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COVID Pushes Ecomm Over the Top

COVID Pushes Ecomm Over the Top

Societies do not change gracefully. Behind major shifts in how humans go about their days often stand unspeakably horrid events: war, plague, famine, flood.

When the shit hits the fan, we deploy all of our technologies to mitigate the disaster. Medically, that translates into vaccines and healthcare systems. In times of natural disaster, we call up the engineers and first-responders.

The current crisis has forced us to shift as a planet in multiple ways. One of the most prominent economic shifts is in consumer behavior. The changes are significant, real and much more substantial than we think.

Are These Numbers For Real?

It’s a black ribbon medal, for sure. But ecommerce has arrived. No longer an oddity or an alternate, it is now required to be online, either as a consumer or a retailer. This one graph pretty well sums it up:

cgk.ink | ecommerce growth

That’s impressive growth on any level. But the percentage increases become ridiculously large when you start looking at a few industries. Obviously, we know the losers (aviation, hospitality, etc.) but there are some surprising winners. Chiefly among them is an industry I focus on a lot: Print on Demand (PoD).

“It was almost a straight line up when people were scrambling to shift from traditional production to on-demand,” says Brian Rainey, CEO of Gooten, a print-on-demand logistics and fulfillment company. “We saw an enormous spike in Q2, and it continued in Q3 and Q4. On-demand manufacturing and mass customization is growing faster than anyone can keep up with.”

Printful, another on-demand fulfillment company that prints, packs and ships custom products from e-commerce sites, reported an 80% year-over-year increase in order count over the last three quarters of 2020 and a 44% year-over-year growth in the number of new stores joining the platform. During the holiday shopping bonanza between Black Friday and Cyber Monday, the online printing and drop-shipping company fulfilled 25 million products. In fact, that weekend, Printful saw a 70% order increase, with as many as 204 orders per minute – twice as high as in 2019.

(Sources)

The Future: More of the Same

“I don’t think anything will revert back to the way it was before,” says Rob Watson, chief experience officer at Top 40 supplier Vantage Apparel (asi/93390), which offers its own home-grown on-demand customization service to distributors. “More distributors are getting into the space and offering a solution that end-users wanted before but never knew that distributors could offer. I don’t think this is going to go away.”

Don’t expect 2021 to rewrite the narrative for on-demand companies and promotional products firms that follow the same model – 2020 wasn’t a blip. It was merely an acceleration of what’s already been happening. Consider that Printful’s impressive numbers during the holiday shopping weekend came after an already staggering growth rate for the company, which ballooned by 441% over the three previous years – from $21 million in 2016 to $116 million in 2019.

Related article: U.S. Ecommerce Up 92.7%

Shopify, Drop Shipping and You.

Shopify, Drop Shipping and You.

Drop-shipping is not necessarily an evil thing.

 

But it is a hell of a lot of problematic to base a business on.

 

Drop shipping is, in a nutshell, a really shitty proposition. It goes something like this:

You find a supplier in Asia (usually China) who makes consumer products for pennies on the dollar. And of course the quality is sub par, but heh, you have dreams of sitting on the beach collecting money while you nap. You come up with a snappy site and sell these items that are shipped on your behalf by your Asian business partners.

It sounds good. No inventory costs, automatically calculated bulk shipping rates and a huge markup.

Then there are the bad parts: complete lack of quality control, no shipping expedition and your Chinese “business partner” is mass producing these items, whatever they are, which leaves you with a hyper competitive ecommerce situation.

All this was reiterated to me in a recent SeekingAlpha.com article. The publication is a totally nerdy geek journal that worries about the details in this digital economy that I ignore. The article dives deep into one platform’s (Shopify) seemingly disturbing over-reliance on drop ship clients.

Source: Pagely.com

If your unaware, Shopify is a great Canadian company that has created an ecommerce platform that allows inexperienced developers easy entry into ecommerce. I’ve used them for years and do not have one bad word to say about them. And their product is actually very good — well thought out, scalable and fairly transparent. And the market has responded by awarding them approximately 20% of the ecommerce platform market share, which is pretty damn good. The problems start to arise when you realize Shopify’s reliance on drop shippers leave them with a very vulnerable population who will, in most cases fail miserably, thus leaving them with no customers 🙁

At the same time, there are persistent questions about the company’s disclosures on user numbers, its lack of disclosure on customer churn, and the apparent reliance of the business on ‘drop-shippers’ – Shopify stores which simply re-sell cheap Chinese merchandise, ordered directly from Aliexpress – at huge mark-ups – a practice which appears to be not only endorsed, but encouraged by SHOP.

These questions have been around for a while – and we are not accusing SHOP of fraud – but if it is the case that a material percentage of SHOP’s clients are this kind of business, then the sustainability of the growth rate, and perhaps of the entire business could well be threatened.

781% MARK UP?

One of the more scummy things about drop shipping is abusive mark-ups.

By all means, you deserve to earn a profit to cover your efforts. But 781% is not only scandalous, it’s idiotic.

If you had, say, created these items by hand and made 10 of them, their value would approach a markup of say 100%. But theser are being made by the millions — and are being brought for the same wholesale by your competitors.

In short, you not only look like a profteer, you look like an aggressive idiot.

The article goes into depth of some very daunting accounting processes — required since Shopify will not release its numbers — which shows the truly horrible truth of drop shipping:

(…) this suggests that the average store on SHOP, using generous assumptions, is generating less gross profit that would be necessary to support even a single worker at the Federal minimum wage. 

This wouldn’t be necessarily alarming, but, there is a very well-orchestrated campaign that markets to people with false claims of the revenue that drop shipping can generate:

(…) the pushing of drop-shipping as a kind of “get rich quick scheme” on YouTube is alive and well.

Source: Youtube.com

Worse than this, many of these video-makers are attempting to sell training or coaching services on the back of this “drop-shipping opportunity”.

Source: Youtube.com

Source: theecomclubhouse.com

There are way to do this correctlly and make a decent income by being realistic. I’ll explore that in my next post.

Print-on-Demand Custom Orders

Print-on-Demand Custom Orders

The flexibility of print-on-demand (PoD) allows opportunities that have not previously been possible at scale. 

cgk.ink presents a lot of high-quality products quickly. We can do this because we have partnered with Printify to create our designs using their technology. This opens up the creative process enormously. And we want you to be a part of it.

Print-on-demand (PoD) uses various techniques to take digital images and transfer them to products with absolute precision in scale, color and sharpness. Indeed, the entire world becomes your canvas. We’ve selected to curate collections of images that make us smile, or laugh, or think. Our range is wide, but limited since we’re a small crew. We’re looking to expand!

We’d love to help you create the item of your desire. 

For example, let’s say that you’re into robots. Who isn’t? So we did a quick Google Image search and found this little guy:

Cute, right?

NOTE: always respect copyrights and don’t steal. Or you’d be a bad robot. There are tons of places online to find rights-free images -or- you can create them yourself:)

OK, so we have our raw material. Now what? Well, it’s a somewhat simple process with lots of cautions and considerations. Essentially, what happens is:

Prepare Your Design:

Things to consider are file type and size, aspect ratio, transparency, and resolution. Of course, make sure you have permission to use the image or design!

Select Your Medium:

Is this going to print on a garment? A poster? Underwear or a shower curtain? Make sure the design is appropriate for the media.

Edit Your Product:

This is where you position, crop and otherwise play with your design on the selected medium. Not all images scale to all products, so be judicious.

Publish Your Work:

Once everything looks good-to-go, it’s a simple matter of pricing and uploading to Printify’s servers. You can choose to go live immediately or do a second inspection on your ecommerce platform.

Sell Your Product:

You’ve already linked your ecommerce platform to Printify, so all the details, images, pricing and shipping are automatically added.

There’s a lot more detail to this process than I’m revealing, but the concept is solid. 

cgk.ink has lots of experience in designing, editing and preparing images and designs that play nicely with Printify’s requirements.

If you have an idea of an image or design that you’d like to see on almost any garment, houseware, decor or accessory, let’s start that conversation below! We’d love to work with you!

2 + 7 =

Hands on Ecommerce: 101

Hands on Ecommerce: 101

I write a lot about ecommerce and, indeed, working on ecommerce sites is the bulk of my business. [caption id="attachment_2282" align="alignnone" width="1024"]cgk.ink | STORE Select STORE from the top menu to begin.[/caption] So I thought it was time to demonstrate my skills in real, live, concrete ways. I’ve decided to create the cgk.ink store as a sort of teaching tool so that you can see the mechanizations and processes behind running an effective online retail store yourself. I plan on using this as a workshop of sorts where I put into play a lot of the things I talk about in concrete ways. This is a fully functioning ecommerce site and the products are very real — as will be the charge to your card if you decide to buy. Wherever you see  means that there is a pop up that explains in more detail exactly what that component does, why it’s there and resources to explore. The first installment is all about a rapidly growing type of ecommerce that is akin to drop shipping but with a twist: Direct to Garment (DTG) print fulfillment. Companies like Printify, Printful, Art in America, etc. have been around for a while. Essentially the process works like this:

  1. You select an image or design
  2. You transmit that to the selected company
  3. They take a blank item (T-shirt, plate, mug — the product list grows every day) and using their own machinery imprint the design on the item which someone has selected on your customer-facing web site.
  4. You enjoy the fact that there are no upfront costs, no inventory to keep and the printer ships and fulfills the item directly to your customer.
  5. You collect the profit which is your retail price – the manufacturer’s cost.
Sounds pretty simple. And it is, but there are several concerns to address as well as unique marketing opportunities. Which images work best? How do you optimize an image that is being displayed in a different medium? How do you price your item? Let’s explore our first steps together.]]>

RETURN TO SENDER

RETURN TO SENDER

One of Amazon’s best features is that returns are free and easy.

I know, I do it a lot. It’s a staple in ecommerce, especially when you sell tangible items (clothing, perfume, anything that you need to sense, really). Ecommerce does a lot of things, but tactile is not a feature on any site.

So, this means Amazon has a little problem with returns. Amazon, as always, will not release numbers on anything, but let’s just assume that it’s a large number. There are internal outlets for these items; Amazon Warehouse, Woot!, etc. But what do you do with this:

From The Atlantic:

“With a couple hundred dollars and a few minutes, you could go to a liquidation website right now and buy a pallet full of stuff that people have returned to Amazon. It will have, perhaps, been lightly sorted by product category—home decor, outdoor, apparel—but this is mostly aspirational. For example, in one pallet labeled “home decor,” available for sale on liquidation.com, you could find hiking crampons, shimmer fabric paint, a High Visibility Thermal Winter Trapper Hat, a Mr. Ellie Pooh Natural White Paper List Pad, a St. Patrick’s Pot O’ Gold Cupcake Decorating Kit, a Spoontiques Golf Thermometer, a Feliz Cumpleanos Candle Packaged Balloon, and five Caterpillar Hoodies for Pets.”

Chaos. Not a Theory.

It’s not ideal and there a lot of questions, but when you buy a palette from Amazon that they say is worth $4K for only $200, you definitely feel like you’re an insider getting the bargain of a century. Except they aren’t:

“Every box is a core sample drilled through the digital crust of platform capitalism. On Amazon’s website, sophisticated sorting algorithms relentlessly rank and organize these products before they go out into the world, but once the goods return to the warehouse, they shake free of the database and become random objects thrown together into a box by fate. Most likely, never will this precise box of shit ever exist again in the world. On liquidation.com, each pallet’s manifest comes with suggested prices for each product in a pristine state. If you add them up, the “value” of the box might be $4,000, while the auction price might only come to $200.”

“So, Liquidity Services, the operator of liquidation.com, became a major (though not exclusive) handler of Amazon’s American liquidations. The company calls dealing with returns “the reverse supply chain”—a part of the retail business that has been growing in importance as online shopping becomes more popular. Liquidity Services now has 3,357,000 registered buyers on its various liquidation websites. In the past fiscal year, it sold $626.4 million worth of stuff.

Amazon represents a growing chunk of Liquidity’s business. In its most recent SEC filing, the company disclosed that it spent approximately $33.7 million on Amazon liquidation inventory, which it then turns around and sells for maybe 5 percent of the supposed retail value. And, assuming the company is trying to turn a profit, it must buy the inventory for a fraction of that. Doing the rough math, we’re talking about inventory that once had a collective value reaching into the billions, before it landed in some box on a doorstep.”

Inventory Just Sucks

Any business will tell you that the cost of acquiring, storing, safeguarding and delivering inventory is the #1 thing tugging their bottom line down. It sucks. HARD.

I’m seeing more and more of my clients move to “physical cloud services,” by which I mean that they employ Fulfilled By Amazon, Shipstation and a ton of other fulfillment services. And they are either delighted that the onus of carrying inventory has been lifted off their shoulders. Until they realize that they have lost control of their entire brand due to the whimsical policies that firms like Amazon mandate. Hairspray. OK yesterday. Not OK today.

cgk.ink can help navigate the turbulent evolution of ecommerce. Let’s talk more in depth about your latest project.

FBA Can Bankrupt You

FBA Can Bankrupt You

Fulfilled By Amazon (FBA) is indeed, a brilliant idea.

It’s also an unbelievably huge, complicated mess that has reduced grown men to tears.

The concept is simple enough to anyone who understands drop shipping. You purchase bulk items from a third party — usually one located in a country where wages and expenses are insanely low — then mark them up and sell them online without ever touching a package.

Amazon inserts itself in this cycle and the third party goods get shipped to one of their warehouses where they store, package, ship, deal with all sorts of customer issues and then take a fee. Sounds easy. But it’s not.

You’re playing with Amazon. That Amazon which is currently worth more than the GDP of Kuwait. The process of selling on Amazon is so detailed and delicate that most vendors simply give up. In addition to the fees paid and the set-up headaches, it is an unsaid fact that you will need to pour money into an ever-gaping maw since you are (most likely) competing with several hundred or thousand vendors — who bought the same, identical product. Advertising quickly adds up and somewhat shady practices need to be deployed to get your product noticed. If caught, Amazon can (and does) shut you down in a second with no appeal.

The idea of passively watching your bank account swell while on some tropical island quickly becomes a depressing reality.

In her excellent article in the January The Atlantic, Alana Semuels’ How To Lose Tens of Thousands of Dollars on Amazon, she describes how this scenario has allowed a very special type of “consultant” to thrive. 

 

Amazon depends on both of these players as more than 50% of all 500 million of it’s products come from Marketplace vendors. So it’s in their best interest to address this quickly and effectively… which they’re not doing.

I’ve successfully integrated several clients’ sites and products into the Amazon Marketplace. I have also advised many more clients to avoid it. It’s easy to say that you want to sell on Amazon but the reality is that there are several (very unpleasant) factors to consider.Often, it’s better to take the money you would spend on Amazon (and other sales channels) and reinvest it into your existing operations. Operations over which Amazon has no control

 cgk.ink can help determine if sales channels are right for your online projects. Let’s chat and see what your options are.