Week 2- Brokers, Manufacturers, Wholesalers, Affiliate and Drop Shipping Models

And just like that we jump into who to procure product from and affiliate and drop shipping models! The speed in which we must internalize knowledge in this class is fast. I have learned, though, that this is the best way to learn anything on the computer and it is best to not worry but just continue to read, absorb, read, absorb. It may all be muck on day 1, but by day 5, the picture is clearer.

Brokers, Manufacturers, Wholesalers

To pursue which kind of organization I will procure my goods from, I decided that the criteria I could use would be: lead time, minimums and price. Other criteria that could be used to evaluate would be: quality,or variety of products. By creating a vendor score card in which I rank the ability to adhere to that criteria, I can flush out which vendor would be best for the current situation of the business I want to develop. Ranking seems fairly subjective, so I decided to create a vendor selection criteria that gave the ranges that each score must fall into. I did not want to guess that I thought the lead time of 4 days was a “5” in ranking, I wanted to break down what each number would mean.

Vender Selection Criteria
Lead Time Minimums Price
“1” if 21+days “1” if 301+ items “1” if $2.50+
“2” if 15-20 days “2” if 201-300 items “2” if $2.01-$2.49
“3” if 10-14 days “3” if 101-200 items “3” if $1.51-$2
“4” if 4-9 days “4” if 2-100 items “4” if $1.01-$1.50
“5” if 1-3 days “5” if no minimums “5” if $.01-$1

Not all criteria can be broken down into ranges, but for this application it could. By giving the criteria weights, I could make the ranking reflect my concerns.

Aviators- Vendor Score Card
Weights 0.3 0.4 0.3 Weighted Totals Rank
Alternatives Lead Time Minimums Price
Alibaba 1 1 5 2.2 2
L.A. Wholesalers 4 4 2 3.4 1

After thinking about need to eventually be able to evaluate many vendors, I decided that taking the time to consider what ranking each criteria deserved, I made a formula for excel that would calculate the criteria. Instead of consider what rank a 10 day lead time would equate to, I made it so I could just put the 10 in one spreadsheet, and it would automatically update to a ranking of “3”. I did this by making an IF/AND function that related to the ranges I wanted. Since I could not find any on the internet I could copy, I include it here for reference later so I don’t have to think so hard next time!

=IF(B10<=3,5,IF(AND(B10>=4,B10<=9),4,IF(AND(B10>=10, B10<=14),3,IF(AND(B10>=15,B10<=20),2,IF(B10>=21,1,Error)))))

I know that large corporations like Honda use a more complex version of this to evaluate their vendors. Sometimes when a business is small, it is better to go with a shorter lead time with less risk at the sacrifice of profit until the company grows. By learning the small steps of being honest about the criteria and importance of those items, I can set my companies up for success and stay within the parameters my time and risk allow.

International brokers:

Alibaba Global Sources Small Volume Go Wholesale

Affiliates and Drop Shippers

I knew what an affiliate was in a vague sense before this unit. I read enough mommy and design blogs to see their links to affiliate products. I did not see how the application worked outside of pushing women to buy “these really cool napkins whose print will change the entire dynamic of your party so that everyone will be your friend!” (Although, I do really love a cute napkin) Now I understand that truly any topic can be utilized into an affiliate model. Pick a topic, write about it, review some product as an added-value marketing, provide a link. Done.

It certainly is content driven for most applications which requires time, but since I love to write it sounds like fun. I also see how an affiliate model can drive traffic to other business I develop further. Starting with an affiliate model can be a good way to enter eCommerce. Transitioning to drop shipping, merchandising, or other endeavors all can be easier by starting with affiliate. If anything, the content can be used to drive traffic to other websites that I develop for customers to buy from me.

Affiliate Links:

Affiliates for Newbies

Amazon Affiliate Program

Google AdWords

Commission Junction

Bass Pro Shop

REI

Drop shipping was up for review next. I love drop shipping. My husband has done it as part of his functions at every job he has had and I find it interesting. “You mean, you can sell things for a higher price and you don’t even have to touch it?!” When it comes to if this is the right model though, some of the criteria to consider are: profit per item, infrastructure requirements, and liability. The profit per item can be substantially higher than the affiliate model, but the infrastructure required for returns, accounts payable and receivable, and the liability of when returns go wrong. I have witnessed and been apart of the conversations between shippers and manufacturers. “No, it’s YOUR fault, YOU pay!” Ultimately, the company suffers and the customer is mad. Before I jump into drop shipping, I need to make sure I am ready to cover the extra shipping costs and sometimes eat the returns that go wrong. Also, another problem that can arise is something called “charge backs”. This is when someone fraudulently claims to their financial institution that they did not make a purchase that they did. The company always eats that costs.

Drop Shipping Links:

From Zero to a Million Users

Encyclopedia.com Drop Shipping

Product Sourcing

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s