Given a choice, should I avoid a startup with inventory | Hacker News Reader

Given a choice, should I avoid a startup with inventory

2 pointsbiturd7 comments

For a long time I have been tossing various startup ideas around in my head.

At the very core I can distill them down to two types. First, an entirely only service driven site. Second, something that involves a product or inventory.

It seems that a startup that has something to sell feels a little easier on the surface. But with that comes what seems to me a ton more logistical problems. Warehouse space, shipping, receiving, inventory. Just the programming alone to support those additional aspects kicks up the daunting aspect a bit.

Then there are the completely online startups. Sites like reddit, kickstarter, etc, where there is no inventory, nothing to ship. A service is provided, and you make money off the service, advertising, or selling something the service has gained.

I have actively avoided any ideas that end up having inventory and real product. Should I throw this out the window and consider it not that big a deal?

In my earlier years I have started a few businesses, all of which had product that needed to be shipped. I remember those days, deadlines, UPS, FedEx, everything was dictated by 4PM, which was when the UPS guy came. 6PM of we were really pushing it and wanted to take the stuff to the main hub, which wasn't always feasible if it was a large order of 2000 boxes.

Any comments?

I will take a few minutes to relay my experience:

I used to be a partner in a company that shipped 1000+ packages a day with fedex. I ran the websites that sold those products, and I made sure to take about 30 minutes a day in the warehouse to help load the truck. They didn't need me down there, but it was a very measurable output of my work.

I might have to disagree with the other comment here about Amazon Fulfillment. It may relieve you of a lot of the logistics, but it will also greatly affect how you resolve issues -- bad batches of products, customer service, wrong/missing parts...

At the end of the day what matters in physical goods e-commerce is amazing customer service, and you cannot do that unless you have access to the warehouse. You have to have physical access to the product. You have to have a good relationship with the fedex/ups drivers and account managers. You have to work fedex and ups against each other when the time comes to renegotiate your rates.

When you outsource too many parts of your business you end up too dependent on too many variables you cannot control. Your business continuity becomes more opaque.

Another story: same company in 2005, South Florida-- post hurricane Katrina and Wilma. Because we controlled a lot of the variables and relationships (logistics, internet, warehousing) we were able to do the following:

  * Redirect the 800 number to a vonage 
    line and send our customer service 
    staff up to an Orlando hotel room to 
    keep answering phones.

  * Because of our good relationship with 
    fedex we were able to get them to send 
    an empty truck down from Atlanta to 
    pickup in Boca Raton.

  * We processes printing labels and tickets 
    over a 2G wifi connection.

That is duct-tape business continuity. All said -- it would have been better to just move the company to a location that is not prone to Hurricanes. We did that in 2007.

OK, this got a little long. I'm happy to share more of my experience if anyone cares.

Fulfillment by Amazon is a great way to outsource something that ian't your core competency. I'd recommend this for a company that makes a product, not one that sells other companies' products. So if you are starting a company like Nest to make a better thermostat, let someone else handle fulfillment while you focus on making your product better. If you are starting the next Zappos, then handle this in-house.

May be, you can start off with drop shipments like someone mentioned, and probably go for further integration down the line? I feel that any idea that has a physical or offline component has a higher barrier to entry and thus has a better chance of succeeding if you get it right, or are even able to provide some incremental benefit compared to existing options. I look at this way - if I don't want to touch something because it's too complicated chances are others feel the same way, and vice-versa.

Good luck with whatever you decide to do! :)

If you do sell a physical product, consider Fulfillment by Amazon. They rent warehouse space by the cubic foot and handle picking, packing, and shipping for you.

http://www.amazonservices.com/content/fulfillment-by-amazon....

People are scared of physical products they're hard. You have to deal with design, manufacturing, logistics, etc. That may make it easier for you if the competition is scared away.

Check out the "drop ship" model of business. It's a good way to do physical products without a lot of hassle.

Other good resources:

http://lifestylebusinesspodcast.com

http://www.buildmyonlinestore.com/

http://fourhourworkweek.com

If everyone else is avoiding having inventory (because it's hard), then there is very likely an opportunity there to make money.

It is hard, and moving that inventory is even harder, but that doesn't mean it's not a good way to make money.

I am interested in this too. Sadly, I don't have an answer for this.

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