This is a guest post written by Andrew Bowden, Senior Manager, Product Marketing at TradeGecko.
Every single day, thousands of new products spark into being. Yet only one in five survives longer than a year.
In fact, as many as 85% of the new products introduced each year fail, resulting in massive losses. From food to appliances, from clothing and accessories to health and beauty products, no industry is immune to the challenges associated with taking business from start to scale.
And while studies have found that there are certain factors – distinctiveness, relevance, and endurance – that help makes a product successful, success is never a guarantee: a brilliant idea can still fail if your business lacks a resilient operating model.
Through the stages of growth, common patterns emerge
At TradeGecko, we’ve had the opportunity to work with thousands of merchants; each come to us at a different stage in their growth. On the surface, it may appear difficult to compare the challenges of a startup with those of a growing business; however, this couldn’t be further from the truth.
While the pains that accompany growth may seem to be random, if you step back far enough, you see that every product-led company eventually runs into the same issues. Depending on how you structure your teams, you may be presented with these ‘learning opportunities’ earlier or later on in your growth journey than others.
To help ensure that your brand is successful in not only bringing your product to market but in being able to grow and scale, let’s discuss how you can mitigate these challenges through the product life cycle.
Inventory = Money. Whether you like it or not, inventory and how you think about it plays an important role in the financial flexibility of your business as it evolves.
At this stage, your idea has just taken flight. You have a prototype in hand and have either identified a supplier to work with or decided to manufacture everything in-house. During this stage of your product’s journey, it’s important to keep inventory levels relatively low as you work with suppliers to establish quality levels and tweak design specifications based on customer feedback. Finding suppliers who can be flexible and facilitate rapid prototyping, while delivering a quality product at an affordable cost will be essential to your early success.
Your first customers are likely to be early adopters – they want to stand out or take pride in having a product whose message is new, different, and compelling. These individuals will be some of your greatest advocates, but could also become your harshest critics. During this stage, it’s important to actively listen to them and prioritize responsiveness in service.
Actively engaging with these customers will allow you to identify faults in your product and make the necessary modifications (hence the importance of keeping inventory levels relatively low at this stage) so that when you enter the growth stage, your product is ready for larger audiences who may be less forgiving. Creating a process now to facilitate returns and exchanges will also pay dividends as your brand grows.
When your product becomes more mature or demand starts to increase, focus on holding more inventory to maximize revenue opportunities and avoid running out of stock.
Now that you’ve started to build market share, it’s time to focus on increasing it and building brand preference.
While you’re building your marketing machine, the next order of business must be maintaining product quality and availability and providing a great customer experience.
Now is the time to put technology to work.
Keep an eye on sales patterns and find opportunities to automate whatever you can so that your inventory levels and customers don’t get out of control. The possibilities of automation are almost limitless – whether you choose to trigger reordering when stock levels drop below a certain point, update accounting ledgers as sales are made and product received, or send unique auto-response emails based on buying patterns.On the supply side, you need your suppliers to be focused on operational efficiency to lower costs while you ride out the growth stage for as long as it lasts. Review your suppliers’ capabilities and see who can scale and effectively manage downstream capacity bottlenecks.
With more customers buying your product and demand increasing, you may need to consider expanding your distribution channels and adding additional warehouses. To save on operating costs, it’s crucial to track and monitor inventory levels, spot sales trends by location, and quickly transfer product between warehouses.
This is the time to push the green all-systems-go button.
You’ve found product-market fit in your local markets; now turn up the heat and go global! This is one of the most thrilling but scariest times for an entrepreneur. If you haven’t set yourself up for success in the growth stage, or at least taken the time to iron out your operational wrinkles, a brief stall may be imminent.
Multiple currencies, different tax types, new languages, and trading partners all add layers of complexity to a scaling business. In addition to adapting your marketing strategies, you’ll need to make some choices about how you set up your supply chain. Will you ship from a central warehouse, open new facilities in your new markets, or partner with a 3PL? On top of that, you’ll have to hold enough inventory to meet demand in each location, route orders to the closest fulfillment centers to save on fulfillment costs, and potentially partner with new suppliers.
This sounds overwhelming… but rest assured, complexity doesn’t have to be complicated! Having the right technology partners in place as you go from start to scale can make all the difference in the world. Watch the video here.
“When you start an e-commerce brand, it’s important that you have the right backbone in place to grow. So using systems that are trusted and recommended, like TradeGecko, Shopify and Xero, really help you look after the business and you can grow off those platforms.
– Alex McBride, Founder, and director, The 5TH
Your business deserves more than a spreadsheet
I love spreadsheets. They’re incredibly flexible and powerful. That said, they do have some glaring limitations that can put your business at risk if you rely on them for too long.
When you start your business, using spreadsheets to manage budgets, accounting, inventory levels and more will suffice. But as sales and complexity grow, risks start to emerge, mistakes can compound and quickly get out of control. That’s because of spreadsheets:
- are susceptible to errors
- require a lot of time and effort to manage
- don’t scale with your business
- can’t easily be integrated with other data and systems
At the SMB level (with $100k to $1 million in turnover), the next best step up from a spreadsheet is cloud software. Xero is a no-brainer for accounting and we’re partial to TradeGecko’s cloud-based inventory management solution.
Without the need to manage labor-intensive spreadsheets to keep track of inventory and orders, and with a friendly interface, businesses can plug and play to manage commerce workflows: monitor stock data, route orders via the closest warehouse to the customer, and automate inventory management.
With TradeGecko’s inventory control software, you’ll avoid stock-outs, reorder promptly, and get automatic stock level updates whenever sales and purchases are made. You can manage inventory across multiple warehouses, in multiple currencies, and have data flow between your accounting, inventory management, and business performance systems.
Solutions like these will help you better manage your inventory, saving you time and money so you can focus on growing your business.