The sub title of this post is called ‘Hidden Costs’.
And so began my intrepid journey as a business owner.
I finally managed to place my order for a pallet of books albeit not without frustration. I found out that the slowness in response to my email was because the email account of the sole person I was liaising with was down.
Lesson 1 – always always cc. someone else in your email correspondence. This way, someone else is always aware of your requests and query.
When the invoice for the books was sent to me, I was shocked that the price was almost twice more than what was listed on their website. I froze for a moment wondering what kind of hole I had dug for myself.
After reading through the breakdown, I found out that the increase in price was because the specifications of the item was different and they included a fee to obtain a certificate of origin.
I researched what a certificate of origin is and called our local Customs office to find out if it was necessary to import something into Singapore. It is not. It’s just a proof of origin in case your buyers need some evidence.
Come on! Who cares if the books come from Singapore, UK or Timbuktu?
Lesson 2 – Don’t accept any invoice blindly. Make sure you check through the items and embarrassing as it might be, clarify what each item is for and assess whether you need it.
Next I needed to make payment to the wholesaler. This one proved to be rather tedious because they don’t accept credit card or PayPal. It had to be a bank transfer.
The most straightforward way would be to do a telegraphic transfer and even that, there are so many options and fee permutations. I finally gave up on finding the cheapest method and went with the TT facility offered by my bank. It cost me $50 in admin fees just to do the transfer. Bugger!
Now I needed to arrange for shipment to Singapore. The wholesaler referred me to their preferred freighter so I just went with them. The prices were reasonable and so I thought that was that.
But here was where I had the biggest shock. I received an email from a local freight company who would be receiving the goods on my behalf. They provided me with an invoice which was about the same amount as the overseas freighter.
I thought this was the total bill until he clarified that this was OVER AND ABOVE what I had to pay the overseas freighter. It was for a multitude of documentation, local port and delivery charges!!
Lesson 3 – Always always always do your research on how much it costs exactly to import something into your country and right up to your door step.
Logistics management doesn’t end when the goods are received at the port. There is a series of supplemental fees for delivery to location, labour fees for uncrating, labour fees for delivery up to doorstep and fees for unloading huge cargo from the vehicle…
So now that my goods are finally on its way to Singapore, I decided to get down to setting up my website and booking kiosks at the malls.
I met another hiccup when I realised that the nearby mall I was counting on to begin my operations opened for booking at specified period once a quarter. I had missed the window for first quarter so the next one would only be second quarter.
I widened my options by sending more enquiries to malls further out but the responses were even less hopeful. That was when I decided I would definitely need to depend on e-commerce as an alternative route. This way I would have a 24/7 gateway for sale of my books.
However I will continue scout for physical locations to sell them, so both online and offline platforms will complement each other.
Lesson 4 – When one window closes for you, don’t give up. Look for the door.
While I have experience blogging and simple HTML, setting up an e-commerce site was a totally different experience. I spent close to a week learning all I needed to know about e-commerce using WordPress.
I admit that I took a shortcut and eventually used free templates and plug-ins to help me with it. All in all, the final look and feel though not entirely professional, does the job.
However with e-commerce, while one saves on rental charges, there are other nitty gritty fees to be concerned with. The first is the payment gateway. Using PayPal is thus far the easiest and cheapest (though I hope they bring Google Checkout to Singapore soon) but not free.
In addition to payment gateway, there is also delivery charges. A business decision had to be made whether to charge for shipping or offer it free. Coincidentally a colleague forwarded an email to the department about how free shipping entices online shoppers to buy and buy more.
With that article in mind, I decided on free shipping for my customers. But that doesn’t mean it’s free for me. The local postal service is dominated by SingPost and after factoring both postal and packaging fees, whatever profit margin I was thinking of has trickled away.
This was when I decided to tap into my financial expertise and come up with a proper cash flow projection with all the now known fixed and variable expenses.
I still have some unknowns such as number of books per pallet (wholesaler estimated 1,000) and the sale value of each book (I used a normal distribution curve for starters).
Using this very critical projection, I found out that in future, importing 2 or more pallets will effectively reduce my unit cost by 35%! Also due to some technical constraints and to get a reasonable margin, I had to also raise my original bargain price.
Lesson 5 – Don’t forget to make accurate financial projections. They are the lifeblood of your business and it helps you to make critical business decisions.
Nevertheless I will pledge to ensure my prices are the best one can find after factoring shipping. After all, my goal is not so much profit driven but to give every child an opportunity to own a home library.
Lesson 6 – Most importantly, never forget the essence of your business.