How to Start an Online Store Without Inventory?

In this day and age, starting a business is easier than ever. With internet businesses booming, you no longer need hundreds of thousands of dollars to get a business up and running. In fact, you don’t even need any investment at all. There are ways for you to launch an online store without having to spend much money. With roughly $100, you can buy a domain name, pay for a few months of service on an eCommerce platform and get the ball rolling without having to spend a dime on inventory.

Can I Really Launch a Business Without Inventory?

Absolutely! There are numerous business models available for online merchants and we’re going to cover various types of businesses that you can launch today. No need to spend thousands of dollars on inventory, no need to rent a warehouse to store all of your products and no need to take out a business loan.

Additionally, launching a business without inventory can also mean many fewer steps required on your behave. For instance, if you actually hold the inventory, you’ll be responsible for packing, labeling and shipping the products. On the other hand, if you use third-party fulfillment centers, they will handle all of these tasks on your behalf.

However, it’s important to note that without an initial investment, you will most likely have to put in a lot more effort. In order to succeed, you will need to pour a lot of sweat equity into your new business. This may mean staying up late at night, spending every spare minute of your time on growing your company and really believing in your business. If you do this, you could become your own boss in no time with a stable income that has the potential to be immense.

Let’s take a look at some of the pros and cons of building a business with little to no inventory/investment and then we will expand by sharing different store types that require no inventory.

Starting a Store With No Money & No Inventory

It’s very possible to launch a business without spending a dime on inventory. Drop shipping, affiliate product referrals, digital products and online services are just a few business models that require no inventory. However, this doesn’t mean they are the perfect solution for your needs. Let’s expand on some of the major pros and cons of owning a business that requires no inventory so you can get a better understanding on whether or not this business model is the right choice for your needs.

Pros

No Warehouse Needed. One of the major upsides to having an inventory-less business model is that you won’t need much space. Businesses with inventory often need to rent warehouses or storage units, but you won’t have to deal with this issue.

No Upfront Cash. The lack of inventory means you won’t have to put up a lot of money in order to make bulk orders. When ordering inventory, the cost drops as you order more units. This often requires you to spend thousands of dollars in order to reach a price point that makes sense. In your case, you won’t have to spend a dime on inventory.

Nomad Lifestyle. Without having to keep track of hundreds or even thousands of products, you won’t be glued to one location. In fact, all you will need to run your business is a functioning computer, allowing you to enjoy more of a nomad lifestyle. You could work from home or you could even fulfil orders from a resort in Mexico.

Better Scalability/Growth Opportunities. If you were to store loads of physical products, growth would mean having to rent a larger storage space. It would also mean more manpower to handle all of the physical deliveries, packaging and other tasks that come along with having inventory. Without having to worry about inventory, you’ll be able to grow your business with more ease and at a much lower cost.

Cons

Shipping Delays. If you aren’t holding any inventory, chances are you’re relying on Chinese distributors to handle the tasks for you. This can often result in annoying shipping delays. Most online shoppers expect to receive their items in under 1 week, but when using third-party distributors from China, the delivery delay can become as long as 1 month. This could result in lost customers and a poor brand reputation for your business.

Fully Dependent on Your Supplier. If you enjoy having full control over everything, this isn’t the best approach for you. When growing a business without inventory, you’ll have to put 100% of your trust into your supplier. They will be responsible for product quality, delivery times, returns and more. You don’t actually handle the products and in most cases, you’ll never even see the products, so you will become completely dependent on your supplier’s capabilities.

Complicated Returns. If your customers want to return a product or if they have issues using one of your products, they will come to you. You will then have to contact your supplier and wait for their response. Without any direct control over the products, you are always a middleman. This causes communication delays and misunderstandings which can truly complicate returns or issues using products. In most cases, it also causes you to have terrible customer support, which is very bad for your brand’s reputation.

Branding & Packaging Issues. When you sell items under your brand, you’ll want to add your own logo or label. Not all suppliers are willing to go the extra mile to make this happen. This could result in no branding from your business. Additionally, you may want to have quality packaging with safety standards in place. However, most suppliers will choose the cheapest packaging methods available regardless of your needs.

Types of No Inventory Stores

Knowing which types of no inventory stores exist is the first step towards decided whether or not this business model is the right choice for you. We’re going to expand on the various business types available that require no startup inventory. This will allow you to explore the various business models available for low-investment/no-inventory startups. If you find one that resonates with you, go ahead and move forward, otherwise you may have no choice but to spend towards inventory in order to satisfy your needs.

Affiliate store

Affiliate stores are incredibly popular on the internet. Affiliate marketers basically recommend products and services that are available from other companies and they earn a commission from every sale. Think of affiliate marketers as salesmen who sell cars for a living - they don’t own the cars, but they earn a commission for every sale they generate.

Basically, you set up a store and promote products from other companies with whom you’ve entered an affiliate partnership (you’ve both agreed to a set commission per sale). There are loads of affiliate networks online that allow you to find thousands of companies with affiliate programs or you could choose to contact companies directly to find out if they are open to affiliate referrals.

Pros:

• You don’t have to worry about shipping, labeling, returns or inventory.
• Requires no upfront investment other than the cost of your website.
• There are thousands upon thousands of affiliate programs online.

Cons:

• Commissions vary greatly.
• Many other people will be promoting the same products/services.
• Must have tons of traffic to your website or social media accounts.
• You aren’t building your own brand, so repeat visitors are harder to get.
• You must become very good at SEO & gaining free targeted traffic.

Dropshipping

Drop shipping is another excellent way to get started with an online business without having to hold any physical products. It works like this:

• Somebody visits your website and places an order for one of your products.
• You receive the payment for the product.
• You then use that money to place an order for the same product from your distributor at your wholesale (discounted) price and have them send it to your customer’s address.
• Your distributor will often add your logo and branding, so it appears as though the item is arriving directly from you.

You can find tons of suppliers online who are willing to provide you with wholesale pricing and can add your logo to the packaging. However, keep in mind that just like any other business model, drop shipping also has its own set of pros and cons.

Pros:

• No need to hold any inventory or spend cash upfront.
• Your supplier handles all of the logistical tasks (packaging, labeling, shipping).
• There are millions of products you can drop ship.

Cons:

• You’ll often be dealing with Chinese suppliers, which can cause communication errors and shipping delays.
• You have no control over the product quality or packaging quality.
• Returns and chargebacks are a hassle.
• Profit margins are not great for most products.

Print-on-demand services

Print-on-demand services are rapidly growing in popularity. You might have seen them online or you might even have used them. These services allow you to print out various items with your own designs. For instance, let’s say you own a business and want to have t-shirts with your business’ logo - you would use a print-on-demand service to upload your logo and then they would create the t-shirts for you.

As a business model, you can find tons of white-label print-on-demand services online that you can promote as your own. Upload your own logo and resell print-on-demand services via your own website. However, all of the hard work is handled by a third-party printing company. Shopify also has a few print-on-demand apps that you can install that allow you to resell these types of services directly in your Shopify store.

Pros:

• Easy to set up and add your own branding.
• No inventory - you are selling an online service fulfilled by another company.
• You don’t have to handle any of the shipping or printing yourself.
• White-label platforms are often well-built with many professional designs.

Cons:

• Highly competitive space - many major players with lots of brand trust.
• You will most likely need to spend lots of marketing dollars.
• No control over the printing quality or shipping delays.

Digital products

Selling digital products isn’t new, but it’s still a large industry that can become quite lucrative. This could be anything that is sold online and is sent to the buyer digitally. For instance, you could launch a stock photo site where you sell images, photographs, illustrations and even videos. You could sell online courses, software, royalty-free music, eBooks or even PDF documents.

When it comes to selling digital products, you’ll have to be much more creative. It’s difficult to resell digital products from other companies, so this is best suited for artistic people. Whether you’re great at taking photos or even if you’re talented in a subject and can come up with courses, this is a superb industry to get into.

Pros:

• No inventory since everything is digital.
• Great profit margins (100% profit if they are your own creations).
• Excellent for brand growth and scalability.

Cons:

• Not for everyone (must be able to create your own products).
• May require a lot of marketing dollars to get some traction.
• You will most likely be competing with large brands.

Services

Selling services online is another tactic you can use to generate income. You can choose to sell your own services or you can resell other companies’ services via referrals. For instance, if you are good at web design, you can build an online store that lists your available services. This could be literally any type of service including writing content, performing SEO tasks, translating content, providing accounting services, life coaching or any other type of service you can think of.

If you don’t have any service that you can offer, you can search Google for services that offer affiliate referrals. For instance, The Hoth, an SEO company, offers a commission for every referral you make. It’s similar to affiliate marketing, but you can also use white label services to add your own branding.

Pros: Great for building a brand name. Virtually any type of service imaginable can be sold online. Many services online provide affiliate referral commissions.

Cons:

• Commissions are not always steep unless you sell your own services.
• Often requires a lot of marketing and advertising to launch.

Starting a Store with a Small Investment & Inventory

Launching a store without an initial investment or any inventory to start with is absolutely possible. With the power of the internet, you can launch a full business without spending any money upfront and without owning actual products.

However, a lack of investment means you won’t be able to afford a team to manage inventory, returns, customer support and other such luxuries. In order to benefit from all of this, you’ll need to work with companies that can handle these tasks on your behalf. While they help keep costs to a minimum, these companies usually take a cut of your profits. Let’s take a closer look at some of the popular options.

3PL (third party logistics companies)

If you don’t want to spend on product storage, inventory, customer support and order fulfillments, one of the best ways to go about the situation is by hiring a 3rd party logistics (3PL) company. For a monthly fee along with a per order fee, they can handle everything in order to keep your business rolling.

When dealing with a 3PL, you will need to ship your products to their warehouse. From that moment, that handle all of your product storage, inventory needs, packaging, labeling, order fulfillment and some can even provide customer support. It’s a simple way to get off the ground if you have a lot of products, but don’t have time or the manpower to handle all of the rest.

FBA (fulfillment by Amazon)

If you’re willing to give up a chunk of your profits for a fully automated sales process, Amazon can be a great partner. When using fulfillment by Amazon (FBA), you send all of your products to Amazon’s warehouse, you list your products on the Amazon marketplace and they handle all the rest. Amazon stores your products, they package them, they ship them (Prime shipping becomes available making your products even more desirable), they handle returns and they even provide customer support.

Fulfillment by Amazon is one of the best ways to launch a business if you make your own products, but don’t have the funds or manpower to handle all of the logistical tasks. Amazon fees are rather steep, but they are well worth it for the amount of work they provide and the amount of potential traffic you can receive by being listed on Amazon along with Prime shipping.

Business Ideas: Figure Out What You Want to Sell

Figuring out what you want to sell is another important aspect worth taking time to think about. Your products will depend on the business model you choose, but then again, you will choose your business model depending on the products you wish to sell. They both go hand in hand.

There are plenty of great business product ideas worth considering. It truly comes down to what you will enjoy selling. You should pick something that you enjoy because it will make it much easier for you to want to spend time and effort on it. A business idea that gets you excited will seem more like a hobby rather than a job. If you enjoy what you do, you’ll be much more likely to succeed.

Platforms: Choose a Marketplace or an eCommerce Platform

Choosing where you will be selling your products is another step you’ll need to take into consideration. You don’t need a website or your own online store in order to sell products on the internet. You could simply list your items for sale on marketplaces such as Amazon, eBay or Etsy. However, if you want to build brand recognition, it’s always nice to have your own website that has your products for sale directly.

In order to launch your own online store, you’ll want to consider an eCommerce platform. For beginners, there are tons of great eCommerce solutions that simple to use. Shopify and Wix are two great examples worth looking into.

Suppliers: Find the Right Ones

Unless you’re creating your own products from scratch, you’ll most likely need to rely on suppliers. These suppliers can help send the products that you sell directly to your customers without having to pass through you first. Choosing the right supplier is a major step that can either make or break your business.

A good supplier will have great communication skills, will be able to send packages in a timely manner and will be able to provide quality products. There are tons of places where you can find suppliers online. One good place to start is marketplaces like Alibaba or AliExpress, which help connect merchants with manufacturers.

Shopify has a lot of great third-party apps that can allow you to find great suppliers. Oberlo is one of the most popular options and is a great place to start if you’re a Shopify user. You can also choose to do business with local suppliers. However, local suppliers will often have higher pricing than Chinese product suppliers. But then again, if the products you plan on selling are rather large, you may make up for the price difference by cutting down on shipping costs by using local suppliers.

When it comes to choose a supplier, you want it to feel perfect. Your supplier will become a long-term partnership and it should be like family. You’ll want to be able to trust them fully with your business’s products and reputation.

Products: List The Ones You’re Going to Sell

By now you should have a pretty good idea on which business model to use, how to choose a supplier, how to pick a platform to sell on and how to manage sales. Now it’s time to pick the ideal product to sell.

Choosing your product is touchy. You’ll need to consider a few things.

Profit Margin:

The amount of profit you make per sale. In order to calculate this, subtract the price you will be selling the product for from all the costs (wholesale price, shipping cost, taxes, duty fees, etc.). Ideally, you’ll want your profit margins to be at least 20 to 30%. The higher, the better.

Demand:

Consider the amount of demand. Search for similar products online and see how well they sell. For instance, try to find the item on Amazon and see how many times it has been sold over the past year. The more demand, the easier it will be to sell.

Competition:

Choose a product that has little competition or that has competing prices that you can beat without getting a profit margin that is too low. For instance, avoid selling toilet paper - you’ll be competing with major brands like Charmin that everybody loves and trusts.

Return Rate:

Avoid products that have high return rates. For instance, clothing has one of the highest return rates because it’s very difficult to find the perfect size when shopping for clothes online.

A final piece of advice is to choose products that you love. If you love the product you sell, you will become a much better salesperson and the business will become much more enjoyable for you - especially when you have to spend long hours every day working on your business’ growth.