free. If you want to differentiate yourself from your competitors, you can easily build an original site by introducing a paid design that is compatible with both PCs and mobile devices.
In addition, "EEGMALL" has no initial cost or sales commission, and yet has many features to enhance your shop. Specifically, it has the ability to edit product pages and designs, link with EC malls such as "Yahoo! Shopping" and "Rakuten Ichiba" and SNS, inventory management, customer information management, sales analysis, etc.
In addition, you can use "EEGMALL" to acquire your own domain and build a cross-border EC shop. You can also use your own domain acquired from another company, so you can switch with confidence even if you are currently using another service.
Check the process from purchasing to selling for an inventory-free online shop in advance
This time, we explained the process from purchasing to selling when opening an inventory-free online shop, as well as the key points of suppliers and platform construction.
When starting online sales, having a large amount of inventory is one of the risks. If the products do not sell as expected, it will become dead stock and cause a deterioration in cash flow. In order to minimize inventory risk, why not consider building an online store without inventory? If you decide on the products and targets to sell based on market research and plan in advance the process from purchasing to selling, you can run an attractive store even without inventory.
"EEGMALL" is an ASP service that is also useful for building inventory-free online stores. Since there are no initial costs or monthly fees, it is also popular with small and medium-sized enterprises and sole proprietors who want to keep their initial investments low. If you are considering opening an inventory-free online store, please register as a member for free and give it a try.