Say you’ve decided you are going to start the company you’ve dreamed of – an ecommerce business. You’re ready, motivated and you’ve already read anything there was to read about it. And now I picture you there, in front of your computer, searching for an answer to the big question: What am I going to sell?
Of course – there is no absolutely right answer to that question. There are, however several things you need to take into account when choosing the right product(s).
1. Market size AND competitors
You will first be faced with a need for information regarding:
- Market size
The trick is those two need to be thought of together. There is a strong connection between them. Your ideal market is big enough to make it worth your effort and small enough to have manageable competitors.
Say you’re looking into selling ebooks. Supposedly you’d try that in an established market like the US. The book market is huge (est. $15 billion) and ebooks amount to 20% of that figure. Unfortunately you will be faced with some fierce competition: Amazon, Barnes&Noble, Sony Bookstore and Apple iTunes. Tough luck, you are probably not going to make it in the big fish pond, baby.
Say you’d try some smaller market, but big enough to have a say in it. Something like kids ebooks. You would have less competition from the big guys (as you can see in the graph above the kids ebooks is the smallest category yet the fastest growing). Secondly – there is still a big enough market to make it worth your effort (approx. $500 mil).
Key take aways:
- choose a market that’s big enough to make it worth your effort, but small enough so you won’t be crushed by your competitors
- be careful with small markets – unless you have the financial stamina to grow your market into something solid it can be too risky to stick to small markets. Ex.: Selling products such as a dog GPS-connected collar with MP3 player and iPhone connectivity. It might be the bomb in 10 years – but isn’t this market a little risky?
- competition is a great thing to have – it means you have a viable market. Growing competition is even better – it means your market is evolving. You should only worry when your growth is outpaced by the market’s.
2. The right suppliers
Suppliers are key factors when determining the future of your online store. You need to make sure that your suppliers are:
- Reliable – you will not be manufacturing your own products. As such – you need to make sure that your suppliers are reliable in terms of product quality, delivery time and financial stability. You wouldn’t want them to sell you broken products, delay shipments or go bankrupt.
- Cheap enough – don’t forget – you need to make a profit to keep your business afloat. To do that you will need to search for those suppliers that will allow you to have a decent margin.
- Able to fulfill your orders – say you’ve ran a successful Black Friday promotion. Your sales went through the roof. Now it’s time to start delivering those orders. Is your supplier up for the job?
3. Can you actually ship your product ?
Think of this: most shipping companies will charge you by the distance and by the pound when shipping your orders. Let’s say you’ve decided on the right products, your market size is big enough, competitors don’t seem to be too threatening but there is a small issue: The product is too heavy.
Can you ship this product and still keep shipping costs at a decent level? If not – you might want to rethink your choice.
4. Recurring sales and upsell strategy
Most of your marketing will be focused on two things: 1. acquiring customers and 2. making sure those customers keep coming back. You need to keep that in mind when choosing what to sell online.
You need to sell products that customers can:
- understand (remember the GPS dog-collar with MP3 player features – it may not be so easy to convince people to buy it)
- get informed about, preferably on your website
- need to be bought periodically (books, electronics, airplane tickets – they are all products that are sold recurrently). This means you can build upon your previous customer acquisitions.
Now that you’ve decided on the right kind of product, the kind that is bought not only once but many times – add something to the order. Upsell. Say you’ve decided on selling fashionable clothes. You might also want to add accessories or cosmetics to your product assortment as they are likely to be bought together.
As you are likely to find it it hard to sell all those products right from the start – just focus on your best sellers. However – do outline your up-sell strategy straight from the beginning and follow up on it.