Neville's Financial Blog

When I first started House Of Rave I was in high school and going to college soon. I didn't have the space to store inventory or the money to buy it.

To solve this I used a drop-shipping business model where I sell stuff, but send the order elsewhere to be fulfilled. This worked very well because I could concentrate on the marketing aspects and not worry about inventory.

Managing inventory is very difficult and generally incurs lots of over head costs. I'd rather leave this to the pro's and focus on what I'm good at. However since I've never kept inventory myself, I decided I wanted to give it a try. So I decided to perform an inventory experiment with a cheap, small and convenient product.

Temporary Tattoos.

If you go to Google and search 'Barbed Wire Tattoo', HouseOfRave comes up on the first two image results:

The images take you to the barbed wire tattoo page.
Those pictures were taken by me about two years ago when I was doing some product photos. I put a temporary tattoo on my roommates arm and took these photos to show what the product would look like when used. Since then they've jumped to the top of the image results for people typing in 'Barbed Wire Tattoo' and 'Barbed Wire Armband' and other various searches.

The search results vary from time to time, but I get a lot of searches for those keywords coming to HoR. However since I've switched suppliers, the new supplier doesn't carry temporary tattoos, so I was forced to pull those items. However I still wanted to capitalize on the traffic the tattoo pages and images were pulling in. My new supplier offered to carry the product, but this was an optimal product to try something with.

So the Tattoo Inventory Experiment was born. I basically bought a bunch of temporary tattoos from the manufacturer of them and send them out from my house.
Since the tattoos are extremely light and thin, I can keep tons of them without a lot of space. They also sell for over a dollar a piece plus shipping, but cost me only a few cents each.

My 'warehouse' is an old shoe box, my 'storage racks' are just labeled envelopes, and my 'shipping department' is a box of envelopes and some stamps. Basically a mini-business in a box!

So when I get an order which includes a temporary tattoo, I simply write out the customers address on the envelope, insert the tattoo, slap on a stamp and send it from the mailbox at my house.

Getting into the real nitty-gritty numbers of the order costs:

--Cost per tattoo: $0.20
--Cost per envelope: $0.02
--Cost per Stamp: $0.39
--Total Cost for One Tattoo Shipped: $0.61

HoR automatically adds a standard shipping fee to the price of the tattoo, so usually people order other items plus a tattoo. Perhaps I should make it really cheap if someone orders only the tattoos. This way I can entice more buyers who simply want the tattoo and nothing else from the site.

--------------------

The next step was uploading all the new tattoos to House Of Rave and create product photos. This went relatively quickly since it's all the same type of product. Photoshop editing took the longest.

All the final tattoo images can be seen on the temporary tattoo page.

Setting up this whole thing took me about one day. The total cost for everything was $60. So far I've already sent out a few tattoos via this method. It's not the most professional way of sending a product (the tattoos arrive to the customer in a hand-written envelope with no packing slip) but it's just a small experiment. Of the 200+ tattoos I have in 'the warehouse' I only need to sell about 30 or 50 of them to break even.

Managing my 'warehouse' in a shoebox is easy, but if I had larger products and THOUSANDS of them, it would be a nightmare!

Labels: eCommerce, house of rave, inventory control, Money Experiments