The Most Dangerous Number in a Consumer Products Business

In times of uncertainty or a critical event, business weaknesses that have been hidden to the untrained eye, start to come to light.

Many businesses haven’t realised the size of the risks they have been taking until an event like the Coronvirus hits.

For example, we are starting to see some pressure on consumer products companies who rely on China for the manufacture of their products, or components of products. It can be something as simple as packaging, a small but important component, or the whole product.

Another example is companies that have relied heavily on the Chinese consumer market. Crayfish was given as the poster example as it hit around Chinese New year, which is the usual peak season. However, all manner of products from food to luxury items are not making it through the border at all, or very slowly.

When the world is operating smoothly, ‘Just in Time’ manufacturing is a great idea – it saves cash being tied up in stock and space required to store it. But, if an event such as we are experiencing now occurs, it doesn’t take long to expose serious flaws in business sustainability.

The saying “if it’s not broken, don’t fix it” is highly relevant here. The problem when things are working well, is our attention is never on the ‘weak links’ in the chain, or asking ‘how would the business cope in a worst case scenario?’.

The goal in a sustainable business is STABILITY. Stability comes from avoiding the most dangerous number in business.

What is the most dangerous number in business?

The number is 1.

1 Supplier – they can’t deliver – you have no products to sell.

1 Key Customer – they leave and the revenue hole is massive for your overhead.

1 Key Team Member – they leave and the system falls down – as an owner it could be you.

1 Key Product – goes out of favour, or has an issue and sales drop.

1 Means of Getting New Leads - Your Facebook Ads account gets shut down and leads dry up.

1 Key Market – The rules change, or you can’t access it (like Crayfish to China).

1 Channel to market – If just a distributor, who goes sideways, you are in trouble.

Any one of the above situations can cause massive stress in a business.

I understand there is this balance between focus and mitigating risk with diversity. Also for some businesses early on in the lifecycle you have no choice given your resources.

The goal is STABILITY in the business, even in the face of a crisis or pressure point. If one of the building blocks falls off, you’ll still have enough in place that everything stays upright.

I’m sure after this event, we will see many companies spreading their manufacturing risk away from China to other countries.

STABILITY IN SALES CHANNELS

While supply of inventory is the starting point to be able to make sales, there are also companies selling New Zealand or Australian products into China.

Revenue in business is key. If that dries up because of a market shutting down or slowing down then there are major problems.

However, there are easy ways to start to diversify how you sell your products and where you get new customers.

For example, a marketplace approach will provide you with an opportunity to get in front of new customers in new markets in a cost effective way you can control. At Sell Global our focus is helping consumer brand companies create a NEW 6 to 7 Figure sales channel for their business on the Amazon marketplace.

We have many examples where brands have created more growth and stability in their business through setting up and launching on Amazon.

A company selling in Toys and Games, had a China channel dry up over night back in 2015/16 (Government changes the market entry rules). He turned to Amazon and now has a healthy 7 figure channel. Diversified by being in USA, UK, Germany, France, Italy, Spain, Australia.

Another company selling in the Home DIY market had solely relied on distributors in export markets. Distributors would often have lumpy orders. But now on Amazon they have a strong mid 6 figure channel that has their cash flowing consistently and has become their ‘bread and butter’ in the business.

I’m not saying be all in on Amazon – that too is risky. But having Amazon as an additional channel is smart. It will also complement your own ecommerce and even bricks and mortar sales.

More and more people will be buying online, this Coronavirus will just encourage that even more. In the Western World, Amazon is the biggest online marketplace. It is where you want to be.

Meet the customer where they want to buy. In many cases, that is in multiple places on and offline.

Get STABILITY in your business and remove reliance on any ONE market, or any ONE method of selling.

If you’d like to understand how Amazon could work for your business, then reach out to myself, or one of the team at Sell Global.

I’m also curious....Where in your business is the #1 risk that needs addressing?

Comment below, it will be interesting to see what you and others are noticing.