How HomeClick.com CEO Mike Golden wins without inventory risk
HomeClick.com offers fixtures and appliances on the high end of home décor – even a bathtub that lists for about $50,000. But at that price, how many of the tubs move, and what does it cost Home Décor Products, HomeClick.com’s parent company, to keep it in inventory? “I don’t take inventory risk,” says CEO Mike Golden. So the answer is, HomeClick.com doesn’t keep the product in inventory – sales of the tub are chalked up under the 49% of HomeClick’s sales that are drop-shipped directly from manufacturers and distributors.
Warehousing only proven sellers is a foundation of HomeClick’s strategy. When HomeClick forms a relationship with a manufacturer, generally it puts the entire catalog up online–hence its online assortment of approximately 1 million SKUs. But only selected products are actually inventoried–representing about 37% of HomeClick’s sales. Another 14% are cross-docked–essentially, drop-shipped from the manufacturer or distributor with a stop at HomeClick’s warehouse for staging. The powerful ERP system that runs Home Décor Product’s entire business includes a module for forecasting and replenishment—when sales of an item reach a certain threshold, it automatically triggers an order to bring the product in-house into inventory.
The other benefit of keeping the top sellers in inventory versus drop-shipping is that the ability to ship quickly out of its own facility pushes up HomeClick’s margin on those products. Because the high end of the home improvements business often involves delivery lead times of four to six weeks, “We’ve learned we can sell things at a higher price if we can get them to the customer quicker than that,” says Golden. “This meshes well with identifying what people will buy based on order history rather than speculation, and bringing those products in here so if a customer orders them, we can ship the next day.”
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