Pre-Inventory Startups

Today, the bar to launch an online commerce business is extremely low. In fact, It’s so low you might want to think about launching yours before you even have anything to sell. It turns out a great many companies (mine included) are doing just that.

When we first launched Wittlebee, I wasn’t sure whether anyone would actually want to purchase any of our products. Therefore, we tested our plan by putting up an extremely simple homepage and checkout form—literally a two-page website. I knew if we could get someone to check out through that questionable experience, we had something truly special. Unsurprisingly, we had no sales during the first few days. However, after about a week ,the orders began to flow in faster and faster. We had one slight problem though. We didn’t have any inventory to ship—not even a single onesie or a pair of socks.

To satisfy those first orders, we ran down to local retail stores and bought their entire clearance sections—literally, the whole sections. In case you’re wondering, some cash registers do indeed have a 500-item limit before they crash. We discovered this personally much to the dismay of anyone unfortunate enough to be standing behind us in line that day. The local stores came to know us eventually and helped us better split up orders to avoid such crashes. The store personnel never really questioned our motives in buying so much merchandise so frequently. Thankfully, today we obtain our merchandise through direct partnerships and through manufacturing. This certainly beats retail, but without those retail channels, we could never have gotten started. Of course, the irony of using retail to destroy retail is not at all lost on me. I’m also certainly not the first to have begun this way.

Back in 1999, local (and even global) legend Bill Gross wanted to determine whether someone would buy a car online. He used a similar approach when launching CarsDirect.com (source):

“We put a site up on a Wednesday night; by Thursday morning, we had four orders. We quickly shut the site down (we’d have to buy four cars at retail and deliver them to these four customers at a loss) but proved the thesis.”

When Zappos founder Nick Swinmurn couldn’t find exactly the shoes he wanted, he launched his own site (at the time called Shoesite.com). Because he didn’t have any inventory, he negotiated a deal with the local Footwear Etc. store in Sunnyvale, California (source):

“I’ll take some pictures, put your shoes online, and if people buy them, I’ll buy them from you at full price.”

These past two stories illustrate how starting an online commerce site without any existing inventory was possible even back in the early days of online commerce. Today, it’s happening much more frequently, thanks in part to the modern ecosystem of highly efficient customer acquisition tools and increased access to potential customers. You used to hear a great deal about “pre-revenue start-ups” (LOL), but as the next generation of commerce companies develop, I hear more and more stories about pre-inventory start-ups.

But be careful what you wish for.

Before we knew it, Wittlebee was shipping 50,000 items per month. Obviously, that’s significantly more than our local retails stores could provide. Remember, use but do not abuse retail to get your business started. Make sure you’re aggressive about finding more suitable channels and the staff to support your business. Once you’ve crashed your first retail cash register, it is likely time to move on.



Comments Closed

3 Comments about “Pre-Inventory Startups”

  1. michael j lambie Says:

    Also reminds me, we’re having our first child soon, so we’ll have to put in some orders on Whittlebee. Congrats on the success here Sean! Were you buying things from local vendors and just marking them up? That’s awesome. Did you ever have a case where you were ‘sold out’ of an item? How did you list availability of such items on your site? Are you going to deliver a talk of sorts on this topic? i’d love to hear more.

    cheers!

  2. Sean Percival Says:

    @Michael

    We actually lost money on every one of those first orders. Or at best broke even. We have been pushing up the margins ever since but always knew it would require direct manufacturing to really get the pricing we needed.

  3. Pura Santmyer Says:

    Hello! Someone in my Myspace group shared this website with us so I came to give it a look. I’m definitely enjoying the information. I’m bookmarking and will be tweeting this to my followers! Great blog and amazing design and style.|

Published: October 21st, 2012 | 850 views