This Week’s Activities

Due Monday, see Calendar for times

Due Wednesday, see calendar for times

Due Friday, see Calendar for times

Due Monday of next week, see Calendar for times

As your instructor decides

Well it was a busy week.  These were some of the helpful readings.

Readings:

How to Find a Wholesale Distributor

How to Quantify and Compare

Shady Suppliers Case

References:

Alibaba.com

globalsources.com

SmallVolume.com

In one of our case studies we were to consider selling guitars through either an Afilliate or a Wholesale Drop shipper.  This was my essay.

Selling Guitars

By Christopher Severn

 

We decided to sell guitars and explore two business models to help us: the Affiliate model and the Drop ship model.

In the affiliate model there are 4 principle participants: the retailer (or merchant), the affiliate (a web publisher – us), the “affiliate network”, and the consumer (anyone who might want to buy a guitar).   So the idea here is to give advertisement space to various guitar retailers on our website and to attract consumers by publishing articles of interest to people who are likely to buy a guitar.  These might include: Guitar reviews, the top10 best guitars, the most popular guitars, the history of guitars, how to play the guitar, how guitars are made, factory tours, how to improve your guitar skills, Songwriting clubs, how to write a song, how to get your song published, words and music for guitar, etc.  As an affiliate of multiple retailers, we put a link to their websites on our website.  We get paid whenever we direct a consumer to their websites who buys a guitar from them.  The “affiliate network” tracks our activity and the activity of the retailers and disburses payment to us monthly on all purchases from our referrals.  We collect 10% commission on the sale, and the retailers gain more customers and sales.  In short, we develop and publish web content that attracts people to our site, and seek out merchants who want advertisement in exchange for referrals or customers.

The second model is the drop ship model.  In this model we have a web store.  The store is full of all kinds of guitars: electric, acoustic, classical, right handed, left handed, 4-string bass, 6-string, and 12-string.  We may even add banjo, mandolin, and ukulele at some point.  The site allows the consumer to add the guitar to the shopping cart and go to checkout and purchase using a credit/debit card, check or PayPal.   The order is actually fulfilled by a drop ship company, who uses our shipping labels.  We will use multiple drop ship companies who have various kind of guitars in stock.  The drop ship companies will guarantee the quality, carry the inventory, pack the orders, and arrange the shipping.  We buy the product from them at wholesale and sell at retail prices to the public.  We will have drop ship companies in four regions to keep the cost of shipping down and to reduce the time in shipping.

I my opinion if we had to do one over the other I would recommend using a drop shipper.  We get a larger markup on the sales, as opposed to commission or even on pay per click referrals.  When people are ready to buy they need a place to go. Our web store can be that place because of the variety.  We can provide sound information with firsthand experience of what consumers want and search for with a flexibility of changing our offering by adding or deleting wholesale drop ship companies.

……………………………………………

The more I thought about it the more I felt that some kind of a hybrid solution could work.  So on our discussion board I Posted the following:

Drop Shipping Guitars was my choice.  My weighted criteria were:

  • inventory issues 10%
  • the informative nature if the website (our products only vs big market comparison) 20%
  • profit per unit sold 40%
  • range of product selection 30%

drop shipping scored 9.4 where as Affiliate scored 8.

Where were the differences?  Profits:  I thought that that a 30 % + margin drop shipping was better than a 5%-15% commission with affiliate programs. However,  I thought the selection of product could be broader with an affiliate.  I just do not know enough about how many guitar wholesalers are willing to drop ship.

Hybrid model: So say I am a merchant (not a publishing affiliate).  I sell guitars.  How do I get people to come to my web site and buy? I could make deals with affiliates who publish news and information online about guitars. They send me customers who buy, I give them a commission on sales.   I also use Search Engine Optimization (SEO).  So consumers are coming to my site and order because my site keeps popping us when people search for Guitars on Google, Yahoo, etc.  My website offering includes pictures of products provided to me by wholesales who drop ship.  I earn the mark up (the difference between my cost and the selling price). The drop shippers handle the shipping and use my labels. I could also be an e-zine publisher and act as an affiliate for guitars and related products.

Is there a conflict of interest is I am both an affiliate publisher and a a merchant?

Case in point: Consumer Reports does not advertise (like an affiliate) because it wants to be objective and fearless in its evaluations of products.  Some product evaluations show that certain products are inferior.  Why would a vendor of a poorly rated product want to advertise in a medium where their short comings are exposed?  There is a conflict between a publisher wanting to sell advertising, and wanting to share the facts about the limits (strengths and weaknesses) of products that scares away potential advertisers of those products.

Christopher Severn

 

I also began to consider things like repeat business.  How many guitars will the average Joe buy in his entire life?  They can last a very long time.  I venture to say that even guitar players ware out more cars than they do guitars.