Sink or Sell Episode 6 - Selling Stuff is Expensive: Know Your Retail Distribution Costs

10th April 2017

Dana Madlem is the vice president of services at Rush Order, which provides retail distribution, customer support and accounts receivable services for hardware startups. Dana helps these startups launch hardware products while successfully scaling their back office operations using third-party logistics.

Most entrepreneurs diligently plan for the costs associated with retail needs, marketing and public relations strategies, as well as all the other obvious components needed to sell a product and get a purchase order. What hardware startups often forget about are the most so obvious costs behind the scenes, like the logistics and distribution factors necessary to get a product in consumers’ hands.

What some startups don’t even realize is that there are a large number of players involved in getting a product to consumers. Your item rolls off the manufacturing line, then goes to a warehouse, then possibly another warehouse and your third-party logistics providers. It then may go to even another warehouse, before arriving at the retailer and the shelf. If this alone wasn’t complicated enough, there are many requirements for how you ship your product, and every retailer has different requirements. From how you submit your invoice to the retailer to how many units go in a box, to how the palettes are labeled, to how the crates are stacked on the palette, it’s all included in a retailer’s routing guide, which can be more than one hundred pages of jargon and rules. Don’t follow them, and you can be slammed with charge backs for noncompliance. These noncompliance charges can really eat into your cash flow.

In addition to overseeing all these crazy shipping logistics, companies like Rush Order handle other issues, such as returns, even seasonal reset bulk returns of your product that a retailer simply may not want to sell any longer. When they receive these shipments, they pick out what can be sold to another client, what can be used as refurbished products for warranty claims and what absolutely cannot be used. Unfortunately, many retailers aren’t so courteous when returning your product as they demand you are when sending it to them in the first place. It’s common for return items to arrive back at the facility with stickers or marks on the packaging, upping production costs even more, as new packaging is required.

Of course, if a retailer notices it’s returning too many of your units, it’ll take notice and kick you off their shelves for good, in lieu of a more successful product. A simple way to get around this is to provide consumers with a prepaid return shipping label, so they can just mail you their return, rather than going through the store, who doesn’t even have to know.

Third-party logistics and the entire side of retail that Rush Order deals with can definitely be a lot to wrap your mind around. However, Dana says it’s all about good planning to ensure success. Plan ahead, be strategic about which retailers you get into and when, dissect each part of the supply chain and uncover all the hidden costs. Then, have a team on your side that understands each of those steps, like Rush Order.

If you’re looking into third-party logistics services to help you reach your retail goals, check out rushorder.com and shoot Dana an email at dmadlem@rushorder.com


Learn more tips like this at HardwareCon 2018, the Bay Area’s Premier Hardware Innovation conference on April 19th-20th.  Experience two full days of keynotes, panels and workshops focused on the most important topics around building a successful hardware company. Get your tickets here now if you want to meet the hottest startups, investors and industry leaders across the global hardware ecosystem.

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