Hey Everybody,
For those interested in a more in-depth look as to why I've decided to produce only for the Kickstarter campaigns with the goal of carrying as little inventory as possible after, I wanted to give a longer explanation here. Whether it's here or on the ravelry group for 2024 planning, feel free to give feedback or your ideas relating to these issues and my decision. This still isn't 100% final, but I also feel like I need to start planning for the next campaign and need to make a decision sooner than later. This is maybe the first 'directional' decision I've had to make with ULA+LIA since the start, and it's been exceedingly difficult for me to figure it out.
Here's a list of the problems I'm facing in no particular order, although the first two are probably the issues I'm struggling with the most.
Lack of Advertising During Kickstarter Production
When we first started doing Kickstarter campaigns, production was rather small both in amounts and in the number of colors and we were making final delivery sometime in November. As we've grown over the years, it seems like January/February is the new norm for final delivery.
The main issue this causes is that I feel it's a bit murky ethically for me to advertise or otherwise market for new sales (especially through email and facebook ads) while everybody is waiting for products they have already paid for. I think even if I made it as clear as possible that I would still be advertising and selling from inventory during the campaigns, it would inevitably cause issues, especially if there were delays in production and fulfillment for whatever reason.
However, without being able to market and advertise my inventory of Mongolian wools during the cold winter and holiday months, there really isn't a reason for me to have inventory. And although this is a problem I can fix by being more organized, there's also the issue of addons through backerkit (which include previous year's inventory) not being linked to my inventory system through my website. This makes it very difficult to keep track of sales and will usually lead to me overextending myself by a couple skeins in a couple colors by the time Kickstarter fulfillment comes around.
On top of this, even if this weren't an issue and I were free to advertise and email blast as much as I need to, I don't like advertising. Optimising facebook ads, google ads, SEO, etc. feels kinda dirty to me and it's something I don't want to spend a lot of time doing.
Too Much Risk
When I started ULA+LIA and launched the first Kickstarter campaign for throw blankets, I was weeks away from getting fired from a small business development job in Mongolia where my salary was something like $400 a month. I had a few grand in loans outstanding to my brother from my failed clothing label a year or so before, and I knew I was going back to teaching English. I didn't have a whole lot to lose at the time and I was more open to leveraging everything I had (i.e. nothing) to make something happen.
As time has passed, I'm becoming more risk averse. Mongolia can be a complicated country to do business in, and if you've followed our campaigns from the start, you've seen some of the goofy things that can happen. From the standard delays in fiber deliveries, the country running out of blue and red dyes, or all the way to unexpected jumps in fiber prices after we've presold and funded the project.
All in all, these issues haven't been that bad. But what if a cooperative that takes a deposit refuses to deliver, there's a fire at a factory, a severe aggricultural disease, theft, logistic issues leading to a loss, polical issues at export/import... there are a number of things I can think of (and do) that are small chances, but possible. It's impossible to say how lucky I have or haven't been so far that nothing too serious like these things have happened.
As I've been continually building inventory, I also plow my personal funds back into production to hold more inventory and also make different colors. If I hold 50% of the inventory in a batch of cashmere, that means that the stretch goals to make new colors are less on the Kickstarter campaigns. However, this also means that if there is a serious loss during production, my cash is also in inventory, and I wouldn't be able to refund/replace what was lost. ULA+LIA and me personally would be bankrupt if something terrible happened to a large portion of the fiber.
If instead of holding inventory, I only produce for the Kickstarter, I'm not doubling down every year and would have the funds to either replace or refund if something goes wrong. I think it's time to be a bit more cautious in production and I plan to find ways to insure the production season regardless.
Warehousing
Apart from the Kickstarter that we did during COVID where we used a warehouse for fulfullment, I warehouse with my parents. After doing the Kickstarter fulfillment and I go back to Mongolia, I create the mailing labels for any orders, email them to my mom or dad, and they fill them and drop them in the mail.
While it worked well when small, we're getting to the point where there's a lot of yarn in the basement. Although we have it well packed in plastic containers, there's the issue of flood, fire, and loss. Being at a house and not a commercially zoned location, there are limits to insuring the inventory. My parents are also old. If something happens to them, I would most likely be home anyways, but that is also something I consider.
I also thought about instead of doing one large Kickstarter per year, I could find a way to fund a whole year's worth of fiber and doing smaller preorders for colors through the year. However, the shipments would still be rather large, and it wouldn't be fair or safe for them to be dragging large, heavy boxes into the basement and organizing them for something like that.
Moving to an actual warehouse is an option again, but using warehouses isn't pleasant, and it's expensive. There are also other issues with our product in particular that makes warehousing difficult... we've got too much different stuff!
Too Many SKUs!
In short, I've got too many different things. A SKU (stock keeping unit) is a unique item we sell. For example, Cream Lace, Cream Fingering, Cream DK, and Cream Bulky is 4 separate SKUs. During our last Kickstarter fulfillment, there were 140 different SKUs!
This is a huge mistake I've made along the way, always wanting to do more colors and more weights. In the end, it got out of control. If inventory sold through every year, it could be different, but we are still selling some yarn from two seasons ago even though there might only be a handful left. I really should just put everything on huge discount to clear older SKUs that don't have much stock left, but I feel guilty doing so after the Kickstarters, as I still think they should have the lowest prices available all year.
Wholesale Not Working Out
I originally thought that I could also do wholesaling to move inventory outside of Kickstarter season, but this has proven to be much more challenging than I expected. Yarn stores are generally ordering for winter season delivery sometime in the summer or early fall. By that time, and especially after people have added on for previous year's yarns in Backerkit, I have holes in inventory. For example, I may be out of cream or other popular colors, or I may be out of select weights, e.g. we have DK but not fingering weight. This leads to confusion and mistakes in ordering. When I have stock in February, shops usually aren't stoked on the idea of picking up a large amount of cashmere to hold through the summer.
It seems that shops also prefer to have a standard/consistent color base (e.g. naturals) that are always available, and some yearly changes in colors. With only producing once a year and not being able to replenish through the year if I sell out, it's just not practical for me. I still haven't seemed to reach the level of inventory or stability in stock that larger stores need and I'm not sure I ever will.
Closing Thoughts
I think moving to the 'No Inventory' method of Kickstarter fulfillment solves or eliminates pretty much all of these problems. We would still be offering current inventory for sale until it sells out, which could take quite some time. It's also possible we could move back to carrying some inventory in another season or two after things get a bit more under control, but we'll see. I could imagine a scenario where we hold 5 or 6 classic colors through the year but still just do an exclusive color palette for the Kickstarters.
One of the issues with ULA+LIA that lead to a reliance on Kickstarter in the first place is that we can only purchase our raw materials once in the spring for the entire year, which creates enormous financial pressure for preordering. While this is difficult, I think it also allows us to do something unique specifically because we need to produce all of our yarn (and colors) at the same time. Creating exclusive yearly palettes for Kickstarter could make the campaigns even more exciting to be a part of. If we have to produce all at once, we might as well make it all look awesome together!
But that's about it for now. Please feel free to share your feedback comments here (although I'll have to approve comments to avoid spam) or in our ravelry group, or to me personally if you'd prefer not posting in public. Although the comments here require your email, it won't be posted publicly.
Thank you for reading and your support!
-Jon
