For people who are starting a Home-based ECommerce Business, one of the things that’s least understood by most is the need for basic Market Research.
There are far too many people failing out there because they simply grab any product they can get ahold of, slap it in an Auction or on a web site, and expect it to sell.
A couple of days ago, I got an email from someone who was thanking me for the free information about ECommerce that she found on our web site. She, like most people, had been struggling with the concept of Wholesale Distributors and Wholesale Pricing, and had found the answers she needed on our site. Somewhere in her email, she happened to ask me how I first learned about Wholesale Distribution.
Now, I’ve spent years writing ECommerce articles that have been published in many different languages all over the world. My company, Worldwide Brands, Inc., teaches people through our web site, and our Customer Service department, all about Wholesale Suppliers, ECommerce, Market Research, and much more.
I’m also a Founding Partner in a Wholesale Distribution company in New York. So, I’ve been around the business for a long time, and learned a lot along the way.
As I started writing all those things in my reply to this person, I realized that she hadn’t asked for my resume! She had asked where I first learned about Wholesale.
It occurred to me that I actually learned about wholesale long before I ever grew up and went into business. The few simple things I learned about wholesale back then apply so well to ECommerce today that I just had to tell her (a shorter version of!) the following story:
Long, long ago, in a neighborhood far, far away, Chris Malta began learning about Wholesale. He was just a tyke then, only ten years old. Chris wanted to earn some extra money for the upcoming Christmas Season, way back there in 1970.
He tried shoveling snow out of people’s driveways, but there’s a lot of snow in Western New York State. Big trucks with nasty old snowplows kept driving by and shoveling the snow back into the driveways. He tried doing chores around the house, but there really wasn’t enough to do to earn him the Christmas Money he wanted.
One day, Chris’s mother realized his plight. An astute businesswoman, she looked down at him and seemed to come to a decision.
“Why don’t you get your coat”, she said. “I’ll show you how to earn money like the grownups do”.
Half an hour later, Chris and his Mom were at Beansy Altman’s Wholesale Outlet, in downtown Rochester, NY. It was a ramshackle place, shivering in the winter shadow of an expressway overpass; a big old four-story brick building that looked almost abandoned. Inside, though, it was warm, and there was a bustle of people weaving their way through stacks of crates and boxes. They were picking this or that item out of this or that crate or box, looking at it, and moving on.
Through the dim lighting and the smell of damp cardboard, Chris saw an old man waving to his mother.
“Millie!” he said, “did you bring a helper with you today?”
Chris’s Mom smiled and said, “Beansy, this is my son, Christian. He wants to earn a little Christmas Money this year”.
“Ah!” smiled Beansy. “Another businessman in the family! Well, all right. We want Christmas Money, we look at Christmas things!”
An hour later, the trunk of Mom’s car was packed full of thick, colorful Christmas candles, and little decorative plastic Holiday wreaths that fit around the candles’ bases.
On the drive home, through the gathering dark and a light fall of snow, Chris’s mother explained the glorious concept of Wholesale to him.
“Mr. Altman sold us one hundred Christmas Candles for twenty five cents each”, she said. “He sold us the plastic wreaths that go around them for twelve cents each. So, how much did we pay for the candles, just by themselves?”
Chris had to think for a minute. It would be another two years before he would meet Mr. Irwin, a wonderful teacher who would finally be successful in lighting the Eternal Flame of Mathematics in Chris’s young mind. He struggled through to the answer, though.
“Twenty five dollars for the candles”, he said.
“Right”, said Mom. “Now, how much did we pay for just the wreaths?”
Chris was warming up to the game. “Twelve dollars”.
“Right again. Very good! Now, tell me this; how much did we pay for one candle and one wreath, together?”
Some more thought, and a quick double-check on the trusty ole finger-calculator: “Thirty seven cents!” announced Chris.
“Thirty seven cents”, agreed Mom. “How much do you think they’re charging over at Woolworth’s for those same candle-and-wreath sets?”
“I dunno”.
“A dollar twenty nine. They’re very nice candle sets. I just bought two of them there yesterday. So how much less than that did we pay for each candle-and-wreath set?”
That one set Chris back a step, but before he could try to answer, Mom said, “That’s ninety two cents, Honey. We got them for ninety two cents less than they charge in the store”.
“Now”, Mom continued, “who do you think might like some of those candle-and-wreath sets?”
“I dunno”.
“Are you sure about that? Don’t you think Mrs. Gallucci next door would like to have one or two?”
“Sure, I guess”.
“Sure she would!” said Mom. “How about the rest of the neighbors? Mrs. Furius? Mrs. DiCiacci? Miss Cerasani? Mrs. Beilaski, Mrs. Carlevatti, Mrs. Toth, Mrs. Sengle, Mrs. Cook, Mrs. Sadack, Mrs. Anderson…”
The list went on and on. Mom knew the neighbors’ names like she knew the names of her own kids. As she spoke, Chris’s eyes grew wider and wider with the realization that he was going to sell those candle-and-wreath sets to the neighbor ladies, and make his Christmas Money!
Mom continued; “Now, how much do you think they’d like to pay for those sets?”
“A dollar twenty nine!” Chris declared proudly.
“No!” said Mom. “If they have to pay the same price they pay in the store, they might not decide to buy them. But, if they find out they’re getting them for less than the store sells them for, and they don’t have to drive through the snow to get them from the store, they will want to buy them. So, what you do is charge a dollar for the sets. Do you know how much money you’ll make if you sell all one hundred sets at a dollar each?”
“One Hundred Dollars!” Chris exclaimed, excitedly.
Well, not quite”, said Mom. “After you pay me back the thirty seven dollars I spent to buy the sets at Mr. Altman’s place, you would make sixty three dollars!”
Well, thought Chris, it wasn’t a Hundred Bucks, but still…Holy Smokes! Sixty Three Dollars! To a ten year old kid in 1970, sixty three dollars was a fortune in spending loot!
When they got home, Mom went over the major points with Chris once more:
“Let them know that you charge less than the store does for the exact same thing, and remind them that they don’t have to leave the house to get it. They’ll buy it from you, Hon. And you be sure to be polite and say Thank You!”
(Thirty four years later, Chris is sitting at his computer keyboard, writing this article. Besides getting a little misty over the memories, he is suddenly struck by the amazing similarity between what his Mother suggested as a sales technique in 1970, and the basic foundation of all Ecommerce today! “Less than the store charges, and they don’t have to leave the house…”. But, that’s not part of the story…not yet, anyway. Not for many more years, for ten year old Chris!)
So, Chris went out selling Christmas Candles, crunching through the frozen snow after school each day, in early December 1970. He didn’t sell them all, but he paid his mother back and made a nice pile of Christmas Money. His Mom put the remaining candle sets in the attic, and he sold the rest of them and more the following year.
During that year, and many others, his Mom helped him make many other trips to Beansy Altman’s and other wholesale outlets. St. Patrick’s Day, Easter, Mother’s and Father’s Day, Fourth of July, etc., etc. With Mom’s help, Chris bought seasonal products at wholesale all year round, and sold them to the neighbors, at a reasonable markup, of course. :o)
Why did I think this story was important enough to write an article about? Because it illustrates a very important point. Whether my Mother did it consciously or not, she arrived at a product for me to sell through Market Research!
Think about that story for a minute:
1. My Mother knew where my customers were. They were right there in my neighborhood, within easy reach of my sales vehicle; door to door selling.
2. She knew the “Demographic” of the customers; they were middle-class women in their early thirties. In 1970, this was a group that was almost exclusively homemakers, thus they were actively taking care of and decorating their own homes.
3. She knew that they would be very receptive to buying a Holiday decoration from me, because (a) it was the Christmas Season, and (b) what middle-class woman in her early thirties in 1970 could resist buying something (at a bargain) from a ten year old kid?
4. She knew who the competition was, and what they were charging for the product; Woolworth’s Five and Dime Store, $1.29. That gave her the proper price point to sell the product with the added convenience of buying it right at one’s own door; $1.00.
5. She knew where to get the product at Wholesale; Beansy Altman’s.
That’s Market Research.
The basic concept, the core business of what you and I do as Retailers, hasn’t changed in 34 years. It hasn’t changed in 340 years. It hasn’t even changed in 3,400 years. Thousands of years ago, traders would travel to distant cities, bring new and exciting things back to their homelands, and place them on the ground in an open-air marketplace for passers-by to purchase.
Hundreds of years ago, merchants in the fledgling US packed wagons full of goods in the East, and made the trek out West, where they used those wagons as storefronts to sell their goods to those who wanted or needed them. Decades ago, people had wholesale supply companies deliver products to their retail stores, where customers gathered to buy them. Today, we use email and electronic ordering systems to have products sent directly from the wholesale warehouse to our customers’ doors.
None of it is possible, though, without Market Research. None of those Retailers, from the sand-whipped caravans on the ancient Silk Road to the manager of the Woolworth’s Five and Dime on Winton Road in Rochester, NY, would have sold a thing if they hadn’t known what t
