By Kendra Leah, @Writing2Day
Once you have found your niche it’s time to do some product availability research. What I mean by this is, will the manufacturers or wholesalers be willing to sell to you? Not all vendors will sell to a store that is home-based. Many are stuck in an archaic mindset that an online store is not the same as a brick and mortar store. I could argue this until I’m blue in the face but many vendors have this policy in place. My policy was if they did not specifically ask if I had a brick and mortar store, I usually did not offer it up.
Another thing you need to consider when choosing vendors is whether or not they sell their own products online. While I don’t consider this a deal breaker, I will caution you that it may not be the best idea to go into direct competition with the supplier. Why would a potential customer buy from you if they can go direct. This is especially true online when a search result for a product leads them directly to the suppliers website.
If a vendor is also selling online, look for those that are selling above their suggested retail price for the products. These vendors are at least giving you a chance to compete and sell more of their product. My business was literally cut in half when one of my suppliers decided to start selling retail online at the same prices their retailers were selling at. Now that you’ve found out that your chosen products are available to you to sell, there are some other things that you need to consider about the products.
There are costs associated with doing business online that will eat away at your ability to generate a profit. Unless you are selling a product that customers download, you will have to ship that product. This is a huge expense and the price of your products is going to have to be high enough to cover this cost along with all of the other business expenses. When choosing products make sure that the suggested retail margin is at least 50%, or double your cost. This is also known as keystone pricing.
Anything less than this and you are setting yourself up for failure. Take a look online at other companies that are selling the same products. Are they sticking to keystone pricing or are they discounting the products? If too many places are offering your products at a discount, you will have a hard time selling them full price. Many manufacturers have policies against this to protect the price integrity of their brand but not all will enforce it. Remember, you are competing on at least a national level online and consumers are very price conscious.
Also note how many different companies are selling the products. Is the market already saturated? Is it being sold at big box stores? You probably don’t want to compete with the Walmarts of the world. Choose instead to compete with other small businesses and let your excellent customer service keep your customer’s coming back to you even if they can find the product cheaper elsewhere.
When I speak of starting a business out of your closet, I’m assuming that you don’t have a large pile of cash sitting around that you can invest in inventory. You need to be able to start small with a company until you know if that product is going to move for you. Ask your potential vendors how much the minimum opening order is and how much the minimum reorder is. Depending on what you are selling, the vendor may have several lines of products within a brand. Many vendors will not let you buy just one line or just a few products from a line.
An example of this would be in the bath and body industry. The vendor’s brand may include items, such as: body lotion, body wash, scrubs, soaps, bath oils, etc. Each of these products may be available in ten different fragrances. The vendor may require you to place an opening order across four or more different fragrance lines and go at least six products deep in these lines because they want you to carry a good representation of their brand.
You need to factor in all of these considerations when making your product decisions. Know how much money you have to spend on inventory and be careful not place all of your eggs in one basket. Do your research and know what consumers are buying right now. The last thing you want is a closet full of products that you can’t sell.
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#ecommerce #productresearch #newbusiness #businessstartup
[…] The last section, before loan applications and exhibits, is all about the products you sell if you are a retail business. Why did you choose to carry the brands you carry? Do you just see something you like and decide to sell it? Or have you thought through your break-even point so you know what your pricing criteria is. Hopefully you have thought about your business image and what types of products and price points fit into this image and the market demographics for your customers. You may find these posts helpful with this section: Choosing Products for Your Business and How to Research the Products You are Going to Sell. […]