When running an eCommerce site, you’re extremely unlikely to be the only website offering a particular item. If you find your marketplace gets very competitive, working in partnership with your competitors can be a preferred option than attempting to battle against them.
Selling shoes on the internet has become one of the most competitive markets around. Large retailers are now focusing heavily on this area, and well-known high street stores also increasing their profile on the internet, it is a very difficult place to do business.
After seeing more and more competition and being forced to constantly cut our pricing, it was becoming increasingly difficult to grow our business and show a decent profit. Many shoes were sold at close to the wholesale price we were paying for them and margins were becoming very tight.
In addition, the range of styles and brands that needed to be kept in stock to offer customers a good selection meant that cashflow was always a problem. If a shoe didn’t sell quickly, it needed to be discounted, reducing our margins further.
Stocking new brands was also a costly exercise as we’d have to commit thousands of pounds to get a decent range, with no guarantee that anything would sell.
After looking long and hard at our business, I realised that the main issue we had was that of stock – we didn’t have the financial ability to be able to hold the stock levels needed to attract customers, so found ourselves in the situation where we were paying heavily for advertising and SEO, but were losing a lot of business as we often didn’t have the style/size our customers wanted.
I decided therefore that tough decisions needed to be made; a few of our brands were working well, so we’d keep these. All other brands would be discontinued and not replaced by new lines.
Instead, we’d become an affiliate and partner with several other online retailers, offering a selection of their products on our site.
Customers would see a product listed on our site. If we hold it in stock, the Buy button would go through our checkout process. However, if we don’t have the item, the customer sees a ‘Buy now from xxxx’ link instead. When clicking it, they’re taken directly to the product page on the merchant site.
This new direction has meant we can add almost any brand to our site now without buying any stock at all. As a result, we’ve been able to make very large cost savings on staffing, warehouse and IT , yet provide our customer base with a much larger range of products.
By concentrating on a small number of merchant sites, we’ve been able to discuss better than normal commission rates, and have created business relationships that we hope will become long-term.
The new strategy means we’re already on course to better profits for last year, yet hold far less inventory. As we progress further, we can concentrate on our site marketing, rather than constantly juggling stock levels.
About the Author
Carl Fraser is Managing Director of Totally Commerce Ltd, owners of http://www.TotallyShoes.co.uk – Retailers of leading brand footwear in the UK.
Totally Commerce Ltd also operate several other websites in different business areas.