Running privite club internet store(e-store) with stock or without stock on hand

For a couple of years e-stores sales are booming. Dozens of private club e-stores have opened in Ukraine. I would share how their apparel supply logic works and the way they process orders.

From perspective of stock-on-hand private e-shopping clubs can be divided into two:

1. E-stores working with stock
2. E-stores working without stock.

E-stores working without stock: these stores first place content on their e-stores, get orders and then purchase goods from suppliers. Generally the clothes are bought from local retailers after end customers make orders via the e-store. The retailer sends samples of clothes to the e-shop for making photos which will be placed into the e-store. Local retailers also send size ratio, price and quantity available. That is how the e-store content generated. There are few disadvantages working this way from the point of end customer satisfaction:

1.  When customer makes an order from e-store. E-store makes an order to retailer in bulk. All products from the same retailer are sent as one order to that retailer. Retailer collects goods ordered in bulk and sends the order to e-store. E-store accepts the order, and then for each end customer processes order separately. Generally this cycle duration is two weeks.
2. After retailers have sent samples of clothes and provided the size ratio and quantity, for minimizing the risks and for earning  more money: retailers do not stop sales of those products in retail stores or outlet stores. When the campaign in e-stores ends, there maybe less available quantity left than the ordered quantity from the e-stores.  The e-store customers learn it after 2-3 weeks. This issue creates dissatisfaction among e-customers of shopping club.
3. If the order made from two different campaigns in e-club, the order delivery will be nearly 2-3 weeks. This issue also creates dissatisfaction among the e-customers.

The e-stores working with stock have none of the above. The customer satisfaction rate is much above than in -clubs working without stock.

If analyze the grow in popularity: the e-clubs working with stock have a 200%-300% hit rate growth, while, the e-stores have only around 50% hit growth.

About another shoe retailer

One of the biggest Russian economy class shoe retailers entered Ukraine market a year ago. For warehousing purposes they rented 8 000 sq.m warehouse. Up to now, they have openned arround 15 shoe stores in Ukraine. The total area of stores is arround 3500 m2. In m3: 10 000. The warehouse volume is 84 000m3.

(Warehouse volume/stores volume)=8

The ratio warehouse to stores volume is 8 times. The warehouse area is too high for this kind of operations. In warehouse no value added services done, no piece picking done. All goods come in boxes with full size ratio from Chinese suppliers and go out to stores in the same boxes even without being openned.

I wonder for what purposes they rented so much space. Maybe they have very big expansion plans? But one year of rent of extra space in warehouse has a cost of 400 000USD.