The Ultimate Kickstarter Fulfillment Guide

The Ultimate Kickstarter Fulfillment Guide

By Augustin Kennady / Oct 30, 2017

So you’ve decided to take the plunge and participate in what millions of entrepreneurs have discovered to be one of the best ways to raise money for a product or service: crowdfunding.

 

There are plenty of guides that will facilitate your journey to a successful crowdfunding campaign, but there are very few that cover what comes next, which includes fulfilling rewards promised to your backers in a manner that preserves your margins.

 

If you are starting or are thinking about starting a product-based Kickstarter campaign, then this guide is for you!

 

Section 1: Overview of Crowdfunding

1.1 Major players in crowdfunding

1.2 Rewards and Pricing

 

Section 2: Shipping and Fulfillment

2.1 Free Shipping

2.2 Shipping Turnaround

2.3 Shipping Methods

2.4 International Shipping

2.5 In-house Fulfillment or Fulfillment Center?

 

Section 3: Springboard into eCommerce Retail

3.1 Prepare for a post-reward Flash Sale

3.2 Incorporating free shipping

3.3 Multichannel Ecommerce

3.4 Using a fulfillment center to manage long-term growth

 

 

Section 1: Overview of Crowdfunding

1.1 Major Players

In the world of rewards based crowdfunding, there are two names that dominate the scene: Kickstarter and Indiegogo.

 

There are other types of crowdfunding – such as equity-based crowdfunding (where you give up a portion of your company) and donation-based crowdfunding (like GoFundMe) – but when it comes to delivering products to your backers in the classical crowdfunding model, Kickstarter and Indiegogo reign supreme.

 

Which service you ultimately go with is a matter of personal preference. Both platforms are comparable in quality and reputation, but there are some products that perform better on one platform than the other simply since more people in that niche community congregate on that site. For instance, tabletop gaming has a larger community on Kickstarter, whereas appliances tend to fare better on Indiegogo.

 

There are many reasons to only choose one of these two sites and not simultaneously list your campaign on both platforms. From a fulfillment perspective, you will find fulfillment to be much more challenging when forced to reconcile orders from both platforms while also balancing delivery dates.

 

 

1.2 Concept of Rewards and Pricing

Let’s talk a little bit about rewards. The idea is that you will be raising a certain amount of money to launch your product. However, your backers will want something in return – and that thing is a “reward”. Very often, rewards include your product itself.

 

So, for instance, if you are trying to raise $10,000 for a new wallet style that costs you $10 to produce, you might consider offering a reward to backers for $25. At that pledge level, the backer would receive the wallet.

Kickstarter and Indiegogo handle rewards similarly, but ultimately it is you – the entrepreneur – who will be responsible for ensuring your backers receive their products. And this is where fulfillment comes into play!

 

 

Section 2: Shipping and Fulfillment

2.1 Free Shipping

More than any other incentive you can offer a backer, free shipping is perhaps the most impactful. Let’s use the previous example. If you are trying to raise $10,000 for a new wallet concept, you may realize that it costs $10 for you in labor to produce a wallet. You are looking to have a manufacturing run of 500 units, because you understand the importance of accounting for a contingency budget.

 

This would leave you with $5,000 in margin after your production run, and it is from this money that you would need to fulfill your product. You set your pledge level at $25, because this is the most popular pledge level, but you then charge $10 for domestic shipping.

 

“Cart Abandonment” – the concept of preparing to make a purchase and then, for whatever reason, declining to finalize the purchase – is alive and well in crowdfunding! Don’t let your campaign be a victim of “Backer Bounce”. Offering free shipping (especially domestic) not only raises the perceived value of the product, but also increases your potential market.

 

To account for free shipping, you functionally have two choices. Both choices are effective, although each strategy works better in particular instances. You’ll want to evaluate which option makes the most sense for your product, your operation costs, and your campaign:

 

1. Pricing it In: In this model, you would figure that $5 shipping is a fair expense. Therefore, you’ll set your pledge level at $30 instead of $25. This is a higher initial outlay, but the perceived value of the product will actually increase. True Fact: Customers don’t view shipping price as a value-additive feature. Telling your backers that they are paying $25 for a wallet and $5 for shipping will result in them thinking that they are spending $30 for a $25 wallet. However, if you tell your backers that they are paying $30 for a wallet and $0 for shipping, they are paying the exact same amount, but the perception now is that they are spending $30 for a $30 wallet.

 

2. Eat the Costs: Sometimes, if your volume is high, your price is very sensitive, and your margins allow it, you will actually be better served by eating the shipping costs. If you find that your competitors sell a comparable wallet for $30, but you sell it for $25, you can just absorb the shipping costs yourself out of your profits. This works to great effect: I distinctly remember one campaign that looked to raise $20,000 and whose most popular reward was $40. The margin was $20 per unit, so the founder decided that she would absorb the cost of shipping (in this case roughly $5 per unit) and offer free shipping to her backers. The end result? She raised over $100,000.

Whichever way you choose to go, you’ll find that offering free shipping is one of the best proactive things you can do to stimulate your campaign, and it will actually make fulfilling your product even easier!

 

 

2.2 Shipping Turnaround

Now that you’ve established your shipping price (ideally free) for your backers, you will want to give them a reasonable timeline to expect their products.

 

Selecting a date is a delicate balancing act: you want the date to be far enough into the future to allow for production and manufacturing of the goods, importing the goods (if necessary), arranging fulfillment, and then executing delivery. However, you don’t want it to be too late as to give off an air of responsibility. Your timeline is entirely your decision and your choice as an entrepreneur. However, we would encourage you to at least think about each of these steps and factor them into your decision:

  • Product Quality Assurance (QA): Congrats! Your campaign was a success, and your new wallet product raised $100,000 against a $10,000 goal! But there’s a problem: your backers are disappointed because the stitching on the wallets is loose on every single unit. We have heard frustrating tales like this frequently, and it serves to remind everybody that – prior to your initial production run and absolutely prior to distribution of your product – it is essential to perform quality assurance on your products. You can expect at least a 1-2 week QA period.
  • Manufacturing Run: This will depend entirely on your supplier. Are you working with a manufacturing company in Guangzhou on your custom product design? Or do you have artisans hand-crafting each product? If you are directly overseeing manufacturing, you’ll have an idea as to how long it will take to finish your product run. If you are outsourcing manufacturing, be sure to get an estimate from your manufacturing partner.
  • Importing Product: Whether you use a customs broker to handle your imports, you enlist your fulfillment center to take care of it for you, you handle customs on your own, or you are manufacturing domestically, you will at some point need to get your product from your manufacturer to your fulfillment center (even if you are using self-fulfillment)! Again, the timelines here are entirely dependent upon your product. All that said, if you are shipping by sea freight from Asia, you can expect a 2-4 week turnaround at the very least.
  • Order Fulfillment: Imagine you run a successful campaign, and you have 500 backers. You get to the end, but now you’ve got 500 different people who will be needing rewards fulfilled. It’s essential to realize that it isn’t just 500 products. It’s 500 boxes. It’s 500 pieces of tape. It’s 500 shipping labels. It’s 500 times you’ve had to pick, inspect, and place the item into the box. It’s the transport and arrangement of all those parcels to the shipping partner – FedEx, DHL, UPS, etc. Doing this process by yourself could take weeks. However, with a fulfillment company. This entire process will generally take no longer than 24 hours.
  • Transit Time: If you ship your products FedEx Overnight (or even FedEx 2-Day), your timeframe will be short. But it will also be very costly. If you ship USPS First Class, your costs will be low, but your shipping timeframe will be much longer. Fulfillment companies can often help you discover the happiest medium (and also pass a portion of their volume-based savings onto you). In general, 3-5 days is a reasonable expectation.

 

All in all, for an internationally sourced product, a 2-month time window from the moment your production run is approved until it hits your backers’ doorsteps is generally a good rule of thumb. You’ll likely exceed expectations here, especially if you outsource fulfillment.

 

 

2.3 Shipping Methods

So far so good. Your product has been perfected, you have thoughtfully established your reward tiers, and you are offering free shipping with a responsible turnaround time. Now the next question you should ask yourself is: which carrier should I use and what speed should I aim for?

 

When you sell a product in a traditional eCommerce environment, shipping speed is paramount. Companies like Amazon do very well by making 2-day shipping a reliable option for nearly every customer. Alternatively, many eCommerce companies can offer free shipping with a lengthy 3-4 week delivery time.

 

The good news is that crowdfunding operates somewhat differently. Sure, you absolutely can use FedEx overnight to get your product and rewards to your backers as soon as possible, but the overall timeline and shipping turnaround expectations specific to crowdfunding negates most of the need to do that.

 

Simply put: your backers are already waiting several months – why not let them wait a few days more?

 

Shipping Methods like FedEx Ground and USPS Priority Mail are available to everybody. DHL has competitive shipping products as well that balance speed with economy.

 

Our recommendation is to use a trackable and insurable shipping method that can reliably reach your customers within 5-7 business days. Usually the most cost-efficient shipping methods are not only the slowest, but also the least transparent.

 

Doubly problematic is that highly economical shipping methods frequently leave little to no recourse should delivery not go as planned – a not at all uncommon reality.

 

If you are working with a fulfillment center, you can outline your preferences with them, or you can utilize their partnerships to your benefit. Therefore, the best shipping provider will vary. However, if you are going the self-fulfillment route, we believe that FedEx Ground will give you the best balance of economy, speed, trackability, and recourse.

 

 

2.4 International Shipping

International shipping is fraught with many challenges. First, the same rules that applied to domestic shipping apply here:

  • you’ll have more backers if you offer free international shipping
  • you’ll want to price international shipping into your reward levels if possible
  • you want something reasonably quick, trackable, and insurable.

 

The difference, of course, is that there is far more variety in terms of international shipping options. If you are anticipating a significant amount of international shipments, we strongly recommend going with a fulfillment center.

 

There are numerous shipping methods that are not explicitly advertised to the public at large that fulfillment centers and logistics professionals will know about. For instance, an eCommerce store trying to ship economically worldwide will often be forced to choose a delivery method that can take two to three weeks for delivery! However, there exist economical alternatives that can get your package shipped internationally with tracking in approximately five business days that will be comparably priced to domestic shipments!  

 

 

2.5 In-house Fulfillment vs. Outsources Fulfillment

So let’s recap where we are at this point. You’ve priced your rewards, offered free shipping, set a reasonable fulfillment expectation for your backers, and you’ve selected the best domestic and international shipment options available to you. Furthermore, your campaign was successful and your manufacturing.

 

Now all you have to do is actually fulfill your customers’ rewards. As you’ll see, this is no small feat. Up to this point, your chief consideration has (rightly) been on your products and your immediate approach post-fundraise. At this point, the focus shifts to logistics – making sure everybody gets the right reward.

 

Let’s take a look at some of the considerations that you’ll likely have on your radar once you get to this point. Note that a campaign with 5000 backers is going to have a significantly different experience with these points than a campaign with 20 backers, but the issues themselves will exist no matter the campaign size:

  • Storage: You’ve got your product, which is great, but now you need somewhere to put it. Are you going to put it in your garage? Your attic? A storage unit?
  • Transit: At some point, you’re going to have to get your product to the place where you store your inventory. Then, at another point, you’re going to have to take this product from where you store your inventory to where you’ll be packaging it for shipment. Then, finally, you’ll likely have to take your products to the place of shipment. This is a lot of back and forth!
  • Packaging: You’ll need to not only buy boxes, but you’ll want to buy packing paper (or bubble wrap if your products are fragile), tape, tape dispensers, and a litany of other products useful in packaging.
  • Labels: You have a few options here. You can buy a label printer, you can print out labels and then cut them, or you can take your packages to your place of shipment and have them do it for you. At the end of the day, though, you will have to consider how you’re going to get your packages labeled for shipment with the appropriate parameters.
  • Management: Every time you pick your product from its storage, pack the product, and ship it to a backer, you will want your inventory to be kept up to date. You’ll also want to make sure that your backer no longer appears in the list of backers in need of product. You’ll need to set up a system to manage this.
  • Customs: Did you get your products manufactured and sourced from overseas? You’re not alone. Many campaigns have found that overseas manufacturing is cost-effective. However, when you’re trying to get your products sent to you, you’ll have to deal with customs. You can go through all the steps of handling importing yourself, or you can hire a customs broker to handle all this for you.

 

These are the major considerations you will have when it comes to fulfilling your rewards. If you opt for self-fulfillment, you’ll have to navigate this labyrinth alone. Now, as you might expect, these issues become significantly more problematic the more products and backers you have to handle. For instance, storing 20 products and then fulfilling them won’t be too space-consuming or time-consuming. You should also be able to handle inventory and order management pretty easily. Once you reach 5,000 orders, things get a bit trickier.

 

One other consideration? Backers talk to one another. If you opt for self-fulfillment and get bogged down in the amount of time it takes, you could have backers receiving their product days (or weeks) before other backers. Needless to say, this sort of situation could conceivably foster some ill-will.

 

A useful litmus test is that if you have more than 50 rewards to fulfill, you should strongly consider outsourcing fulfillment.

 

Using the points above, let’s examine how outsourcing fulfillment can actually help save you time, money, and hassles if your scale warrants it:

  • Storage: Your fulfillment center has all the storage space you need. You will usually have to pay inventory fees for products that don’t ship, but if you are fulfilling within a one or two month time window, you may not need to pay any storage fees at all!
  • Transit: Your fulfillment center will be the location that the products are delivered, the packing location, and the location from which your carrier will pick up the packages for delivery to your backers. It’s a one-stop shop.
  • Packaging: Your fulfillment center has all the packaging materials you need (and probably a heap more that you don’t need but might want).
  • Labels: Your fulfillment center can generate and place labels with ease. Label generation and printing – a major consideration to a self-fulfillment enterprise – is a complete non-issue to fulfillment centers.
  • Management: Your fulfillment center will handle your inventory and order management for you. You’ll be able to see your current inventory counts, and you’ll also be able to see the status of every order (and even track the orders that have already shipped).
  • Customs: Your fulfillment center will work with a customs broker on your behalf and handle this lengthy and cumbersome process for you!

 

To be fair, not every fulfillment center will be able to help as described. However, at ShipMonk, we can absolutely handle everything mentioned above.

 

 

Section 3: Springboard into eCommerce Retail

The names “Kickstarter” and “Indiegogo” imply forward motion. After all, once your crowdfunding campaign is over, the real work is just beginning. With every successful crowdfunding campaign comes with it an opportunity – an opportunity to use your successful campaign to launch a successful eCommerce business!


Many entrepreneurs fail to capitalize on the momentum that they build from their successful crowdfunding campaigns. As a result, their products languish and any rekindling of the venture has to overcome a significant amount of inertia to be successful.


The great news is that segueing from crowdfunding into your own eCommerce site is relatively easy. There are a few things you’ll want to do in order to prepare, however. This list should prepare you well:

  • Shopping Cart: With crowdfunding, you don’t actually have to worry about the merchant side of your business. However, once you launch your website and begin allowing commerce from your website, you’ll want to choose a shopping cart. Our recommendations are rather simple: if you are using WordPress, you should go with WooCommerce. If you are operating on relatively low volume and/or are new to eCommerce, Shopify is the best option. If you have heavy volume and you are requiring a great degree of customization and comprehensive analytics, then Shopify or ShopifyPlus may still work for you – or you might opt for Magento.
  • Website: Speaking of your website, you almost invariably already have one. Now is a great opportunity to optimize the structure of your site. Are you using the best images? Do your images clash with the readability of your text? Have you humanized your website? This last bit is extremely important. With a crowdfunding campaign, your primary targeted landing page is your campaign’s page on Kickstarter or Indiegogo. You likely have a video and/or an extensive story visible. This sort of material quickly gains backer trust. Furthermore, you have the benefit of the Kickstarter/Indiegogo name to further instill that sense of trust. However, on your site, this baseline of trust no longer exists. You must recreate it with a contact page, sensible refund and return policies, and a mission statement. Feel free to amend your crowdfunding materials to conform to your new venture as an eCommerce company!
  • Fulfillment: If you elected to go the self-fulfillment route with your crowdfunding campaign, you likely will want to partner with a fulfillment center early in your eCommerce venture. You’ll have significantly less time to handle regular fulfillment, and – unlike the crowdfunding case, where you could fulfill all your rewards at once – you’ll have orders that need to be fulfilled on a daily basis. Many an entrepreneur has been overwhelmed by the challenges of scaling fulfillment, so the sooner you can meet with a fulfillment company that can understand your goals as a company and your needs as an entrepreneur, the better.

 

 

3.1 Prepare for a post-reward Flash Sale

Perhaps nothing you can do can launch store awareness of your new venture better than offering a flash sale shortly after your campaign has finished. The concept of a flash sale is simple: you will offer your product (leftover from your rewards) at a discount that is meant to entice new customers who perhaps feel twinges of regret about not backing your product to have a chance to buy!


A flash sale, specifically one that follows in the wake of your campaign, needs to be handled with care and consideration for your initial backers. For instance, if your campaign focused on a product that your backers pledged $30 for, and you turn around and offer that product in a flash sale for $15, you’re going to short shrift your initial backers. A modest discount – say, $25 instead of $30 – is acceptable, since it is well within range of your backer reward level. If demand is especially high for your product, you might consider forgoing a discount entirely and offer the product at a premium over the reward level, thus providing your initial backers with an added discount. Your choice here will be dictated primarily by demand for your product.


A flash sale’s duration should also be short. Black Friday. Cyber Monday. “Your Product” Saturday –  pick a day and own it. Some flash sales last a weekend. Some last an hour. Experience has shown that the most successful flash sales are between 3 and 24 hours. You should expect to sell out, and you should prepare for heavy traffic.


Also note that, depending on the goal of your flash sale, you may not need to focus primarily on profits. Indeed, many flash sales are very unprofitable in the short term for entrepreneurs. The reason to offer them is simple: building brand awareness. And this early into your journey, you should take each and every advantage available to you.  

 

 

3.2 Incorporating free shipping

The leading cause of cart abandonment rears its head to the fullest extent once you transition from crowdfunding to eCommerce. While some backers will not necessarily be put off by shipping costs on rewards, since many backers feel an inherent thrill to helping launch a new company, your customers are likely to be far less benevolent. They will expect free shipping, and they will likely strongly prefer that the turnaround delivery time on their product is under one week.


Fortunately, if you work with a fulfillment center, you can stabilize your operations cost and be able to offer free shipping to your customers without significant damage to the bottom line.

 

 

3.3 Multichannel Ecommerce

Multichannel eCommerce is one of the buzzwords of the industry. Simply put, it means that you are selling your product on multiple channels. As you may imagine, this can pose challenges from a logistics standpoint, but it can also pose issues from a branding standpoint that might not otherwise seem immediately apparent.


There are clear benefits to selling your product on certain channels like Amazon. You are reaching a potentially massive user base, the fulfillment fees are generally low, and the overall costs are often a bargain. However, in addition to the issues of conforming to Amazon’s rigorous specifications, you will be ceding buyer identity to Amazon (or whichever comparable channel you are considering). In other words, when your customers buy your product from Amazon, they are not necessarily correlating their purchase of your product with your brand. After all, they didn’t purchase a product from you. In their mind, they purchased a product from Amazon. Especially in the early going, ceding this type of opportunity to cultivate brand identity and build up a solid email base can be detrimental to your brand.

 

There may well come a time when selling on multiple channels – Amazon, eBay, Jet, etc. – becomes a reality and viable for you. When that time comes, talk to your fulfillment company about how they handle multichannel eCommerce fulfillment. However, understand the benefits to restricting your channels in the early going while you are building your brand.

 

 

3.4 Using a fulfillment center to manage long-term growth

If you follow all of these tips and you built an engaging and desirable product, there is a strong chance that you will experience growth. While most people associate growth with positive changes, expanded operation, and Bentleys, there are also a significant amount of challenges associated as well.


Think about your manufacturing chain. If you get your products manufactured in China, sending your product via sea freight made sense when you only had to worry about one pallet of product. But what if your product demand increases tenfold? This is definitely not an unheard of rate of growth, and it can leave you scrambling to orchestrate such a shipment.


A fulfillment company will likely not have connections with your particular manufacturer, but some companies do have connections with customs brokers who can work with your manufacturer to send up documentation, receiving, and transportation for large shipments from several pallets to several containers.


Now consider inventory. Your garage was fine for storing those two pallets of products, but what are you going to do with twenty pallets? Or perhaps your storage needs are smaller, your spouse doesn’t want a pallet of product sitting in the dining room. No matter the size of your inventory, your fulfillment company will be able to help grow with you and accommodate your increased inventory quantity.


Then you have to consider order management and inventory management. Reconciling orders with inventory is simple on an Excel spreadsheet when you’re crowdfunding and fulfilling twenty rewards. What happens when you are looking at 200 orders per month? How are you going to reconcile this inventory with the orders quickly and effectively? If your fulfillment company has an inventory management system, you can rest assured that this process will be handled automatically, so you’ll always know when you need to order more product and what the status is on every order.


Speaking of which, think about the actual fulfillment process itself. All the boxes, packing supplies, and labor hours outlined in the “nightmare” scenario of mass-backer-reward fulfillment become even more pronounced with eCommerce growth. Fulfilling your shipments becomes a full time job in and of itself for multiple people, so outsourcing makes a good deal of sense.    


Partnering with a fulfillment company early in the game will save you from ever having to confront these issues in anything more than an indirect way. While we strongly recommend at ShipMonk that every eCommerce entrepreneur utilizes self-fulfillment early on in their endeavors to appreciate and understand the process and the multitude of associated challenges, there comes a point when growth becomes an obvious and insuperable challenge.


If you feel like growth is imminent, don’t delay: start speaking with fulfillment companies as soon as possible!

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