Ebiz 2 - I may call it quits
January 15th, 2008 by KenricMy ebiz1 is doing very well. Now that it has been up and running for 2 months, it is deeply entrenched in the search engines. Today it reached almost 200 visitors and 900 page views with only 10% being from paid clicks.
I’m continuing to put allot of behind the scenes work into ebiz1 and ebiz2 is being neglected. But apart from it being the step child ebiz, I’m not too ecstatic about opening it up.
Here are the reasons why:
- Product margins and competition with the manufacturers - The margins of the products are fairly high when you compare the wholesale price to the suggested retail prices. However, nobody ever sells them at MSRP. For example, there is a product that has an MSRP for $399. It’s wholesale cost is $200. I would price this item at $299. Other comparable stores are priced from $280-$350. However, the manufacturer themselves are selling it on their home page for $240. I cannot compete with that. None of the online stores can.
- Price points - Unfortunately, when I first envisioned my store. I pictured a simple sleek store where buyers knew what they wanted when they showed up. With protein skimmers, most people have their minds made up by the time they come shopping. So if I plan to create a simple store with little information content, I needed to offer price and terms. Well, from point #1, you see I can’t really offer price. I mean I guess I can, but why should I drop my price down to $230? Is it worth it? I’m sure other stores would complain.
- Dropshipping - Out of the 6 or so manufacturers, it looks like only 3 offer dropshipping. I would have to carry inventory for the other 3 and buy in bulk and these things ain’t cheap. One manufacturer required a $1,000 order to start.
- Customer Service - From reading on the reef forums, these skimmers seem to require a certain amount of customer service which I do not want to do.
- Not much upside potential - Maybe I’m getting greedy now, but with my experience in ebiz1, I realize that upside is limited in a niche business. Do I really want to spend the time to develop another business with a target of making $1,200 a month? Should I go for a slightly larger market with say a $5,000/mo potential?
Posted in Ebiz2 | 
Stumble it!
Two deal killer I can see there:
1. Manufacturers resale - you will never be able to beat their resale price. They can always cut their margin and beat out any competitor. This is a very bad idea for manufacturers to do, they end up polluting their reseller/disti market and lose volume in the long run. Much better for them to focus on what they do best (manufacturing) and let resllers focus on waht they do best.
2. Customer service - didnt know this about protein skimmers. CS is a huge expense for a company. Anything that is CS intensive better have the margins to support it. CS is usually thinly staffed since it provides no revenue. Think about how easy it is to buy something at Best Buy - you got nine counters ready to take and process your order. When you try to return it… one long-ass line to wait in and one dumb as a rock employee trying to help you.
By RealOG on Jan 16, 2008
I suppose this is the answer I was inquiring about.
Skimmers are finicky, unless you’ll be providing top of the line H&S, Deltec, Bubble King etc. it will be tough to stay afloat.
If you’re able to get into the realm of High-tech goods, go for it, but I would not expect to make much on the lower end e.g.octo’s…too many already sell them and if you cant beat the pricing that target customer wont buy from you.
By glassbox-design on Feb 26, 2008
I found your blog from a link to a blog, from a link to a blog, from a link to a blog. Anyway, glad I did. Interesting reading. We must be kindred spirits. I have started a number of business, but it always comes down to how hard do I want to work for the money. Is it worth the effort?
Had a great idea for a product recently with no competition. Fell in love with the idea prior to running the numbers. Lined up a manufacturer in India, developed the website, got right to the edge of launching the business and it hit me - do I want to work that hard (no drop-shipper) for maybe $10,000 per year?
My most lucrative ventures to date have been real estate and software. Still doing it. Good luck and I will keep reading.
By Terry on Apr 1, 2008