The Comprehensive Guide To Finding A Product To Sell
You've got a fantastic eCommerce product idea and are eager to get started on your new online business endeavour. But, before you go into developing and manufacturing your product, you need to undertake some thorough fact-checking.
Before starting a business, one of the most important things a business owner can do is establish whether or not there is a market for whatever they intend to sell. Do your potential buyers believe your new product is as fantastic as you do? Do you have product features that will satisfy your customers?
As thrilling as it may be to begin your new life as an entrepreneur, there is nothing more unpleasant or costly than devoting all of your time and energy to an enterprise that will fail and a lack of hungry and eager clients is a surefire way for a new company to fail.
The truth is that product research and selection are extremely difficult and time-consuming. Most people would drive themselves up the wall with all the research.
Product features that make a good product
We know from recent reports that global e-commerce sales are consistently growing at a rate of 25% annually. Now, the question is how to find a profitable product to sell.
Some things to be aware of before starting:
Most people get trapped seeking the "perfect product" and, so, never get around to starting anything. There is no such thing as a flawless product. Every product has obstacles to overcome and those who do will prosper.
We will look over what drives product profitability and what makes a good product. As you can see, product profitability varies over time, and all products have advantages and disadvantages. Your task is to discover a profitable product and launch it - then expand from there.
Too much learning and information lead to uncertainty and a lack of confidence, making it appear as if everyone else has it figured out except you. Learning is NOT a productive activity as nothing is generated. The only way to succeed in business is to put what you've learnt into practice.
Too Much Thinking
Customers ask themselves, "Should I offer Boba Milk Tea or cooking utensils?" That's overly broad thinking for where we're at in the process. Right now, we're searching for simply one profitable product to sell. We do not desire a profitable niche or a profitable category. Let’s repeat it once more - we want one profitable product. One profitable product leads to two, three, and so on.
When you're just starting, it's easy to become overwhelmed by the prospect of preparing your empire's entire future. You fixate on minor things such as where to obtain UPC codes. Instead, you must get up every day and take the smallest step possible toward realising your dream.
After you've sold some products and made some money, you'll optimise your product catalogue, surrendering low-profit items for new opportunities and consolidating your greatest products into product lines and brands.
At this point, we need to be thinking about profits and not expanding.
Following The Herd
You don't want to use the same methods as everyone else and there is no simple system that predicts which things will be profitable. Even for those who are ‘leading’, not all of them have it figured out.
Lack Of Data
Most people who try to get into this line of business never go past comparing prices on Amazon vs. Alibaba vs. Aliexpress. Oftentimes, merely comparing prices at face value as such would not give you the full detail of what costs go on behind the scenes and how much of the price you’re paying goes into covering which operating costs and the like.
Basic product criteria:
Small, Light, and Easy To Send
The larger and heavier your product, the higher the shipping cost. Shipping is often the second-highest expense in this industry. You should also avoid products that are fragile or have a lot of moving parts. The more intricate a product, the higher the return rate, which raises transportation expenses. We'd like to avoid that.
Items Sell For $20 - $50
After paying sales fees, advertising charges, shipping & handling, storage, and so on, any product selling for less than $20 will have essentially little profit margin remaining. So, if you're just starting and want to make a respectable living in this industry, you can automatically rule out any product selling for less than $20. On the other hand, the greater a product's selling price, the more it will cost you to get started selling it.
While there may be no upper limit, you may get a sense of how much investment will be necessary before attaining profitability by simply adding two zeros to the end of your product's selling price. A $20 product will probably require $2,000 in investment before it becomes a lucrative revenue stream, and a $50 product will probably require $5,000 before it becomes profitable.
Profitability And Efficient Utilisation Of Capital
You want products that have a reasonable profit margin and make effective use of your cash. When you're just starting, you may simplify these complex phrases by applying what we call the '4 times rule' - whatever you pay for a product, you should try to sell it for, at least, 4 times the cost.
Here’s another product rule or two to keep in mind:
Understanding Product Life Cycle
This is one of the most significant ideas in e-commerce that is rarely discussed. You can't succeed with products that aren't in the growing stage of their life cycle.
Competition Is Good
Nobody succeeds in business if they shun competition. However, many people's main worry while investigating items is this very issue of competition. You cannot be timid in your approach, but approach it with an abundance mindset.
Get enthused about the items you'll bring into the world. Do not underestimate how your product will become better for your customers.
The only thing to be concerned about is a lack of competition, which indicates a dead market not worthy of anyone's attention.
Always Add Value
You don't want to start modifying your product right away while you're just starting. You may put a logo on your product, but let's postpone customising the physical product itself or adding pricey packaging, supplementary products/bundles, etc, until after we've got this thing up and running.
The key to getting started is to locate a product with increasing demand and to grow in tandem with that demand. As a result, you can begin with a reasonably simple, unmodified product. Then, with each order, aim to offer more value based on customer feedback and ranking data, and find products that you are passionate about.
We estimate that roughly 80% of all sellers are uninterested in the things they sell. To them, it's just a company — they don't even have the life experience to develop or improve the items significantly.
However, what about sellers who locate things that meet all of these criteria while also falling inside their hobbies and life experience? Those vendors have such a close relationship with their clients that they wind up defining the market and dominating their competitors. And they have a great time doing it!
So, while you'll probably start with a very basic product, you can soon start changing things with your supplier to differentiate yourself and leave all your competitors rushing to play catch up.
Brainstorming what to research
You now understand exactly what makes a fantastic product for a new business.
We'll go over the real comparison and selection process in the following section. Before we do that, we need to think about which products we want to research and compare.
At this point, we are not concerned with pricing or profitability. We are merely looking for high-potential items to later evaluate and compare their profitability.
There is no right or incorrect technique to generate product ideas. Most people begin by roaming around aimlessly, seeking goods that grab their attention...which does work occasionally. What we recommend is for you to consider the following:
Similar to strolling around and looking for goods that catch your attention, but much more focused on products that can be turned into a business.
The goal here is to uncover some of the less obvious product options that you might be able to sell better than most other merchants. Products in these categories often have better margins than most others.
So, consider your driving passions, interests, and hobbies. Consider some of the great products you've recently seen there and start jotting down those products.
2. What's Trending
The goal here is to investigate emerging product trends. Simply browse some websites or marketplaces and look for items that strike your eye and fall within the parameters listed above.
3. I Spy
Even though this is the most straightforward approach, we do want to warn you not to blindly copy other sellers and sell whatever product they are selling. That's a prescription for always being behind the curve, trying to catch up to the true champions.
However, this is a great method for discovering what they're currently investing in. Perhaps just utilise this strategy to acquire intelligence to fuel your brainstorming sessions.
Using history to predict the future
It might sound complicated, but it’s rather simple.
Utilise simple techniques to find a few pieces of sales data for each product and enter those figures into a spreadsheet.
You'll be able to get an overview of how that product is doing and that’ll be able to give you, to some extent, future projections of sales volume, profitability, and even how much your first purchase will cost you as well as how much money you'll make once it's all sold.
Research: How To?
1st Step: Product Viability
This is how much each of the top ten merchants will charge for this product. Most of the time, you'll sell for slightly more than this — but consider this your worst-case scenario pricing.
Any product with an average price of less than $20 will not advance to the next level as these products will not be successful and you will not be able to establish a business with them.
Any product with an average price of more than $50 is not necessarily a terrible product, but it will cost a fortune to purchase inventory to begin selling it. These products are best saved for later, once you've established some solid cash flow.
Too many sales, as we discussed above, are terrible for novice sellers. We're striving for a sweet spot of a product that we can launch on a low budget, quickly reach profitability, and then naturally grow with the market from there.
Any product with average revenue of less than $3,000 will not advance to the next level. These products may be profitable, but there isn't enough volume to make them viable products on which to build a business.
Any product with average revenue of more than $25,000 is not necessarily a terrible product, but it will cost a fortune to get started and compete in such a vast market. Not to say that these items are to be skipped entirely, but maybe they’re best saved for the future.
Ideally, you can identify some products with average revenues ranging from $3,000 to $20,000 that are still in the early stages of their life cycles. The notion is that you can capitalise on rising demand and become a market leader by the time the market reaches those greater revenue levels.
This is how many reviews the average vendor has. It approximately illustrates how many reviews you'll need to be seen as an evident industry leader by all new clients.
Any product with fewer than 25 average reviews is not necessarily a bad product, but it is a warning sign that the market may be a tad too small for a new business to flourish.
On the other hand, if there are more than 200 average reviews, it may be a warning sign that this industry has already matured. Products have been polished, and marketing has already been automated. Competing in these areas may be quite difficult compared to products with fewer reviews.
The sweet spot in this category is products with Avg Reviews ranging from 25 to 200. Anything outside of this range is unlikely to work in your favour, especially on the high end of 200, unless you have the experience and a large budget.
Sales Over Revenue Per Review
These are some extremely great metrics that we enjoy using. Both generally display the same thing - the number of sales made by vendors for each review on their product listing.
Using this measure in conjunction with average reviews provides an approximate estimate of where a product is in its life cycle. A product with a low average review and a high sales/revenue per review indicates that the product is new, has few reviews, and is most likely still making insane amounts of money. Those are certainly the kinds of items you want to sell.
Any product having an average sales per review of less than 2 or an average revenue per review of less than $40 will not be advantageous to you and you can get rid of all of these.
2nd Step: Product Profitability
Premium products at premium prices should be sold by new sellers. In almost every case, your product will sell for somewhat more than the average price of the top ten sellers we looked at above.
Shipping is the second largest expense in this business and may sometimes even be the largest expense - both acquiring your product from the supplier (sourcing/importing) and getting it to the client (fulfilment).
Shipping is notoriously difficult to estimate and that’s why we recommended selling for 4 times more than the cost as this would also help cover the shipping costs to some extent.
Actual Product Cost
Now we need to find out how much this product will cost us. How much will each inventory unit cost from the supplier?
3rd Step: Preparing For Future Orders
Most new vendors will begin with a test order of 100 items. When those units have been successfully sold, you will begin ordering more inventory to keep up with rising sales.
You’ll want to keep in mind the cost of shipping in addition to the carrier’s reliability and different shipping methods that would best be suited for your business needs.
This is the precise profit you'll make after you've paid for everything like shipping, handling, importing, fulfilment, seller fees, taxes, etc.
Net Profit Per Unit
The same as Total Profit, but stated per unit of output rather than showing the total profit of the order. This will help you to see how product profitability varies with order quantity.
Net Profit Margin
Here is the actual net profit margin you can expect on this product based on purchase quantity and shipping method.
Return On Investment
This is comparable to the net profit margin, except it demonstrates how well you use your money. This will be less useful when you initially start, but it will become quite valuable when you have a variety of products and you want to sell only the ones that make the most sense for your business.
Put it all together and pick your winning product
You've already done more product research than most merchants will ever do. You now have all of the information you need to make an informed decision.
Your task at this point is to scroll around, compare all of these things, note down all data that we talked about earlier, and pick your winning product.
As you can see from your statistics, some products simply do not make sense. They may have extremely low-profit margins/profit per unit, or they may necessitate such big inventory orders that they are just beyond your present budget.
That will still be fine because there is at least one fantastic product in your data that you can utilise to launch your business.
Ask these last few questions
Is it an impulse purchase that would not require a lot of research before buying?
For your first few things, you want to sell them on the spur of the moment and, luckily, most products in our desired price range are impulse purchases.
Is the product fragile or hazardous to ship?
Shipping and return expenses could skyrocket as a result.
Are there moving parts?
When you're initially starting, having more moving components is a bad thing.
Could the top ten results for this search query be improved?
Are there any photographs missing from the present sellers, or might their images be improved?
Can I compete with (or outperform) the present product and listing quality of existing sellers?
You want to sell high-quality products that your clients would enjoy (this is where the profit margins are).
Is there a fan base for this product?
In the future, you could wish to use influencers, Facebook Groups, and other similar tools. A product with a strong and enthusiastic community is preferable to selling something that lacks that spark.
Is there a clear product funnel or does this product encourage recurring purchases?
The last thing we consider is what comes after each product. Is there any product on your workbook that has a clear path to introducing more items to the same customers? This is crucial to us since we want to turn our products into product lines and brands.
We have now gotten to the end of our guide. Ultimately, we’ll cap things off by stating that in starting a new e-commerce business, the main goal is to ascertain aspects that make you stand out from your competition and give your target audience a reason why they should buy from you. Use our guide and implement everything we’ve given you to the best of your ability and we wish you the best of luck in your e-commerce journey.