Crowdfunding campaigns have become popular in the last several years, but businesses are often faced with hard realities when they begin a campaign for the first time. EcommOps has had many clients blind-sided by the challenges of crowdfunding, and it’s important to consider the expectations vs. the reality of using a crowdfunding campaign for your business.
EcommOps know how to make crowdfunding fulfillment work. We’re a full-service 3PL that uses DTC China fulfillment to make crowdfunding campaigns simple. Our clients have been able to launch their campaigns in multiple, international markets with the help of our services, which has helped make their campaigns a success!
Below, we’ll touch base on what exactly crowdfunding is, the benefits and challenges of using crowdfunding campaigns, and ways to help make your campaigns a success (like direct-from-China fulfillment).
What Is Crowdfunding?
Crowdfunding is an alternative funding method for a new product. While crowdfunding platforms may have their own unique gimmicks or features, you can general expect any crowdfunding campaign to:
- Advertise a product that’s not yet available
- Solicit “backers” to a campaign, with the product in question as a reward
- Offer “rewards tiers” based on how much a customer backs a campaign (higher tier rewards can be exclusive product extras, special discounts for being an early backer, or other bonuses).
- Offer no guarantee of producing the product. Instead, a campaign may need to reach a certain threshold for the product to be pushed out (if the threshold isn’t met, the backers are simply refunded their money).
What Businesses Expect from Crowdfunding
The benefits of crowdfunding tend to be straightforward and the primary reason why businesses find crowdfunding enticing. We’ll review those positive expectations here, but don’t forget that there are also challenges to crowdfunding campaigns (which we’ll address shortly):
Easy Access to Fundraising
The most obvious benefit of crowdfunding is that it provides an easy route for fundraising. Customers essentially pay you upfront for your potential products (as opposed to your business needing to make an investment in inventory and hope that demand clears your stock).
The upfront funding helps to eliminate the risk of trying a new product, since you don’t have to be concerned with having too much inventory.
Fairly Safe Product Test
Not only do businesses have a low-risk entry to getting inventory, crowdfunding also serves as a safe way to gauge demand on a novel product. Crowdfunding campaigns often have unique products that provide a challenge to accurately predicting demand. With a campaign, you can naturally see what kind of demand potential your product will have.
Free Exposure and Marketing
Another clear expectation businesses have to crowdfunding is the potential free exposure and publicity a viral campaign offers. Some campaigns explode in popularity, and customers back those campaigns simply because so many other people are backing the campaign.
While there’s no guarantee a product campaign will go viral, if it does, it’s a tremendous amount of free exposure, marketing, and publicity for not only the product in question, but also for the brand itself.
Which brings us to the final expectation of crowdfunding. It serves as an excellent opportunity to bring an entire brand attention, especially if the campaign takes off. Customers could be curious about other offerings you have, or you could incorporate existing products into the tiered rewards offered to backers.
What Are the Realities of Crowdfunding Campaigns?
The expectations of a crowdfunding campaign are why most businesses jump in to begin with, but far too many aren’t prepared for the realities of what comes with executing a successful campaign. The measure of a successful crowdfunding campaign isn’t just whether you gain backers. It’s also how well you fulfill orders and match customers’ expectations of timeliness and product quality.
Reality #1: Complicated Fulfillment
Many businesses aren’t ready for how complicated crowdfunding fulfillment can be. Some of the fulfillment factors that businesses often aren’t prepared for include:
- Shipping to multiple customers in multiple countries in multiple markets.
- Tracking which customers are in which reward-tier and who should receive which rewards.
- Collecting and storing addresses from backers while the campaign is active and orders aren’t fulfilled.
Customers are often waiting months for a campaign to end, so if there are issues with fulfillment (which could be missing rewards, the wrong rewards, or a missed order entirely), it can kill the enthusiasm for your campaign. It can also tarnish the quality of your brand, and may result in a wave of returns if the issue is widespread.
Reality #2: Slow Fulfillment Speeds
Even if your ducks are in a row in terms of your back-end fulfillment processes, the reality of just how long fulfillment can be often takes businesses by surprise. Traditional sea freight shipment from a China factory can take weeks or months. The following are the steps your products take to get from the factory, to your fulfillment center, and to your customers::
- Mass production of products begins.
- Inventory is packaged for bulk shipment and sent to port.
- Order is shipped via sea freight from China to the U.S.
- Inventory then has to go through the customs clearance process.
- Products are delivered to your local warehouse.
- Inventory is received, cataloged, and then prepared for consumer-facing packaging.
- Orders are sent to customers (keep in mind that international customers will have an even longer fulfillment timeline).
Now imagine that you’re a backer in a campaign, which can take weeks to months before a customer anticipates any product shipment at all. Then, imagine being the customer, having waited for weeks or months for the campaign to close, only to continue to wait weeks or months longer because of an incredibly long fulfillment period.
Customers lose excitement about their product, and they may outright cancel orders because they think the product will never come.
Reality #3: Product Quality
Finally, businesses often underestimate how hard it is to get a high-quality prototype to translate into a high-quality, mass-produced product. You need to be prepared to actively manage your factories in China, or at the very least remain in regular communication. Product quality is crucial for a crowdfunding campaign. You have to remember that:
- Customers may be waiting weeks or months to get their product (so receiving something that doesn’t match expectations is going to crush your brand authority)
- This may be your only interaction with these customers (it’s not like they can hop back on your store, do an easy return, and order something else). That first impression is important for your brand.
- Mass returns will crush a campaign, which is the last thing you want if you managed to gather a lot of attention and a lot of orders.
What to Consider for a Successful Crowdfunding Campaign
There’s all kinds of factors to consider when thinking about creating a successful crowdfunding campaign. Since EcommOps are fulfillment specialist, we wanted to focus on the fulfillment side of what to consider in order for your campaign to be successful:
Product Size/Shape (in relation to shipping)
The lighter and more compact your product is, the easier and cheaper it will be to ship. It’s too easy for a brand to get excited about a product, have a successful crowdfunding campaign, only to realize that they haven’t charged enough to cover shipping costs of a heavy or irregularly shipped product.
Carefully consider the cost of fulfilling your product in the early stages of planning, and be sure to include the cost of fulfillment into your pricing.
Backer Locations (or countries you’re shipping to)
It will cost different amounts to ship to different backers in different locations. You may want to limit your initial market first to keep fulfillment simple, and if a campaign proves successful, extending your reach into other markets.
Shipping Restrictions (i.e. liquids)
Certain products require special shipping lines to be legally and safely fulfilled, which commonly includes products containing:
- Lithium batteries
- Toxic materials
- Food products
Make sure you understand how to legally and safely ship your product to target markets before offering your campaign in those locations.
Keep Product Offering Simple
Finally, keep your product offering simple (especially if this is your first crowdfunding campaign). This may mean making sure your product is easily shipped, or it may mean keeping your tiered rewards simple and straightforward. It could also mean making sure your product is a uniform shape for easy shipment.
Regardless of what simple means for your brand, the simpler you keep your product offering, the easier it will be to execute a successful crowdfunding campaign.
How China Fulfillment Empowers Crowdfunding Campaigns to Be Successful
The final item to consider when running a crowdfunding campaign is the fulfillment strategy you want to follow. If you are planning to partner with a China factory in sourcing your product, then direct-from-China fulfillment can make your campaign much simpler than traditional fulfillment methods. Let’s take a look at the biggest reasons why:
Simplified International Shipping
China fulfillment makes international shipping easy. Instead of the long fulfillment process we described earlier with sea freight shipping and local fulfillment, your fulfillment strategy looks like this:
- The factory sends products to your China fulfillment center (which general takes around 2 days)
- Products are shipped from your China fulfillment center directly to customers (with general shipping times of 5-8 days anywhere in the world).
This simplified approach removes a lot of the complexity of traditional fulfillment methods. It also removes an enormous amount of costs to international shipping. Our clients regularly save 50%+ on international shipping costs just by choosing to fulfill from China instead of a local warehouse.
If you are trying to break into multiple markets and are committed to using a China factory for your products, then we recommend you consider China fulfillment.
Flexible to Demand
China fulfillment also allows you to be flexible to demand, even the typically unsure demand that a crowdfunding campaign offers. The lead times between a China factory and fulfillment center is only a couple of days, which means businesses have the flexibility for both:
- Ordering just enough inventory to meet current demand, without the need to overstock
- Scaling up production quickly should demand suddenly spike, without needing to worry about selling out and missing demand
Demand is especially unpredictable with crowdfunding campaigns, but China fulfillment makes it easy to accommodate both low and high demand with the trade-offs seen in traditional fulfillment.
Resilient to Supply Chain Disruptions
Aside from the typical supply chain issues we’ve discussed, acute supply chain disruptions can cause havoc on your crowdfunding campaign. Whether it’s port congestion like you see in Q4, issues like extreme demand from the COVID-19 recovery, or even accidents like the Evergreen shipping disaster, supply chain disruptions can make a mess of traditional supply lines.
Fortunately, China fulfillment doesn’t use the same kind of supply lines. You won’t have to worry about sea freight issues or port congestion, because your parcels are being delivered directly to customers.
Easier Product Iterations
If your initial campaign is successful, you’ll likely want to consider iterations of your initial product offering. Crowdfunding is great for gathering product feedback, which helps to give a clear guidance on which direction your product changes should go. It could be general quality improvements, new features, or any other kind of change that would improve the user experience.
China fulfillment makes product iterations easier because of the short lead times between the factory and the fulfillment warehouse. You can quickly send product details to your factory partner, and they can quickly get new products ready for shipment in a fraction of the time that it takes traditional supply lines to do so.
This means you could leverage the hype around your initial product offering to capture demand for the new product iteration, since you don’t have to wait months to get product changes into the hands of customers.
EcommOps: China Crowdfunding Fulfillment Specialists
There are plenty of positive expectations businesses have when they consider a crowdfunding campaign, the realities are often hard for businesses to cope with, unless you have an expert crowdfunding partner in your corner, like EcommOps!
We’ve helped businesses launch and manage successful crowdfunding campaigns leveraging the power of China fulfillment, and we’d love to do the same for you. EcommOps offers our clients unique benefits, including:
- A true 3PL experience
- Bilingual support (English/Mandarin)
- Shenzhen-based fulfillment warehouse
- Inventory management services
- Crowdfunding fulfillment services
If you’re considering launching a crowdfunding campaign and want to cement your fulfillment strategy, EcommOps wants to partner with you. You can reach out to our experts through our webform, and we’ll be in touch on how to make your crowdfunding campaign a success!
Crowdfunding Fulfillment FAQs
1. What is a crowdfunding fulfillment service?
A crowdfunding fulfillment service is provided by a fulfillment warehouse that caters to crowdfunding campaigns. Services can include unique packaging, inventory management, returns management, and of course, order fulfillment.
2. What are the benefits of using a crowdfunding fulfillment service?
The benefits of using a crowdfunding fulfillment service will vary from provider to provider, but in general, you can expect:
- Faster order fulfillment
- Easier inventory management
- A hassle-free experience that allows businesses to focus resources in other areas outside of fulfillment.
If you partner with EcommOps, additional benefits include:
- Less money tied up in inventory
- Faster lead times from factories
- 5-8 day direct-to-customer shipping
- 50%+ reduction in international shipping costs
3. What is the fulfillment process for a crowdfunding campaign?
The fulfillment process is going to look different for each different crowdfunding campaign. For example, a Kickstarter campaign may not begin production until well after the campaign has completed, while a Patreon service will fulfill products on a monthly basis.
4. What is the difference between a fulfillment warehouse and fulfillment center?
These two terms describe the same thing, which is a large building that takes in inventory and fulfills customer’s order as they come in.