Selling large quantities of one or two products with high consumer demand is a highly efficient way of doing business.
The high demand and turnover means you need not worry about getting stuck with a warehouse full of dead stock. This greatly simplifies inventory management, picking, packing, shipping, and customer service.
This strategy of selling lots of a few in-demand products does have its problems. The main one is competition. There is nothing keeping other businesses from getting their slice of the pie. When lots of competitors move in, growing your business gets ever more difficult. You might succeed in the face of this by doing a better job than them of branding your business, and differentiating yourself in a way that consumers find compelling other than having the lowest prices.
While working on this, you might consider augmenting your business with the easier pickings of the long tail. If you “plotted” on a graph the numbers of products according to their demand with the highest demand products on the left side and lowest on the right, you would find that the vast majority of products are on the right side, or the “long tail” part of the curve. In other words, there are far more medium to low demand products than products with high demand.
Before e-commerce existed, many companies ignored these medium to low demand products because each by themselves had insufficient demand to support a real business. A few of these were kept in stock to complement their main big sellers. Selling many different kinds of low and medium demand products would add up to substantial profits in theory, except that expanding your retail space to accommodate all of them is cost prohibitive. Another problem is that the demand for many of these items aren’t necessarily local to your retail outlet.
However, technology has changed since then, and online stores expand your exposure beyond your immediate locality. The cost of expanding an online store is negligible compared to expanding physical retail space. As mentioned before, there are lots of easy pickings (products with low competition) if you’re willing to sell a few of each of many different products. Of course, you should moderate this by going after products of moderate demand rather than zillions of low demand products.
The Need for a Good Warehouse Management System
The only challenge not discussed yet is the warehouse management side of this. Because you will manage lots of different product types, inventory management, picking, packing, shipping, and other aspects of customer fulfillment become more complex. However, the right warehouse management system makes this feasible. A good WMS allows you to accurately track your inventory levels and reorder items before they stock-out.
Pickers won’t have to run around all over the place in a warehouse stocked with hundreds of different products. A good warehouse management system can group purchase orders and direct pickers so that walking distances are minimal. Advanced analytics and data presentation allows you to know which products to keep or order more of, and which you should drop. Many companies are doing this successfully. Why not join them? For more information about how a good warehouse management system can improve your profits, contact us.
