Jan 22nd 2011 Issue
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E-Commerce Q&A Part 1

Charles Cain - Jan 22nd 2011

E-commerce - shopping simplified

The right strategy will work

Combining tea and technology

The question is rarely whether there is opportunity, but whether we are properly targeting and maximizing that opportunity. About once per week I get into an extended conversation with an entrepreneur either looking to get into the tea business or already in and searching desperately for profitability. Their underlying question is usually "can it be done". The answer, of course, is yes. The real question, in my opinion, should be "what are the odds?"

There is no "sure thing" in business. The goal is to identify as many potential obstacles as possible and put together a strategy that offers the best possible chance for success. There remains tremendous opportunity for tea businesses to make money online. That said, the customer expectations are increasing rapidly, and the competition is getting more aggressive. The window of opportunity is narrowing, and the the investment required to compete effectively is increasing. The less money you have, the more important it is that you don't make mistakes.

For an introduction to this topic and a deeper analysis of how I would launch a tea website and what makes me qualified to comment on this in the first place, read Getting started: E-commerce. For a discussion on how to get into the business on a shoestring budget, read E-commerce Q&A Part 2: Launching for $10K or less.

I received an email this week from a gentleman named Tien, asking a series of questions I see pretty regularly. I'll attempt to answer those here.

1. How do I choose a platform or web merchant? What do I need to watch out for?
This is actually a huge question. There are a ton of providers and a ton of options. Rather than answer the question directly, I would suggest simply that you need to do your homework. Start by buying tea from a few of the leading tea retailers. (You should go ALL THE WAY through the process and analyze everything from the home page to after-sale support and communication.) Make a list of the features and functionality you think would make YOU most successful. Divide the list into categories of priority, and then compare your list to available platforms.

The Internet is full of information and reviews, and the competitive landscape is always in flux. The best company and/or platform changes at the speed of technology. References are great, but anything that's not extremely recent is irrelevant. Two years is an eternity in this business. In addition, don't expect to be able to do your research and choose a partner in a day. 40 hours of REAL research is a drop in the bucket if you're making a significant investment and hoping to start a real business.

2. How do I select a packaging partner? Any recommendations for a tin manufacturer that can handle printing?
I wrote an article on packaging strategy here. For tins specifically, check the exhibitor list for the World Tea Expo for a list of suppliers in a variety of categories. My friends with Tiesta Tea just had some very impressive tins manufactured in China by Planet Canit. (Guys, post some better pictures of your awesome tins!). The catch here is that the minimum order for custom tins is usually 10 or 15 thousand pieces. If you can't afford that, look into a stock tin and a custom label.

3. What's the best strategy for warehousing and shipping for a small, independent reseller?
I covered some of the ground of packaging and private labeling in Getting Started: Packaging Strategy. So long as you're dealing with packaged product, I would definitely start by filling orders out of my home/basement/garage, etc. Aside from some municipalities (I've heard horror stories out of California), you should be safe shipping already-packaged food product out of your home.

Drop shipping is great if you're looking for a hands-off solution, but you're going to loose out big time in terms of customer service, flexibility, and margin. You can't build a product collection with items from different vendors if you're drop shipping. You can't take a phone call or immediately answer an email about the status of an order, and you won't make much money. It's not wrong, and frankly there are a lot of people that do it, but I personally would not.

Here's just one reason why - Holiday sales often account for 40% of annual business. During the holidays many of the larger tea websites are offering discounts of 20% to 50%. If you're sitting on the typical drop shipping margins of less than 50% after paying for packaging and handling fees, you are dead in the water before you even get started.

This is only the tip of the iceberg when it comes to planning out an E-commerce operation, but hopefully this will help Tien and maybe a few others. Have any other questions? Let me know.

Adagio Teas