We all know TikTok is great at blowing products up — from baked feta pasta to Dyson Hair Wraps. Once it’s viral on TikTok, it’s impossible to get. Let’s not forget about the infamous Feta Cheese shortage, which due to supply chain issues made it impossible to get months after it went viral.
This story is a bit darker as it became personal to me — yes, I am calling out everyone who is a reseller on the Dyson Hair Wrap. Why do I even need a Dyson Hair Wrap when I put my hair in a bun every day? The answer is simple: TikTok told me I needed it. Ok, let’s dive more profound into my need to blend with the Gen Z community…
So, if you were like me, you had product trackers everywhere from Nordstrom to Walmart trying to find the Dyson Hair wrap (thank you to #Honey). No one could buy one for the “street” retail price ($549) because of the secret snipers of the internet, which are resellers. They were hanging out on TikTok and watching the trend. We can start an entire monolog on why they are frustrating to me as a consumer, but this time, let’s focus on the Brands of the world.
Brand A is known for people buying more than they intended to, but this time, people are shopping on BrandA.com for one thing and one thing only — Dyson Hair Wrap. It’s a bit of a hunger game trying to get the gold and blue color. The reason for this chaos is that reselling these Dyson Hair Wraps are super profitable. Thus, people are buying as many Dyson Hair Wraps from Brand A, say 100 units for $500 each and using a $50 each coupon (no tax in my state). I could resell anywhere between $600-$700 per Dyson Hair Wrap and make a $100-$200 profit per unit sold! I could make about $10,000 of easy money and ship directly to an FPO where I do not even have to touch the product.
So what does this mean for Brand A? Well, Brand A couldn’t prioritize customers like me who wanted the product #salty. Also, they are now working with Dyson to get more products to sell on their website. Meanwhile, the reseller is on eBay, Facebook Marketplace, Amazon, Mercari, and Poshmark, trying to flip the product into 10k.
Imagine the people that do house-flipping. It’s the same thing here. You buy a house in a nice neighborhood, you put in the bare minimum, and you will make a profit. For the hair wraps, it’s the same thing; it’s a safe investment from Brand A because I have a 30-day return policy and can return if I don’t sell those 100 units and it’s a pretty “hot”/trending item.
What does this mean for Brand A? 1. they just got out of a bidding war with other retailers trying to get more hair wraps, 2. they have to handle the reverse logistic costs (~$16 per unit), 3. they need to restock and remarket the product, 4. they are leveraging skewed data for making future forecasting decisions.
1. Maintaining Strong Vendor Relationships — The first one struggles with vendor relationships because Brand A just asked for 1,000 more units, but if they have 100 refunded units go back into stock. Is it worthwhile for Dyson to store inventory at Brand A or elsewhere where the product is “actually” selling? Also, how do I ensure that my channel partners are not undercutting the price of my product on my website through discounting that is out of my control?
2. Reverse Logistics Nightmare — Whatever the reseller buys from Brand A will be returned and refunded under Brand A’s 30-day return policy. This is costly, as solely the reshipping is roughly $6 an item and does not incorporate the time to receive, check, and restock the product. This impacts Brand A’s Supply chain and decision-making as now, their Demand to Net Revenue or the Profit & Loss per product has now shifted negatively. Demand to Net Revenue/Profit & Loss gives you the forecast of your companies health — the notion a sale is a sale is not always correct. Net Revenue takes into account the returns, cancellations, restocking fees, reverse shipping fees, and call center fees. To understand the product growth and health, one must understand their P&L to accurately determine “success rate.” By only looking at Demand, it would be like taking guidance from a faulty compass for a ship in the dead of a storm. No reason to make risky decisions based on holes within the data/supply cycle.
Furthermore, the problem is compounded, as the Brand A’s business team are told to forecast the growth of Dyson Hair Wrap, which will be unknowingly made on inaccurate data. They are stuck with this financial impact ongoing to the next fiscal year. I guarantee that if you ask what the direct effects of the return cycle by-product are and how they account for it at any company, 98% will not know how to answer (guesstimating the statistic, but feel free to tweet @botnotio if we are wrong) .
3. Striking While the Iron is Cold — it’s hard to get purchasers at the price point of $600 — it’s a luxury item. You missed the holiday opportunity of Holidays, Christmas, New Year, and Valentine’s day. Now, you have to remarket this product at a random time of year — sure, people may want to buy it, but is it truly the loyal customer, or is it a cyclical cycle of resellers?
4. Preparing for Next Year — naturally, the best way to predict the future is by looking at historical data, as it is easy and should have all the golden nuggets I need, right? Wrong! Often, we just look at the units sold and add a multiplier based on the yearly trends. However, this can be extremely misleading, as 100 orders do not mean 100 customers and can lead to over-estimating inventory and sales.
Here at BotNot, we’ve been behind the spreadsheets, and we want to help you with the product lifecycle and supply chain logistics. It’s hard to do, and even harder to do right. We start this off by telling you who you should prioritize that sell-to, and from there, we help safeguard your product by combating the reverse logistic and Demand to Net Revenue impacts. We could tell you a time or two where we had to fight on the lines of the Dyson Hair Wrap trends, and we are here to support you. If this seems like it falls in line with you or one of your friends that owns an e-commerce shop, give us a shout, we’re here for you.