The Effect of Product Lifecycles on Resellers

The Effect of Product Lifecycles on Resellers

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Working in the business of resale can be a bit complex. While manufacturers produce original products from scratch, resellers are constantly purchasing new, refurbished, or used goods and attempting to flip them for a profit on the market. Furthermore, businesses that manufacture their own products do the bulk of research on their product lifecycle one time. Further research is usually only required for updated analytics or new product offerings.

However, in the product resale industry, research is one of the messiest processes. It’s important to be mindful of the effect of product lifecycles on resellers if you want to see any success in the industry. Before looking into product lifecycles and how they affect resellers, let’s talk about the overall process that resellers have to go through to run a profitable business.

Decide What Products You Will Resell

Resellers can essentially pick 1 of 2 methods:

  • Reseller of a particular good or industry of goods
  • Reseller of anything that can be turned into a profit

If number 2 sounds like an antique store to you, you’re not far from the truth. Decide what you want to sell and why you want to sell it. Being a reseller is difficult if you’re not adequately prepared and aware of the amount of product research you want to do – or need to do. Obviously, in the case of option 2 listed above, the amount and depth research needed will be more frequent, as the effect of product lifecycles on resellers is more demanding in such cases.

Purchasing Goods

Keep a bottle of ibuprofen nearby. This is where the headaches start. Unlike manufacturers who create their own products, or distributors who have clear-set, predetermined purchasing routines, resellers go through business-gymnastics to get the right products. Craigslist, Ebay, and Facebook are all great for small ad-hoc projects and single product flipping, but what about the big stuff?

The first step in the process of purchasing goods is to contact suppliers. Having consistent routes established for product sourcing is imperative if you plan on reselling a particular product or industry of products. If you are more interested in purchasing large quantities of products at once, selling them all, and moving to a different product category, a wholesale website such as Alibaba is a great option.

The second step of this process is selecting and negotiating. After you’ve selected a product, be mindful of the fact that negotiation is often allowed. Talk with the supplier and negotiate a good price. You of all people should know that they are making a profit on the transaction and there is at least some degree of “wiggle room” for price variations.

Storing or Warehousing Goods

Depending on the project of size, you will need to find storing solutions that suit your needs. For a very large resale business, you should begin looking to rent out warehouses or portions of a warehouse to store your products. Contact a third-party logistics company (3PL) that has a warehouse. You will often be given a contractual option to rent out a certain amount of space for storage.

If you plan on running your company as a cottage business (a business out of your home), you’ll have to practice your Tetris skills. Depending on the industry, you should be allowed to run most resale companies out of your own home if you so choose. If you have a shed or garage space, it can save you a lot of money. Just make sure you treat the space to hold the goods and shelter them from damage/wear-and-tear/weather/temperature changes/etc.

Selling Your Goods

Your method of selling the goods will differ depending on whether you are in the b2b or b2c landscape.

If you are in a Business-to-Business industry, take the time to research who your competitors are and what their product offerings look like. You’ll want to make sure you can at least cover everything they can do. Regardless of what random articles on the internet will tell you, cold calling does work. Gather a list of potential business customers and stay on top of them. Make cold calls, cold emails, schedule meetings, and continue focusing on building relationships. After this initial phase, much of your business will come from referrals.

In the Business-to-Consumer landscape, it’s all about digital marketing strategy. You can’t get consumer sales from cold calls. Build your website(s), set up payment gateways, create social media accounts, and start digitally advertising your products. Without having a digital presence, you are wasting money, time, and watching your products live out their lifecycle in a storage house.

What the Product Lifecycles is and How it Changes Between Industries

As I have mentioned in previous blog posts, the product lifecycle is easy but it’s not simple. That is to say, the product lifecycle is not a difficult concept to understand, but obtaining the necessary information, research, and analytics to turn the concept into useful data is complicated.

The product lifecycle is essentially a model to describe the journey of a product, from creation, to popularity, to declining in sales. Every product has a product lifecycle, but each type of product goes through a different cycle. For example, manufacturers of laptops issue new laptops every few years for a couple of reasons. First, laptops only have a 2-3 year life span before they begin to fail. Secondly, new technology is introduced to the market every couple years that make old computers (2-3 years old) dated. However, products like tires, refrigerators, lawnmowers, and others have long lifecycles. People aren’t eager to pursue the newest technology in those industries, and the products are in a relatively stable consumer buying landscape. Thus, the effect of product lifecycles on resellers will differ greatly depending on the product being resold.

How Product Lifecycles Affect the Resale Business

With the facts covered of how each product category has a different lifecycle, the next logical step for those in the business of resale is, “how does this affect my industry?” Depending on the types of products you sell and the method you take (one category or multiple,) expect to be doing a lot of research. Running a reselling business for old phones, for example, may not be a good idea, since cellular technology lifecycles only last about 2-3 years at most.

Here are the 4 steps of the product lifecycle and the effect of product lifecycles on resellers:

Introduction

Introduction is the first phase of the product lifecycle and is characterized by all things that contribute to the initial efforts of a product launch. This includes market research, development and testing, and initially pushing the product onto the market.

As a resale company, this stage of the process has very little relevance to the business. Products that are under development, testing, and research are far from a stage at which product resale would be profitable.

Growth

The growth phase occurs immediately after product launch. It is the traction (or lack thereof) that a product gains. Growth can be measured by popularity, distribution, target market reach, and overall upward trajectory in product sales.

In the retail business, your largest opportunity during the growth phase can be one of a couple things. Firstly, many businesses and individuals will be selling the products that the new technology is coming around to replace. Although this means the product lifecycle of old products is phasing out, it does mean there is an opportunity to flip low product offers into profitable sales. Secondly, the growth phase means you may profit from high volume, below-market cost purchases. Distributors will often sell large quantities of products for a slightly lower price in order to sell the goods for a quick profit. What this means for those in the resale business is a quick opportunity to “hop on the band wagon” and ride out the product popularity wave.

Maturity

Maturity is the most stable section of the product resale business. It is characterized by a plateau in product sales, a new established “norm” in the market, and – often – lots of competition. Think about the calm after the storm of a new iPhone release. A new one isn’t being released, but the “craze” over the new product (growth phase) is over. The effect of product lifecycles on resellers begins to stabilize during this phase.

This is the time to get most of the product flipping done. In the maturity phase, you’ll need to be quick on your toes in the resale business. Establish relationships with vendors that can get you large surpluses of products and focus your attention on finding channels that you can sell them in mass quantities too. Obviously this isn’t easy, but allowing your purchased goods to sit in hopes of stock out via one-off sales could leave you with held up inventory. If you have a brick and mortar location, make sure your shop has products in the maturity phase located at the front of the store. Resale stores can end up with nonliquidated inventory due to poor product floor placement.

Decline

The last phase of the product lifecycle is the decline stage. This is when products begin to decline in popularity due to the rising popularity of a new generation product.

For those in the resale business, the decline stage is when products need to get out the door quickly. Often, it means taking a low-profit sale or even a loss on a sale in order to avoid complete non-liquidation of inventory. The effect of product lifecycles on resellers works against business owners strongly during this phase. This is a fantastic time to move goods into the “clearance” section. It is best practice to anything and everything you can to move products out the door that are going through the decline stage. Holding onto inventory for longer than needed means held-up inventory and lost money.

Conclusion

Hopefully you’re not too scared of the business by now. But the effect of product lifecycles on resellers is very prevalent. Depending on the business you are running, you will want to make sure that you do your research on the product lifecycles of the products you plan on selling. Some products have dynamic, fast-paced lifecycles while others take their time. Do you research and understand you products and target market inside and out.

If you are interested in starting a resale business, call our team at Interlog USA! We have worked with many resellers in the past and are always happy to share our insights with others. Don’t overlook the effect of product lifecycles on resellers if you plan on entering the industry!

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