How Our E-Commerce Reached $6M/Year In Sales Despite The Logistic Issues
This is a follow up story for Magnus Home Products. If you're interested in reading how they got started, published over 4 years ago, check it out here.
Hello again! Remind us who you are and what business you started.
Hello, I’m Howard Law and I am a co-founder of Magnus Home Products, an e-commerce business specializing in unique high-end kitchen and bath products that are typically not found in the big box stores. We offer over 15,000 SKUs online.
Some of our signature products are unique bathroom sinks made of concrete, petrified stone, stone, and wood. We offer a wide range of farmhouse sinks in fireclay, copper, stone, cast iron, and stainless steel. Our bathtubs are constructed of copper, stone, wood, cast iron, acrylic, and resin. Our customers include homeowners as well as commercial accounts such as remodeling companies, plumbing suppliers, designers, etc.
Our products are both sourced directly from the factories and also through third-party distributors. I visit every factory we buy from and have developed long-term relationships with all of our vendors/partners. This allows us to offer new and unique items much sooner than our competition. We also develop exclusive designs not available anywhere else.
We started Magnus in August of 2017 and currently do about $6,000,000 in sales annually.
The labor force is very tight, especially in our area as we are competing with both Wayfair and Amazon for warehouse personnel. Typically it takes us several months to fill a position, and the individuals from the temp services normally are not long-term solutions.
Tell us about what you’ve been up to. Has the business been growing?
Since our original article was published, the world has changed dramatically. We faced the worldwide Covid crisis which impacted every company. This has affected us personally in several ways. One would be a changed in customer ordering habits and how much they were willing to spend. Hiring new employees has become almost impossible, and the domino effect on products imported into the USA has caused serious issues.
We started importing some of our goods about 4 years ago. We had a small 10,000 sq. ft. warehouse, so our importing was limited and we were still depending on our drop ship suppliers for many of our goods. In the spring of 2021, we decided to move our company into a new facility with 40,000 sq. ft. of space. Allowing us to take greater control of our destiny and import our most popular items.
Unfortunately, the timing of this was right when the costs of containers skyrocketed and lead times increased dramatically. For reference, a 40’ HQ container used to cost approximately $4,500. For the last year, they have been averaging $24,000 a container. In the last year, this represented approximately an additional $700,000 in shipping costs. While some of this was passed onto customers, we also had to absorb some of this increase.
At the same time, delivery times from the time we place orders with the factories until the goods arrive in our warehouse have doubled. Typically the total lead time ran about 100 days. With the shortage of containers, the congestion in the ports and the rail system along with the backlog in the trucking industry it has led to shortages of products and made it extremely difficult to forecast future needs.
All of these factors have combined to depress sales and forced us to pull back on our growth plans and focus more on surviving. We are reviewing every aspect of our business to find additional cost savings or to better utilize staff.
What have been your biggest challenges in the last year?
The biggest challenges have included finding quality employees and the logistic issues discussed earlier.
The labor force is very tight, especially in our area as we are competing with both Wayfair and Amazon for warehouse personnel. We advertise on nationally recognized job sites for direct hires and now have started working with multiple temp agencies to fill roles in our warehouse. Typically it takes us several months to fill a position, and the individuals from the temp services normally are not long-term solutions.
As I discussed earlier there have been huge issues with the supply chain as an importer. Skyrocketing inbound shipping costs along with huge delays in receiving goods have caused retail prices to increase while eroding our margins. Additionally, it is extremely difficult to keep goods in stock and to be able to effectively forecast future needs.
What have been your biggest lessons learned in the last year?
With all of the challenges of the last year, we have had to learn to be open to scrutinizing every aspect of our business.
We hired an independent company to review our outbound shipping rates, this resulted in a 20% savings on shipping costs to vendors. We also brought in packaging experts to review our packaging processes and materials used. They were able to identify better ways to pack some of our products and introduce us to new equipment to utilize more cost-effective packing materials. These steps are saving a few percentages in shipping materials costs, but it is also reducing the labor spent on each order and also has reduced damages, resulting in fewer claims and happier customers.
The logistic issues and costs associated with buying goods from Asia forced us to look to other markets for goods. Due to the high importing costs, we have been able to shift some of our ordering from Asia to both the USA and Europe. While the production costs themselves may be higher, when taking into consideration the shipping costs, the final landed costs are now competitive with the Asian goods. Also, lead times are typically dramatically less.
What’s in the plans for the upcoming year, and the next 5 years?
We need to continue to focus on trying to be as cost-effective and efficient as possible. With inflation causing the costs of everything to rise every aspect of our business needs to be constantly reviewed.
We currently sell directly through our website and on Amazon. As the costs of advertising continue to climb we have to audit each avenue of income. With our online sales, we need to work harder at reducing Google spending and increasing our SEO presence. When looking at Amazon we have to look at all the costs associated with selling on Amazon which include their set fees, their additional ad spend, higher return rates, and the difficulty of reaching customers thru the Amazon email and telephone portals.
We are reviewing our current product offerings and are trimming categories that do not have a high enough turnover rate to allow us to focus more on top-selling categories. We plan to continue to develop exclusive products, which have been some of our best-selling items. We also continue to concentrate on how to improve the product we offer so that our customer receives a better product at a lower price than what our competition offers.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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