One of the most important factors for success in e-commerce is knowing what to sell. Finding the perfect product to sell is often the most important step in creating a profitable and growing company. Next, I will explain the product selection strategies of the Amazon platform and the independent website Shopify. Both Amazon sellers and sellers who run independent websites Shopify can take a look at this, because these are all reference factors for product selection in cross-border e-commerce, and can help you better operate the platform or independent website.
For the past two years, I have been trying to answer this question – What is the perfect cross-border e-commerce product? To better understand the perfect e-commerce product, I had to identify the common characteristics that successful products and profit points share.
By analyzing hundreds of successful and unsuccessful products and profit points, I developed a comprehensive list of key metrics and criteria for evaluating new ideas.
Below is a summary of product selection techniques and some guidelines for finding high-profit products suitable for e-commerce sales.
Note: You may never find a product or niche that meets all of the criteria below. Evaluating your idea against this list can give you a better understanding of your chosen product/niche, help avoid pitfalls and improve your overall chances of success.
1. What is the potential market size?
Choose a product and niche with a small but sufficient market size. Avoid niches that are too small when using low keyword searches. For example, a product that caters to pregnant women between the ages of 25-40 may be good. But a product that caters to pregnant women between the ages of 25 and 40 who like punk rock music might be too narrow. It will be harder to find customers, more expensive to acquire customers, and the small market size will greatly limit your potential growth.
Example: The Shopify store Daneson sells luxury toothpicks. As you can imagine the market for luxury toothpicks isn't huge. A niche like luxury toothpicks can be both good and bad. The smaller market size may limit revenue, but if they can define their target customers well and acquire them cheaply, they can definitely own this niche. As a bonus, high-end toothpicks are a product perfect for attracting media attention.
Tool: Using Google’s Keyword Tool can help you determine the search volume for your chosen keywords. This can give you an idea of how many people are searching for your keyword terms and in turn give you an idea of the market size. Combine that with realistic judgment and some Google searches in your area of interest, and you should start to get a feel for your market viability.
2. What is your competitive advantage?
What is the competitive landscape for your product? No competitors, a few competitors, or many competitors?
If there are a lot of players in your niche, that could be a sign that the market is proven. But, in order to break through, you have to do something different to capture customers’ attention and build market share.
Example: Shopify store Luxy Hair wasn't the first company to sell hair extensions online, and when it started two years ago the market was flooded with competitors. From the beginning they knew they had to do something different. Luxy entered the game with a different marketing strategy by providing value for free through video tutorials on YouTube.
2 years and over 700,000 YouTube subscribers later, they are now one of the largest online hair retailers in the world.
Tools: Of course, a good Google and Bing search will help you discover current market players. Google's Keyword Tool can tell you the approximate search volume for your chosen keywords and tell you how competitive they are (meaning how many other people/businesses are bidding on those terms). Don’t forget that the more people bid on your keywords, the more expensive they become.
3. Is it a trend, a fad, or a growing market?
Make sure you understand as much as possible about where your product is located. Is your product or niche a fad, trend, stable or growing market?
Example: A Geiger counter is a personal device about the size of a cell phone that tells you the radiation levels around you. Cool niche right?
With a quick Google Trends search, I knew immediately that if I had sold them in March 2011 after the earthquake in Japan, I could have made a small fortune. Probably if I tried to sell them now, I’d probably be sitting on my inventory for a while.
Tools: Google Trends will help you gain an overall understanding of certain trends, fads, growing or stable markets. If you see unexplained spikes, try searching further to see what the possible cause is.
4. Can you buy items locally?
If your product is readily available locally, people will have less reason to look for your product online. For example, most people who want to buy a toilet plunger simply go to Walmart or their local hardware store.
If your product can be purchased locally, how can you differentiate yourself and convince people to buy it online? Can you offer a better alternative? Higher quality? Better price?
Example: Ellusionist sells gorgeous, high-end decks for magicians and card players. Check out their products. Have you seen anything like what they sell locally?
5.Who are your target customers?
You don’t need to go into detail at this point, but you should have an idea of the type of customers they might sell to and their ability to buy online.
If you have products for teenagers, you should remember that most do not have credit cards to purchase online.
For example: Clothing for seniors provides adaptive clothing for older adults. One of their main target markets is the low tech sector with low online commerce adoption. You’ll need to tailor your entire online store to accommodate them.
Tools: If you find other companies selling similar products, you can use Alexa to get information about their visitor demographics, which may help you better define your target market.
6. What's your mark?
Before getting too far into the process, it is crucial to consider the labeling of a specific product. This is extremely important because selling products can incur a ton of other small expenses that can eat into your profits. Having a strong initial markup will give you the necessary cushion to absorb these variable costs.
Example: Let’s look at an actual product to better understand why initial markup is so important. We'll be using a pet pedometer - a small device that attaches to your dog's collar to count the number of steps they take.
This could be a fun little niche – people are always willing to spend money on their dogs. But can you sell this product profitably?
I chose a potential selling price of $24.99 and obtained a cost per unit of $2 from the manufacturer on Alibaba. I added all of the other approximate expenses associated with putting the product on sale to the spreadsheet below:
You can see from this example how small fees can cut into your margin. In this case, a product that was initially marked up at over 1,200% ended up being less than 100% when all was said and done. Of course, these are only approximations, and you can significantly reduce costs by handling order fulfillment yourself and reducing your advertising spend.
Tool: Try to find examples of products on Alibaba that interest you. Email pricing and minimum order quantities (MOQs) to a small number of manufacturers. From there, use Google to try to find others selling the same or similar products. How much do they charge?
Survey Monkey is a great tool for creating quick surveys to send out to your social network to find out what others in your social circle would pay for.
When you start to get more serious, you can use a tool like Weebly to mock up a quick site and actually try to get customers to pass orders to validate your price point. There can sometimes be a big difference between what people say they're willing to pay and what they actually pay, especially if all you're asking for are the opinions of friends and family.
7. How much can you sell it for?
A price range of $75 to $150 is generally recommended as it minimizes the need to find a large number of customers to make a decent profit and provides some cushion for customer acquisition (marketing) costs.
Prices over $150 tend to come with more customer scrutiny. Potential customers will want and expect more reassurance. They’ll have more questions, which overall creates a longer, more difficult sales cycle.
Example: In our previous example with the Pet Pedometer, our selling price was a relatively low $25. Therefore, variable costs eat up the majority of our profit, leaving us with a profit of only $12.95 per unit. Let’s say we swapped out the pet pedometer for a new product called “Product X”, and let’s assume that the potential selling price of “Product X” is $100 (4x more than the pet pedometer). I also multiplied other appropriate costs by a factor of 4 for consistency.
Our profit margin is 73% and the Pet Pedometer has a 42% profit due to the higher selling price, and the profit per unit has increased from $12.95 to $76.75.
8. Can you offer subscriptions?
You’ll hear it time and time again: It’s easier and cheaper to sell to existing customers than to find new ones. A subscription-based business allows you to automatically sell to the same customer multiple times. There are generally two types of subscription-based e-commerce businesses, discovery and replenishment.
Example: A discovery-based e-commerce business like Quarterly Co. sends you something on a schedule, but you don’t know what it is. It is picked up by others, but usually falls into the same category every period, such as beauty or fashion products.
A replenishment-based e-commerce business like Dollar Shave Club is based on sending you things that you consume and constantly need. In this case, razor blades.
The subscription e-commerce model is particularly important for companies like Dollar Shave Club, because their products are priced extremely low. Monthly Blade subscriptions start at $1 per month. Their business model won’t work if they don’t keep selling to the same customer.
9. What's the size and weight of your products?
Product size and weight can have a significant impact on your sales and profits. More and more customers want free shipping these days. If your product is oversized and/or heavy, expensive shipping may deter potential buyers. Did you know that shipping costs are the number one reason for shopping cart abandonment?
Additionally, there will be added costs to ship your products if you work with an overseas manufacturer, and added warehouse costs if you choose to use a fulfillment warehouse.
Example: There is a popular oversized yoga mat company that sells giant workout mats. The product itself is a reasonable $99. Shipping to the US is $25, Canada is $40, and the rest of the world is $100. For some people, it's hard for them to justify spending 40-100% on shipping.
The same goes for any large or heavy items. You may be very keen on selling iron weight sets, and perhaps you have found a good supplier who can offer you a good price – you need to consider the added shipping costs. There is only so much a customer is willing to pay for shipping.
10. Are your products durable?
How fragile is your potential product? Fragile products can be an invitation to trouble. Fragile products will cost you more in shipping/packaging costs, and you’re bound to have more customer returns and exchanges. Always remember that even if it’s the shipper’s fault, it’s still the customer’s experience with your brand. You are ultimately responsible for your entire experience.
When you get to the stage of ordering samples, test them and push them to their limits. Put them in the heat/cold, apply pressure, twist, pull, drop, kick it. Don't worry about breaking the bank on a few hundred dollars for a sample. It is more important to have a more accurate understanding of the quality of potential products.
Example: Play Lashes loses over $2,000 worth of product due to shipping damage when the shipping company attempted to load the shipment into the PO. The box is too small. The hard plastic casing that protects the delicate product shattered on most of the devices. Going forward, they decided to have their fulfillment warehouse bubble wrap all orders.
11. Are your products seasonal?
Businesses with seasonal products can suffer from inconsistent cash flow. Ideally, you want to find a product that will show demand year-round. At the very least, you just want to be aware of seasonal demand fluctuations so you can plan accordingly.
For example: Christmas items like the Omega tree stand are best sold before the holidays. Check out the Google Trends report below.
Tool: Understand seasonal trends by looking at Google Trends for your product/niche keywords.
12. Does your product create passion or pain?
The best products to sell are those that inspire you, relieve pain, or solve a problem. Customer acquisition (marketing) costs also tend to be lower because customers are actively seeking a solution, rather than discovering it.
Example: Pro Teeth Guard sells custom mouthguards to prevent teeth grinding. People with this problem may look for a solution and find Pro Teeth Guard without the need for expensive advertising to attract them. As JP, owner of Pro Teeth Guard, pointed out during a Skype call, “When someone is in pain and your product helps relieve the pain.”
13: What is your turnover?
Having a product that constantly needs to change is risky. There is a chance that you won’t be able to sell your product until you have turnover. For example, clothing with seasonal colors or accessory products for the ever-changing smartphone and tablet market. Of course, there are many successful businesses now catering to these markets, such as iPhone and iPod cases, but it is important to be aware of how fast your product turnover may be. There are costs associated with entering a market like this.
Example: I had the opportunity to speak with the owner of Sutra Designs, designer/owner of a line of leather smartphone/tablet cases. Since launching, he has struggled to build brand awareness and sell his products.
Sutra Designs' biggest challenge is generating enough traffic to sell his inventory before the cases become obsolete with new hardware models. If he chooses to design a new product for the new hardware model, he will face the additional costs of developing a new design and minimum order quantities from the manufacturer. This will be permanent and ongoing because of his chosen niche.
14. Is it a consumable or disposable product?
As we have discussed, it is easier to sell to existing customers than to new customers. Using consumable or disposable products can simplify this process by essentially limiting the life of the product.
Example: Manpacks sells products that typically have a lifespan like razors, condoms, socks, and underwear.
15. Do you need to consider perishability?
Perishable products are risky for brick-and-mortar stores, let alone e-commerce. Since some perishable items require quick delivery, shipping costs can be quite high.
For example, baked goods, meats, frozen foods, and any item that needs to remain refrigerated or has a short expiration date requires special care when shipping to customers. If you choose to sell perishable goods, you need to be prepared for the additional processing and shipping costs associated with your products.
Example: Yummy Tummy Soup Company produces delicious homemade soups and desserts and ships them to customers through an e-commerce website. This model works for them, and they do well, but it’s not right for every eCommerce merchant. They need to prepare fresh soup every day and pay close attention to shipping times.
16.Are there any restrictions and regulations?
Before you enter a niche or choose a product, make sure there are no regulations or restrictions, or that they are at least manageable. Certain chemical products, food products, and cosmetics may be restricted not only by the country you are importing the goods into, but also by the country you are shipping the products to.
Some places to make a few phone calls to are the customs office of the country where you will be importing the product, your warehouse if you plan on using the product, and the Food and Drug Administration if it is a food/supplement product.
For example: Silky Polish, a non-toxic, cruelty-free nail polish, was excited about their product and niche, but ran into problems when they learned it was considered a “hazardous material” because of flammable chemicals.
The regulations prevent them from shipping products to customers when they are imported, or selling them to customers, thus preventing overseas sales.
17. Is your product scalable?
Many people don’t think about scalability when they first start. It’s hard to think about the future when you’re still in the process of starting up, but scalability should be considered and built into the business model from the beginning.
If your products are handmade or contain hard-to-find materials, think about how you can expand your business if it takes off. Can you outsource manufacturing? Will your staff size increase as the number of orders increases, or will you be able to maintain a small team?
Conclusion <br/>The products and niche you choose are the core of your business and one of the most important decisions you will ever make.
While the perfect product may or may not exist, it is important to minimize risk by choosing your product and niche.
Using the above criteria as a guide can help you better understand the products you are considering and improve your overall chances of success.
