Hi, thanks for the free couple chapters. I have already bought the book via kindle and have read it twice! What a great book, thanks! I do have one question. When researching for a market , are there products you won’t bother selling because the price is so low for those products. Do you look for products that can go for a high price? What is your normal range that you look for?
For example, I found a market that sells products between .99 – $10 per item. Is that advisable to get into that market? I actually have about a million questions but I think I’ll read the book one more time. You guys are really helpful with the knowledge that you shared.
This is the BEST question we have ever been asked!
Why We Do Not Start E-Commerce Sites Selling Low Priced items
- Lower profit margin: I don’t think this really requires expanding, even if your overall profit percentage was fantastic on a $0.99 item, you have to move A LOT of stock to hit those lifestyle goals!
- Bigger competition: At that price point you are competing with giants like Amazon and eBay, which is flooded with sellers offering great deals. All of these sellers are competing with one another, driving prices lower and lower and each seller having to work harder to get noticed.
- More work for less gain: This encompasses both points 1 and 2. Lower priced items leave you having to work harder to stand out, sell more to reach your goals and when you sell more you have to work even harder again. Moving more product brings a whole lot of extra problems you don’t think about at the time such as having to order stock more often, including packaging. Having to answer a lot more questions from customers, including exchanges and returns if applicable. You spend a lot more time packaging items and shipping them. You have more stock to keep track of, including inventory and accounting paperwork. We actually have been here, we use to sell one of our ranges on eBay at a reduced price and although we were selling loads more than the website would, the website was a lot more profitable and we had a lot more free time.
- Less Branding Opportunities: More profit margin means you can actually add more value to your items/brand with the little touches that you can not afford with the smaller priced items. This could be through your packaging, your add-ons, little bonus items, the services you can offer your customers (we can offer a free exchange on an item because we have the profit margin to cover this additional cost) and the advertising budget you can afford to give yourself.
- Shipping becomes a larger psychological component of the sale to a customer: The extra cost of shipping can actually make or break a potential sale with your customers. Shipping prices are pretty much the same for x size product, but if product A has a RRP of $4.99 with shipping of $7.99, and product B has a RRP of $149.99 with the same shipping the customer is less likely to care as it is a much smaller percentage of the purchase price. It might seem unfair as everybody knows that shipping prices don’t go to the seller, they cover the cost of paying the courier or the post office but to a customer, they matter!
- More room for promotions: For example, free shipping and half price. Take 50% of a $149.99 item and customers notice. If a price moves from $4.99 to $2.49 the ‘wow’ impact is not as big. You have no room to offer free shipping, free exchanges or a money back guarantee on a lot of products at the 099-$10 price bracket.
and wait there’s more….
- The price range we prefer is anywhere between $30-150 for your primary items. You might sell some ancillary items (smaller add-on products etc.) for less, but this is because they often are purchased with a higher profit margin product, and so they still have a good profit margin.
- Just remember, $1 cheap stores come and go, but the “Louis Vuittons” of this world stick around for decades. You can’t necessarily start off with those kinds of ridiculous profit margins until you have brand recognition and loyalty, but if you start off dirt cheap, that will always be your brand, and that’s difficult to change in future.
- Does the product you are thinking of selling only sell for between 0.99c and $10? We’re in markets that sell for between 99c and $200 depending on where you buy the product from and what added incentives are included. It may be that you can be a premium seller.
I hope that our A helped with your Q. If you have a question we would love to hear from you, so head to our contact us page and send us your Q now!