If you haven’t already, check out Part 1: How the Hoverboard went Viral, and Part Two: The Rise of Copycat Hoverboard Startups.
By summer 2015, it became evident that our company was in a mad-dash to stay atop the Hoverboard industry as the market leader. Everyone and their grandmother were looking for the “segway” hoverboard as cheap as possible. Demand for the product was sky-rocketing and in order to stay ahead of the pack we needed an abundance of inventory to be continuously selling.
We figured, okay well other companies are now competing with us, so all we have to do is sell more product than them. This was our second horrible decision since the company went viral, as we soon found out and learned the hard way.
Back in late 2014, we had the opportunity to personally meet the Chinese factory owners we were purchasing our units from. This factory had developed a Chinese patent around their device and so, as a reseller here in the United States, our company felt confident that we were purchasing and re-selling the highest quality Hoverboard on the market.
When we first ordered our 20–30 Hoverboard units from this factory, we experienced zero delays in shipment. In fact, ordering Hoverboard units at this time was no big deal, primarily because the world (on a mass scale) wasn’t aware that the product even existed.
This seamless ordering process changed dramatically however, by the time May 2015 came. By the end of May, millions of people had become aware of our Hoverboard product because of the massive reach celebrities like Kendall Jenner and Justin Bieber had on social media when they would promote our company. The general public was becoming mesmerized by the Hoverboard, day by day. People even started seeing an opportunity to make a quick buck by re-selling the product themselves.
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Suddenly, there was a massive number of people in the States demanding Hoverboards. But these Hoverboards weren’t just being purchased for personal use but rather for re-selling.
New companies each day were popping up on the internet such as Buzzwheel, Monorover, Uniwheel, Skywalker, along with so many others by the time June 2015 came around.
These companies were being started by one or two individuals who would order 10–30 units from China in order to flip them for a profit here in the States. This saturation of the Hoverboard marketplace suddenly resulted in a significant jump in demand, which then put major pressure on Chinese factories to produce and ship Hoverboards by the millions.
The Chinese factories weren’t the only ones feeling the pressure. We were feeling intense pressure of our own. We were getting hundreds of orders per week, but we didn’t have adequate inventory to fulfill the demand we were receiving.
When delays in shipment started taking place, we would contact our factory usually between 12 – 4 AM EST due to the 12 hour time zone difference, trying to find out the status of our shipment. We would get in contact with our factory having to deal with incredibly difficult language barriers and we would continuously hear some of the following responses from our factory:
“Sorry for the delay, we will get your shipment out tomorrow.”
“We’re finishing up production very soon, don’t worry.”
“There was a delay with the shipping company but we’re fixing the issue.”
These responses from our factory were excuses. Oftentimes, they were simply lies. Our factory was clearly not in a position to ship us our Hoverboards, but they were denying this fact by coming up with various excuses for the delay in our shipment. They were so inundated with other companies ordering their Hoverboards that they couldn’t keep up with the rise in demand that had taken place.
Once our shipment would finally arrive, there would frequently be issues. Oftentimes, we would only receive partial shipments of our order to the office. For example, we would have a 500 piece order scheduled for delivery and only receive 200 pieces. Then it would take another two full weeks before we received the remaining 300 Hoverboards.
Other times, we would receive our shipment of Hoverboards, but the keys wouldn’t be in the boxes accompanying the Hoverboards. Our keys were shipped separately and our small team would have to manually match up the keys for each Hoverboard individually by serial numbers on each of the Hoverboard boxes. It was a big pain that could only be solved through sheer force of will (and manual labor).
Our company took a big hit due to these problems that we simply didn’t have the ability to fix. This lack of consistency really damaged our reputation, as our company was on a high following the viral success of not only Hoverboards, but our company as the place to go for them.
The four week delay in shipment started creating miserable experiences for our young startup. It resulted in our customers calling our office, yelling and screaming at us trying to find out why their Hoverboard, which they had just spent $1,500 on, still hadn’t arrived.
Most importantly, the problems we had with our Chinese manufacturer made the simple task of fulfilling orders very difficult. This four week delay gave consumers the impression that our company was a scam, which a young business simply can’t afford. When customers didn’t receive their Hoverboards anywhere close to when we told them they would, they logically started concluding that our company had stolen money from them. It was at this point where things started to take a massive turn for the worse. These customers started calling their credit card companies complaining, and the results of these complaints resulted in one thing, disputes!
Stay tuned for Part 4: Financial Collapse.