Selling "Stuff" Part Two: Fulfillment

If you are going to get serious about selling products online, you'll have think about how you'll get them to your customers. To give you an idea of all that goes into the process, here's one company's list of steps. Fulfillment Services

If you are doing a relatively low level of business, you can handle the shipping out of your house. The popularity of eBay has turned a lot of people into shipping experts. From-the-home shipping as been facilitated with priority mail and free priority boxes, labels you print yourself, scales that calculate postage, and so on.

To give you a sense of what you'll deal with if you do your own shipping, here is what Yahoo has made available about using UPS. Shipping Manager Overview

If you need bulk shipping supplies, you might want to check Sam's Club or Costco. You can also comparison shop for supplies online. Here are several sources, though you should do your own search once you determine what you need.
ULINE
PackagingSupplies.com
Papermart

There are a lot of tricks that online commerce experts have learned over the years which you can apply. For example, it used to be that direct marketers would offer attractive product prices and then inflate shipping charges to pad the sale. Now that free shipping is popular, the products might be priced higher to cover the difference.

Here's a resource specifically directed to musicians. Should you handle fulfillment for the merchandising webpage yourself?

If you decide your merchandising business is big enough to outsource fulfillment services, you'll find many companies that do this. For example: Fulfillment by Amazon - Let Amazon Ship for You

Some companies specialize in working with bands. Here are two examples.

Musictoday

Musictoday couldn't possibly coordinate orders of this scale, complexity, and precision without state-of-the-art warehouse-management software and equipment, such as handheld scanners and a $200,000 automated packing machine. The logistics are made even gnarlier by the special offers that bundle in exclusive knick-knacks and routinely turn the sale of a single CD into a shopping spree. It's a fine example of Capshaw's vision of the symbiotic artist-fan relationship--fans get special items, the artist gets the profits. But that kind of customization creates a fulfillment nightmare that would challenge any retailer--and bring a hungover band to its knees. All the more amazing that Musictoday boasts 'a 98.4% to 99.8% accuracy rate,' according to COO Del Wood.

The other side of the warehouse is like the stash of some obsessive-compulsive collector: 30,000 items from about 400 clients. The shelves, lined with different-colored bins, keep going and going. Ramones flip-flops. Cans of Arnold Palmer iced tea. AC/DC boxer shorts. And behind a locked door, pricier items, like a $5,000 lithograph signed by the Stones. The inventory, too, is organized for maximum efficiency, with the fastest-moving items on the front racks, within easy reach--"nose to knees," as Hubbard says. "Way Behind The Music," Fast Company, 12/19/07

Factory Merchandising

In traditional online merch contracts, the band authorizes the merch company to sell an exclusive item, and that company then pursues sales online. The merch company manufactures the merch and/or receives the merch from the band, then sells it and takes a percentage of the total sales. The usual rate is around 30% of the total sale. With our arrangement, the band retains complete control over what is being sold, and how the sales are made. The products are sold through the bands own website, so there is no need to license the merchandise rights to another company. The band simply decides which items to list for sale, and our fulfillment company fills the orders made through the band's website.

... The fulfillment company charges exactly HALF of what most companies charge for fulfillment services: only 15% of the total sale. That means on a $15 t-shirt sale, they only take $2.25 to package and ship the order and handle all payments and returns. Secondly, prices at Factory Merchandising are consistently lower than those of other merch companies. Even though this arrangement is made available through Factory Merchandising, we will not charge an additional fee for the service. The manufacturing costs are the same as they are for tour merch. In addition, since we already have the screens for the band's designs, there won't be an additional set-up fee to make the merch for the store. As an example, suppose you sell a t-shirt online for $15. The manufacturing cost for a one color shirt is only $4.25, and the fulfillment company only takes $2.25 to ship the order. That sale returns $8.50 to the band, a much higher return than most bands receive for their online merch.

Here are other companies that provide music merchandise and fulfillment.
BUYSWAG
nimbit
Zambooie
Audiolife

Here's another list. Fulfillment | The Indie Band Survival Guide

My discussion of music merchandise fulfillment is by no means comprehensive. There are many resources available from experts in direct marketing, online commerce, and retailing. My purpose is to make people aware of the complexities involved. This is important if everyone in the music business heads this direction.

Suzanne Lainson
@slainson on Twitter

Selling "Stuff" Part One: Direct-to-Fan

Artists/bands have traditionally made their income from three sources: recorded music, performance, and merchandise.

Because digital music can be copied so easily and fans can find ways to get it for free, recorded music is no longer as reliable as a source of income as it once was. To make up the difference, bands are now looking to sell more goods/services/experiences that can't be easily copied.

For the next few blog posts, I'm going to be exploring different aspects of hard good sales.

Let's start with what is now being called "direct-to-fan" marketing. It's not exactly new. Some bands have been doing this since the earliest days of online commerce (and, of course, at shows well before that). They have been selling T-shirts, CDs, and merchandise from their websites. What appears to have changed is that rather than this being a side business, some artists/bands are viewing it as a primary business.

Lately I have been telling people that direct-to-fan sales is just another name for direct marketing. Why? Because there are already significant resources available within this sector. If the future of the music business is selling stuff directly to fans, music marketers should take advantage of the decades of experience and research already out there. Whatever merchandising and marketing services, products, or advice you may need, you will likely find it in the direct marketing industry.

Sure, there are some areas of direct-to-fan marketing that are more music-specific (e.g., music files, fan communities and interaction, ticket sales). But other tools (e.g., email marketing, shopping carts) aren't industry specific.

One topic which gets discussed a lot within direct marketing circles, but not so much during direct-to-fan discussions, is database marketing. Much of music marketing still operates at a basic level (e.g., capturing fan names, addresses, and emails). Music business articles and conferences aren't addressing more complex issues (e.g., purchase behavior, lifetime customer value, retention rates). One reason for this, I am sure, is that a lot of bands have short life spans, so people aren't thinking of selling to fans over a period of years.

But a few music marketing companies have grown into fairly complex operations that can outlive individual bands. Therefore they have reason to develop relationships with fans that might last for years and to utilize more sophisticated tools.

Madison House, for example, started as a booking agency. It expanded into a management company for String Cheese Incident. Over time it created a record label, a ticketing agency, a merchandise company, a travel agency, a design company, and a PR firm.

An even bigger operation is Musictoday, which was started in 2000 by Dave Matthews's manager, Coran Chapshaw.

Along the way, Capshaw built the mechanism for recording live shows (ATO Records, which now boasts more than a dozen acts, including David Gray and My Morning Jacket) and selling shirts, CDs, and tickets (Red Light Management).

Those early CDs contained the seed of what Musictoday would eventually become, in the form of a mail-order insert for merchandise. Capshaw and the band were designing and selling their own goods and pocketing "the retail spread." As that business expanded, it outgrew the spare room at Trax. Then, in the late 1990s, they began offering items online--and the bigger picture revealed itself. The infrastructure had fallen into place for a much bigger operation. "I realized that we could do it with more than just Dave Matthews," says Capshaw. "We had the potential to help other bands." "Way Behind The Music," Fast Company, 12/19/07

The article describes what the company does: "Musictoday's 200 employees are responsible for emailing fans, processing orders, printing tickets, mailing merchandise, fielding complaints, monitoring message boards--all of it."

What distinguishes Musictoday's approach from more traditional direct marketing is its emphasis on band personality.

"We believe that direct-to-fan relationship is stronger, more loyal, more long lasting,” says [chief of staff Nathan] Hubbard. “Coran had the vision to say, ‘Passionate music fans want to interact directly with the artist, both at the show, but also online,’ and so built the infrastructure to help not just the Dave Matthews Band fans, but ultimately fans of all kinds of artists.”

Part of what appeals to artists in this deal is Musictoday’s discretion: Rarely is it obvious that some company in Crozet is running the online store. Look carefully on the official Internet stores for artists as diverse as Bob Dylan, Eminem, Christina Aguilera or Le Tigre—scroll to the bottom and you’ll find an unobtrusive tag, “Powered by Musictoday.” That’s it, though. There’s no other evidence that the poster, the t-shirt, the cd you bought will be shipped to your door from the humble ConAgra building. "The music machine," C-Ville, 8/28/06

Still, even with the personalization of marketing services, Musictoday is about database marketing.

... there's a compelling lesson here for any company that makes a product: If you control a piece of the transaction, you understand more about your customers. By aggregating fan data that artists haven't usually been privy to, Musictoday can help shape decisions such as where to tour, advertise, or deploy superfans to evangelize. Considering that an estimated 60% of concert tickets typically go unsold every year, that kind of targeting is no small contribution. "We're able to say to artists, 'We know more about your fans than you do,'" says Nathan Hubbard, 31, who runs Musictoday as Capshaw's chief of staff. "'Let's put our heads together and figure out how to monetize this relationship.'" "Way Behind The Music," Fast Company, 12/19/07

Live Nation wanted access to those fan relationships and databases, so it bought 51% of Musictoday in 2006. Said Live Nation CEO Michael Rapino:

We're doing more consumer segmentation. We know that the average fan went to one or two shows last year, and the avid fan went to five. We know 30% of the population attended a live show. Who are they? What's the commonality between the teens and 40-year-olds? What else do those fans want to consume? "The Music Man," Fast Company, 12/19/07

A new company that is also going after some of this market is Topspin Media. It's developing online tools to help artists/bands to do more direct marketing themselves.

But unlike Musictoday, it doesn't mail out packages. According to its website, "Topspin is more about demand generation than demand fulfillment. We approach marketing on three fronts: direct (email and the like), viral (quality driving organic person-to-person marketing), and targeted (such as targeted paid placement)."

I will be covering fulfillment and other aspects of hard goods sales in upcoming blog entries.

Suzanne Lainson
@slainson on Twitter