I was asked on my Ask.fm account to make a short blog post about how I started Response Commodities so I decided to follow through and make a post about it. Pardon my rambling here, I just whipped this up quick and didn’t go through the editing process much.
I’m not going to go into too much detail because a lot of it is trade secret, but I’ll go through the common sense stuff. I was interested in trade for a long time before starting the business and I first began networking with other people in the industry. I did research and first thing I found where niches that had high profit margins and new trendy items. I picked tobacco products, electronics, and clothing – all high profit niches.
The next thing I did was look on Alibaba for people selling products in those niches. I found sellers, contacted every single one, then negotiated test buys. Most people selling things, I’ve found, are scammers. I negotiated smaller buys upfront, purchased from multiple people, got their skype screen names, and waited for the orders to come in. Some purchases came in, some didn’t – I had to cut my losses.
When the small ones came in I tested selling retail to gauge interest. I also looked at the quality of items I was buying to see if it would be suitable to sell without having to deal with complaints. After selling the items retail and building relationships with the merchants that delivered high quality product fast, I slowly increased my order size until I reached a point where I was ordering in bulk.
Obviously, the larger the order the lower the price per unit. To experiment, I opened up an operation that cold called businesses in my related niches to open up a line of communication where I could begin negotiating rates for bulk orders. In many cases, I ended up being able to drastically undercut their prices off the bat. To propel sales, I fronted inventory to retail operations so they could sell and pay once items where sold.
I slowly began getting into bigger ticket items like electronics, which ended up being bigger margins for me. The biggest challenge with the business now is ordering the correct amount of product, keeping up with the latest technology, and maintaining cashflow while I front product to retail outlets.
Now, I’m still at the very early stages of the business and other things have caught my interest more – but the company has potential and is earning money. Obviously I’m not in Wal-Mart or anything like that yet – but if I put my full focus on it I could grow is dramatically. The biggest challenges I’ve faced with the business is the cashflow required to scale it, and the risk I take when I over order product inventory and it doesn’t sell. For example, I didn’t predict trends correctly in my electronics division and over ordered hundreds of a certain product, only to have the next version released. Now, I’m sitting on inventory of a product that it far more difficult to sell because it’s old technology and I’m going to have to take a loss selling it – plus it’s very difficult to find someone to buy it.