In the quest for online retail success, you may want to try selling low-cost, high-profit items. How you approach this strategy will depend on several factors. In this article, you'll learn how to identify and market low-cost, high-profit items so your business can earn more money.
How to Determine if an Item is Low-Cost and High-Profit
By definition, an item that is low-cost and high-profit is something that you can buy for a low price and sell at a significantly increased price. For example, if you can buy product X for $5 and sell it for $50, then you have an item with a 900% markup. That's an incredible return for such a small investment.
You can determine an item's markup by dividing the profit by the cost and moving the decimal to places to the right. For instance, if your company buys a widget for $10 and sells it for $25, you would divide the profit ($25 - $10 makes a $15 profit) by the cost of buying the object ($10 in this case). In this scenario, you'd divide $15 by $10 to get 1.5. When you move the decimal, you find that the widget has a 150% markup rate.
If you're not great at math, or simply don't want to scratch calculations at your desk, you can find plenty of markup calculators online that will do the work for you.
In reality, the definitions of "low-cost" and "high-profit" vary from company to company.
In reality, the definitions of "low-cost" and "high-profit" vary from company to company. What one ecommerce business finds cheap could be somewhat expensive for another company. For instance, a large ecommerce company that already has already enjoyed years of profitability might find $50 very affordable, especially if it can sell the item for $150 (a 200% markup). A smaller company that just got started might balk at the idea of spending $50 wholesale per item.
The Benefits and Drawbacks of Selling Low-Cost, High-Profit Products Online
The benefit of selling low-cost, high-profit products online is that you get a terrific return on your investment. There aren't many opportunities where companies can earn $15 on a $10 investment. As long as your customers continue to buy your products at the price you set, you stand to earn a lot of money.
When it comes to retail, the profit margin always matters. Low-cost, high-profit products will make your company successful as long as you can sell enough merchandise. What else could a business ask for?
A 200% markup sounds great, but you'll have to sell a lot of products if you only generate a few dollars per sale.
There are, however, some potential drawbacks to selling low-cost, high-profit products. For one, the strategy can take a lot of work. A 200% markup sounds great, but you'll have to sell a lot of products if you only generate a few dollars per sale. Expect to devote a lot of time to packing and shipping small items.
Assuming that your products sell well, then you will need to keep a steady supply in your warehouse. That can create inventory problems when you're purchasing low-cost products from overseas companies. Delivery times from countries like China are often unpredictable. Inclement weather, for instance, could disrupt your supply chain. If your delivery gets delayed, then you could run out of products while customers want to buy them.
Missed sales opportunities do more than hurt your earning. They can also harm your relationship with customers. If a customer visiting your store discovers that you don't have any toy cars in stock, then that person will go to another online seller. If the customer has a positive experience with the other seller, then the person may continue to use that store. Suddenly, you've lost countless future sales because you didn't have a popular item in stock.
How to Market Your Products Online
How you market your products online could decide whether your ecommerce company thrives or fails. In some ways, marketing becomes even more important when you sell low-cost, high-profit items because you have to sell a large volume of product to earn money.
Luckily, you have several options that can boost sales:
Your Website
Your website should offer in-depth information about the products you sell. It should also promote the products by telling potential customers how the items will solve a problem in their lives. A hair clip solves the problem of keeping hair out of your face. A toy car solves the problem of choosing a gift for a child. Concentrate on the benefits to make people understand why they want to buy items from your store.
Concentrate on the benefits to make people understand why they want to buy items from your store.
You also need to use SEO strategies to help customers find your page or product.
Your Blog
Most of the pages on your website should have static content that doesn't change very often. Your blog, however, gives you a chance to connect with your audience frequently. Fresh content will improve your SEO ranking and help you develop your brand.
Customers often shy away from online stores that they don't know. If you make your site friendly and knowledgeable, then people are more likely to buy from you.
Social Media Posts
Social media is crucial to online marketing. Your business's Facebook, Instagram and Twitter accounts give you opportunities to share your blog entries, connect with followers, and point customers to the products you want to sell most.
Social media marketing has evolved beyond Facebook posts, though. In today's competitive marketplace, you should consider creating video content. By 2019, video will make up more than 80% of web traffic. Videos can also improve click-through rates, boost conversations, and help customers use the items that they buy.
Like all business ventures, there are some risks to selling low-cost ecommerce products with high profit margins. If you're intimidated, start with a small number of low-cost products and see how well you can sell them. If you like the results, then you've found a strategy that works for you.
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