The project objective was to build an application that takes a supplier’s catalogue, then quickly and efficiently identifies the products giving the best return on investment.
‘Zephalopod’ is an online retailer, owned and run by Daniel Warren. The company buys products wholesale from suppliers and sells them on Amazon’s European marketplaces.
The company does not specialise in particular products. Any available product is considered but those chosen must demonstrate a quick and sustainable Return on Investment (ROI) and rate of sales. Daniel estimates that only 1 in 50 to 1 in 100 products that he considers are worth buying.
THEREFORE THOROUGH RESEARCH TO IDENTIFY THE RIGHT PRODUCT IS KEY TO THE SUCCESS OF THE BUSINESS!
The Business Issue
Identifying the right products was a slow and sometimes random process, significantly impacting business turnover. The product selection process was very manual, the main steps ‘per product’ being:
- Look through a wholesale supplier’s catalogue for potential products
- Find the corresponding listing online, noting the product EAN and wholesale price
- Use the EAN to search for the product on Amazon’s website. If sold by Amazon note key data such as:
- Shipping/handling costs
- Sales Ranking (used to estimate rate of sales)
- ‘Competitive prices’ offered by other sellers
- Feed the above data into a proprietary spreadsheet to calculate the ROI. The ROI calculation formula is based on Zephalopod’s extensive experience working in the ecommerce sector
The average time taken to process a product was 5 minutes. As a result it was impossible to do a complete survey of all available items.
Zephalopod work to a monthly budget and keep searching for potential products to buy wholesale until their budget is filled. Given these time and monetary restrictions there was no guarantee that the best items were selected. Instead, an adequate number of products was identified.
Zephalopod approached MJD IT Solutions in late 2016, to design and develop a simple to use ‘Return on Investment’ (ROI) Calculator that is capable of ‘bulk-processing’ a supplier’s catalogue significantly faster than the manual process.
The process is now as follows:
- Obtain a supplier’s catalogue data – such as an Excel spreadsheet or CSV file
- Upload the data to the calculator
- Initiate the process to ‘bulk-calculate’ the potential ROI per product
- Save the results to a CSV file
Key to the success of the bulk process is the application’s ability to call Amazon Marketplace Webservices (MWS). These functions enable the application to get the required Amazon-based data per product.
The end-result is a spreadsheet containing ROI data per supplier product.
In returning all the calculations in one spreadsheet, Zephalopod can filter and re-order the data to quickly and easily determine which products provide the best ROI.
Also, the automation of the calculation process enables the management of far larger product ranges in a far shorter space of time. For example, a supplier spreadsheet containing 5000 products can be processed in less than 45 minutes!
Dan Warren commented:
With the tool that MJD Solutions built for me, I am now able to evaluate thousands of products at a time with a few simple mouse clicks.
As well as saving me weeks of work, I am now able to survey all available product data at once, ensuring that not only do I find adequate stock to invest in but also the very best out of any pool that’s available to me.
This ensures that my budget gets spent in the most efficient way possible, leading to significantly greater return on investment.
The application went LIVE in January 2017 and Dan has already used the calculator to make product selections.
Sales figures are not yet available. However Dan estimates working with the calculator will add an estimated 30% to the company’s rate of growth, given how easy it now is to evaluate new suppliers. In cash terms this would create another £52,000 turnover in the next tax year that he would not have achieved otherwise. This should result in anything between £12,000 and £19,000 in extra returns and therefore a much higher profit margin.
With the power of the calculator at his disposal, Dan’s new challenge will be managing his rate of growth – for example ensuring he has the resources and manpower to physically process sales.
THAT HOWEVER IS A NICE CHALLENGE TO HAVE!