My brief experience with selling the popular loom band kit, how I got the idea, what I learned and what I would do differently next time.

In April 2013, I was talking to my brother and we were trying to come up with an idea for an online business. Straight away, I thought of selling something online. I had experience in marketing and e-commerce plus I knew I would be able to source product from  Alibaba.

3 key lessons I learned while starting my online store

 

For anyone who has been on Alibaba before, you’ll know just how many products are available. I had started my career as a buyer’s assistant so I understood about MOQs (minimal order qualities) and shipping but still was confused by the overload of information. Some products looked cheap, some products were really expensive plus I had no idea what type of product we should sell.

I knew I needed to narrow it down to a product that would be popular in the Australian market, cheap to buy and ship, plus have a quick delivery time.

To find ideas for a product that could work I started searching for crazes in other countries, I thought Japan and the USA would be good places to start. Japan because it has cute, kitschy products and the US because we tend to adopt many of their crazes in Australia. I saw some  animal silicon bracelets   but after some research I saw they had been popular in the USA about 2 years earlier and I was worried that it may be too late to bring them to Australia.

I then looked at the  Amazon top 100  this shows a ranking of the top selling items on Amazon.com. It is really helpful as it shows if the item is moving up in popularity or not. When I looked at the Toys & Games section one items caught my eye – the Rainbow Loom. For those who may not know, they are kits with silicon bands that allows you to weave the bands together to create colourful friendship bracelets.

I liked the look of the product but I still needed to do some more research. I used the  Google Keyword  tool to see if anyone in Australia was searching for Loom band kits, there was maybe 300 searches a week, compared to 159,000 in the US. I did as much research as I could to see if it was available in Australia and as far as I could see it wasn’t for sale anywhere in Australia. I was working on the assumption that the craze would take off in Australia and the 300 searches per month would jump significantly.

I contacted the person who started the product in the USA, I asked if I could license the product brand to sell in Australia but unfortunately received no response to my multiple emails.

Then I contacted some companies in China on Alibaba. I found a good supplier who seemed like they could help me. They worked closely with me so I could change the design (I didn’t want to “steal” someone else’s design).

The company in China did a design for the box but I didn’t think it would be suitable so I put a job up on  Freelancer,  which is a great site if you want anything designed. It cost $60 and I think it was highly worth it.

Here is the difference it made:

 

 

I placed the official order for 5000 items, the smallest amount I could buy, for $1.05 each in July 2013. There was a lot of back and forth with the factory in China, including some faulty product that has to be remade. Overall though I was really happy with the service, it was friendly and mostly fast.

After a slow start, I received the product in December 2013 just in time for Christmas.

First thing I needed was a website. I am lucky that my partner is a web developer, so he whipped up a website in no time. It was integrated with an online payment tool and an e-commerce cart. What I didn’t realize is just because you have the right product and a website does not mean people will come to your site to buy it.

I had small numbers of visitors to the site so I investigated Google adwords and found it was too expensive, similar with Facebook. Over the next 3 weeks I had some sales trickle through, and let me tell you the first sale was exhilarating.

After a couple of weeks I was disappointed in the results, the sales hadn’t increased and I had thought Christmas would be the time people would buy. I knew I needed to try something else if I didn’t want to be left with about 4950 kids toys.

I decided to try ebay and listed a couple of items. Again sales trickled through, first a couple, but then more and then more again. I remember the first weekend when we got 15 sales, we were away for the weekend and had an email alert from ebay each time we made a sale so we kept hearing the kerching sound all weekend. During the peak of selling Colour Looms we were selling 70 to 80 items per day!

So what were the lessons I learned:

1. Check postage costs

Seems obvious right? Well this was something I failed to research. All up paying for the goods and getting them to Australia ready for sale cost me about $8,000. I figured I probably needed to sell about 500 – 600 items in total to break even and I figured I could do that. What I didn’t check was the cost of postage. It ended up being close to $6.00 per unit but had I made the packaging about 1cm lower in height the postage would have only been around $2.00. A work around was to sell 2 units at a discounted rate as two kits could fit in the $6.00 postage bag bracket but I wish I had done my research around postage.

2. Customer Service is the most important thing

I can’t stress the importance of customer service in anything you do. We’ve all had those customer service experiences that have stood out because someone went out of their way to help us, and likewise we all know how frustrating it is when customer service doesn’t live up to our expectations. Having customer feedback on our eBay account proved invaluable, we never once had a negative feedback and only 3 neutral ones with 500 odd positive ones. This helped other buyers know they could trust us and they would get what they ordered. We achieved powerseller status on eBay and we’re now a top rated seller.

How did we achieve this? We made sure we answered every query within 4 or 5 hours, and we posted items every weekday morning so no one was left waiting for their item. We did have a couple of lost items but we replaced them straight away, even though there was the possibility they weren’t actually missing. The percentage of items that went missing was tiny and it was worth it to us to trust our customers and just replace the item. Once I resent an item that I was told was missing and then the original item and new one showed up so the customer sent me a cheque for the second item. I like to think that most people are honest like this.

3. Don’t complicate your website

As I explained earlier my partner created a website with e-commerce integration, I was lucky this was free but had I paid for the e-commerce part, it would have been wasted money. With the e-commerce integration, customers could come straight to my site and buy directly from me, which was great but it is a lot of effort to get those customers to the site and then to convince them to buy. It isn’t impossible but it is a lot of marketing and a time commitment is needed to focus on converting customers. We ended up keeping the homepage of the site and then linking to our eBay store. eBay is a large marketplace that attracts millions of people looking to buy so we were attracting people via our homepage but also through our eBay store. At least 80% of our sales came directly via eBay so it paid off switching to this method.

The craze lasted for about 6 months, and there are still loom kits for sale on eBay today but due to other time commitments I have stopped aggressively selling them. How many did we sell you ask? We sold just under 2700 units and made a nice profit. Would I do it again? Definitely. Colourlooms were never going to be more than a craze and I knew that going in. We had high sales over a short period of time, but I think a solid product that sells a steady amount week on week would be a great side business. The initial research was only a couple of hours of commitment and dealing with suppliers also only a couple of hours all up. Once the store was set up managing the sales, loading products, emailing customers and posting items, took no more than 2 hours work per day. I could have put more time in too, writing blog posts, posting in forums to get more customers and becoming the online expert in the product. I could have encouraged kids to send in videos of themselves using the kits to win a prize and posted these on the site to generate interest. I could have utilized my Facebook page to build a community and run promotions.