Welcome to Ask Shopify, a series where ecommerce experts tackle real questions from store owners who are trying to launch, build, and scale their stores. We’re here to help with every aspect of your store, from marketing to HR to accounting.
Who’s we? We’re the ecommerce experts both inside and outside of Shopify. Between our team, who spend all day immersed in the world of ecommerce (and who sometimes run stores themselves!) our squad of Shopify Experts, and our amazing customers, we have access to world-class expertise—and now you do too. So let’s dig in and get to your questions, because they’re good ones.
Our business is at the point where it is about to explode. How do you transition from a small shop (fulfilling orders from your basement) to fulfilling orders with major retailers too? What are the biggest pitfalls to watch for?
First of all, congratulations! This is an undeniably big moment, and while it comes with a lot of change, and a lot of hard work, so did getting to this point—that’s worth celebrating.
But OK, you’re here now, and you’re wondering about the hard work part of it. To help you out, we talked to Dan Fallak, a Shopify merchant who has scaled his multiple stores to huge success. His products and brands include Amazeballs™, Coasterly, Adulting FTW, and Woodposters, and he’s taken those businesses from fulfilling orders by hand, all the way to selling in major, big-box retailers.
“There's so many things that change when you go from fulfilling orders yourself, in your own little space, to selling to independent stores, to dealing with big box chains,” says Dan. And speaking of fulfilling orders, that’s the first thing you’ll need to get a handle on as you grow.
Managing your (new) fulfillment process
There’s a lot you need to know about working with big box stores, and working within their systems—but don’t worry, they’ll tell you about it. In detail.
“All big box stores have vendor manuals,” says Dan. “These things are like 200 pages of guidelines on how they want to receive product, because these companies are getting product in from hundreds, if not thousands, of different vendors.”
“When they get a shipment in they want it to all look the same no matter who it's from. They want the barcode printed and placed like one inch from the top right corner of every box so that when they get it they know exactly where the barcode is going to be.”
Working within that framework is going to be a major change (and challenge) for anyone who’s used to shipping and fulfilling orders themselves.
That’s why Dan is a big advocate that if you’re at the point of working with major retailers, it’s time to bring in some professional fulfillment support.
“When I first realized I was going to be doing business with big box stores, I found a fulfillment center, an actual logistics warehouse, that had dealt with this vendor before, who knew their shipping guidelines, knew their manual, and I outsourced it to them.”
As a business owner, Dan knows that you’re already trying to manage every part of the business yourself, but as he puts it, “you already wear enough hats.”
“You don't need to become the warehouse logistics expert as well. I found value in outsourcing this. I basically shipped all my goods to a logistics center and then gave them the instructions on where it's to go, when it was supposed to go, who it was going to, and then they did all the preparation for that shipment properly, so I wouldn't get any fees.”
Um, fees?! Yeah, large retailers take their fulfillment process seriously, to the point that it will cost you if you’re not compliant.
“If you don't meet their requirements you get dinged. You get fees taken off your invoice. Like, ‘Oh, you put the label in the wrong spot? That's $200.’”
You’ll save yourself a lot of time if you focus on your strengths, and don’t try to become a logistics expert on top of everything you’re already doing. And how should you find a fulfillment partner? Dan says it’s all about the legwork.
“It's not hard to do a Google search to find warehouse and logistics or fulfillment centers. Then you just have to interview them and be like, ‘Do you deal with big box store X, Y, Z?’"
Getting your legal stuff in order
It’s not just your fulfillment process that needs to change as you grow. You’ll also need to look into legal protections for yourself and your business that might not have been necessary as a smaller shop.
“I had to incorporate, because I wanted to separate the business from my personal life now that I'm being exposed to way more customers,” says Dan. “If anything goes wrong, I don't want to be personally liable. Plus, once I realized I was getting way more exposure, I was like, ‘Okay, I guess I better trademark the word ‘Amazeballs™.’ I'm going to want to own that."
It’s not just your own protection you need to worry about anymore, either, so make sure you read the fine print.
“A lot of larger vendors will have specific requirements on how much business insurance you have. I had to up my business insurance, because they wanted a certain amount of coverage.”
Managing your cashflow
Cashflow is always going to be a cornerstone of running your business, but it changes pretty drastically when you go from a small shop to working with big businesses.
“The other big thing to prepare for is the payment terms,” says Dan. “A lot of these big box stores won’t pay you for 60 days after receiving the shipment. Meanwhile, you've probably put out all your money 60 days before you deliver the product to them, so you're out that money for almost 120 days. Cashflow can be a challenge.”
Plus, a big order is great for volume, but Dan cautions that you’ll need to take another look at your numbers when you’re handling large shipments.
“Once you're dealing with these big orders, they're great, but you have to output so much more because the volume's so much bigger. Your margins are smaller because you're dealing with a big box store, and you're not getting paid for longer. It's a different game.”