Running your own e-commerce business (or any business for that matter) can be expensive. Many first-time entrepreneurs often face the risk of running out of their initial capital and may stumble coming out of the gate. Others may not make it past the first year based on their expenses alone. However, there are solutions for e-commerce businesses, especially those that rely on fulfillment: crowdfunding. Using crowdfunding may allow you to fund fulfillment the right way.

What is Crowdfunding?

Crowdfunding is a method of raising money from a project through a substantial amount of people, usually through the websites. This fundraising method allows you to receive smaller increments of the end goal without the need to directly sell items much like you would for a traditional fundraiser event. Instead, crowdfunding can allow you to incentivize the process through rewards for different donation amounts. Some of the most popular crowdfunding sites include Kickstarter, Indigogo, and GoFundMe.

How Does It Work For E-Commerce?

While crowdfunding has been used for life-changing events or for teachers looking to update their classrooms, entrepreneurs can take advantage of this opportunity by funding their products. What’s interesting for e-commerce donors is that they can take part in one of the vital aspects of the campaign: the creation of the product itself. By funding the business, they can take pride in being a part of the next big phenomenon, no matter what the product will be.

For e-commerce sellers, the process is simple. Describe to your donors what product you’re proposing, the benefits and features that will improve their lives, and how they can take part in funding it. Offer rewards for donors based on their donation amounts (including the product itself) as well as other incentives such as free shipping.

One of the main things to consider with crowdfunding for e-commerce is providing a reasonable timeline for your backers. Rather than funding a movie or medical expenses, the people funding your campaign are expecting to receive their products and any other rewards in a timely manner. Consider the cost of shipping, quality assurance, transit time, and storage for products (it would be wise to use a fulfillment center such as 3rd Eye Logistics to handle your large inventory).

Benefits of Crowdfunding

Crowdfunding offers solutions to many problems facing beginning entrepreneurs. The obvious example is start-up costs, but the format of sites like Kickstarter and GoFundMe goes beyond money. As mentioned previously, crowdfunding can provide backers with a sense of ownership towards the product and its creation, which in turn builds anticipation for the end result. Your campaigns can also be shared across social media, adding into your marketing process. In short, crowdfunding can create momentum for your entire e-commerce business right from the start.

Potential Drawbacks

With that said, there are a few caveats to using crowdfunding to start your e-commerce business. As much as your backers can help you, you are still dependent on their funds for the initial start-up. Not every project on crowdfunding sites gets complete funding, so you must be aware of that possibility heading into it. The people funding your project also expect to receive their rewards or product in a timely manner, and any hiccups along the way could result in negative feedback, especially across social media. Finally, you also need to be aware of any rules or regulations each crowdfunding site implements for projects that could affect your bottom line (Kickstart, for example, has a 5% fee applied to collected funds).

If you’re just starting out in the world of e-commerce or interested in selling your dream product, crowdfunding can get you started the right way. Start your research into various crowdfunding sites and watch your campaign grow from concept to shipping in a matter of weeks.

Found your crowdfunding site and looking for a place to ship your new products? Contact 3rd Eye Logistics today to learn more about our fulfillment offers!