In this section, we'll be covering how to pick a product and what criteria you will use to make your choices. We'll be talking why competition is good unless it's Wal-Mart. We'll also be discussing the different ways to segment your market and find groups that are enthusiastic and passionate to sell to.
This is the most important decision you will make, and how you go about it depends on whether you already have your niche picked out (and maybe a website already up) or you are starting with a blank slate. Let’s start with a blank slate first:
You want the product to be high value. It's difficult to make money selling product if your gross margin is less than $25, including the money that you spend on shipping. Normally this means that you want your product price to be somewhere between $50.00 and $1000.00 for consumer items.
Profit per item is not the only reason to sell more expensive products:
You don't really want customers who are looking to buy cheap products. You don't want customers that are looking for the lowest price on a particular product either.
People that are looking to squeeze every last penny out of their dollar are typically more difficult to please in other ways as well. People who are willing to pay a fair price for a premium product are likely to be more affluent and easier to deal with.
eBay customers illustrate this perfectly. I used to sell on eBay, and I did okay. I sold products ranging in cost from $99-$2500, and by the time I quit I accumulated over 200 positive feedback without a single negative. But I have to say that it came at a significant price in terms of my profit margin, and my patience. Cheap people are difficult to keep satisfied.
The next thing to do is to make sure that you have competition. If you don't have any competition at all for this product, chances are there's not much demand for it either. Once you determine that somebody is selling your new favorite gizmo, you need to try and get a feel for how many of them are being sold.
Two places you can do this are Amazon.com and eBay. Find your product or a similar one on eBay and check to see how many of them have sold from all vendors over the previous 12 months. Now take a look on Amazon. You won’t be getting sales figures, but you can gauge how popular something is by its overall ranking within its category on Amazon and by looking at the reviews.
Once you determine that your item is popular enough to justify selling it, and that it will move at a price which gives you a chance for a decent profit, you want to find out how difficult it is to get locally. My rule of thumb is that if I can buy it at Wal-Mart, I don't want it on my website.
The problem is you can rarely match the price of Wal-Mart or Target. You can spend a lot of time producing great category and item pages with tons of supporting information, just so people can read it and then run down to Target to buy their item.
By the way, you may have noticed that many chain store websites like Target.com have AdSense ads on them. This is because people are using their websites primarily as a research tool, and the merchants don't expect to convert well anyway. I do this myself all the time. I just want to see if target has got the kitchen device, or shoes that I want online and then drive straight to the store and pick them up.
I like picnic tables. But I don’t want to sell them. They’re big and heavy. Heavy means expensive to ship, and big is even worse. Shipping companies will charge you “oversize” rates for large items that can eat up all of your profit.
Stay away from liquids, if possible. Liquids are heavy. (One gallon of water weighs 8.3 lbs.) The potential for leakage and damage is high. And you have to take special precautions to send them via air. We ship liquids, but by ground only.
If you intend to have something large or heavy dropshipped, make sure you read through the agreement carefully.
If you want to try shipping a product yourself, order the smallest possible quantity to start and keep careful records. Make sure your shipping costs don’t eat up your profit.
People know what they sell, and sell what they know.
The above is an old adage in sales, and refers to the fact that salesmen tend to focus more on items that they are already having success with, to the detriment of the rest of their product line. For you, however, it’s more about getting a running start.
If it is at all possible, work with something you are already using, or at least are interested in. You’ll find that not only is the work easier when you are interested in your subject, you are likely to do a better job of picking which products to sell on your site if you have some background experience.
Once you have it narrowed down to specific area of interest or “niche” you can do some research online to further zero in.
Researching product on Amazon is pretty easy, thanks to their great design. Hopefully you have something in mind, and at least some familiarity with the product type or market. You’ll start with the Amazon Directory page.
Pretty cool. Just a huge list of categories. Let’s say you want to sell treadmills. Work your way through like this: Exercise & Fitness/Treadmills to get here:
As you can see, we’ll start by sorting on “Customer Review”. There is no point even looking at crap. Inferior product will cause you so much work in customer support that it doesn’t matter how great your margin is – you’ll still end up losing. And who wants to be the guy who sells cheap junk?
Ok we have great ratings and the prices are nice and high – perfect. Lots of ratings too except for the TrekDesk – but there’s a reason for that.
Don’t just latch onto the first 5 star product you see. It’s worth your while to think about this a little. In the picture above we have only 34 reviews for the TrekDesk Treadmill Desk. But this is the quintessential niche product. I wouldn’t expect a lot of reviews. I want one, and I would consider putting up a site about these things.
Another search for “Treadmill Desks” on Amazon shows a slew of products similar or related to the TrekDesk. Let’s take a look at the manufacturer’s website too:
OK – they use fulfillment by Amazon. That’s fine. If you scroll down to the bottom of their site, you can see that they have an affiliate link as well. The site has a ton of product info.
Let’s see what else is out there...A Google search for “forum: treadmill desk” returns pages of relevant results....Article: treadmill desk is just as good.
There is an actual online community of sorts for this product, plenty of interest, lots of different manufacturers, tone of related treadmill accessories.
I would want to do some competitive analysis first, but so far this product category definitely looks good. I would continue to research manufacturers to find one that ships their own product and has a re-seller program.
Not bad. We started out with an overcrowded niche and narrowed it down to something where we may be able to gain a foothold. We have multiple products and multiple manufacturers.
My picture of the eventual site looks like this for monetization:
Content will be really easy to come by. First I would put together a portfolio of at least 20 products to feature, then gather content following the procedures in the Content Generation section of this book. That should give you well over 100 pages to start with.
Next I would dig through the articles and forums and come up with about 20 posts related to the products.
One thing I am seeing a lot of is “make your own treadmill desk” articles and blogs. It looks easy. I might actually build one and record the process.
This is the end of the free content for this chapter. If you liked what you saw here, there's plenty more in the complete Grabapple Guide to E-Commerce. Check out the sales page for more info: