Live Learn Invest

Choosing an ecommerce product (part 1)

November 7th, 2007 by Kenric

There are so many products that you can sell online that it can be so difficult to choose what to sell.  Before building this site I experimented with many different products on Ebay such as Cubs tickets, T-shirts, candles and many many other miscellaneous items.  There were many pros and cons to selling these products.  However, many products had just cons and that is the first thing I realized.  Some products just don’t make any sense for me to sell.

It took me a while to find something that I think I can sell profitably and with minimal effort.  Time is money and many people forget that in running an ebusiness.  Just because you’re at home doesn’t mean that your time is worth less.  Working from home is still working.

Here is what I learned from Live Learn Invest T-shirts that I made a few months ago.  I only ordered a few t-shirts so my costs were very high per shirt.  But the object of making the t-shirts was not to make money.  It was to go through the motions of ordering, selling, packaging and shipping.  My Buy a T-shirt page is where I first learned how to do payment buttons on Paypal and setup a sellers account.  I did manage to sell a few t-shirts and I shipped some to my friends. 

So let’s just look at the t-shirt biz.  Let’s say I ordered 500 shirts and managed to get my pricing down to $9 a shirt.  The first big number would be the $4,500 spent upfront to get my shirts.  Would you risk $4,500 on getting stuck with 500 shirts?  I wouldn’t.

Now, I get an order for a shirt at $20 including shipping.  These shirts do not come individually packaged, they come in a big box.  So I would have to go get the shirt, fold it nicely, put it in a clear bag and then a mailing envelope.  Then I would print an invoice, mailing label and stamp.  Now my package is complete and I set it aside to bring to the post office the next day.  This takes anywhere from 5-10 minutes per order.  With fees and shipping my profit per shirt would be about $6.

I do not want to do all that work for $6.  For me this is way too labor intensive to make $6.  This is literally creating another job for yourself.  I didn’t even take into account going to the post office.

Here’s what I learned that I did NOT want:

• High capital upfront costs
• Physically packaging and shipping
• Carrying inventory myself
• High volume low margin physical product

So what would be a better ecommerce product? 

It would be an eproduct, something that is emailable or downloadable like an e-book, pdf file, data file.  This type of product has unlimited inventory, is 99% profit per sale and fully automated.

Imagine you create an ebook on how to play poker.  You spend 40 hours on creating this ebook.  You sell it online on a fully automated system for $19.95.  We a buyer makes a purchase your system automatically emails the ebook to them or it provides the customer a password to get to a download page.  Constrast the amount of work you personally do per sale in this scenario vs. the online t-shirt store.

There is an even better eproduct though.  Suppose that instead of selling your how to play poker as an ebook, that you decided to sell it as a subscription.  An example of this would be teach people how to play poker using a monthly newsletter that costs $5/mo.  Now you’ve created a continual income stream instead of a one time sale.  You create one newsletter a month and just push it out to your subscribers.

Now there is another product that I call the perfect ecommerce product.  This would be a subscription service product.  An example of this is a monitoring service.  Suppose your business charges $5 per month to monitor webpages.  Again, this is a monthly income stream and the main difference between this and the subscription service is that you don’t have to create anything monthly.

The beauty of eproducts is scaling.  Eproducts can be scaled easily.  Scaling is the ability to expand smoothly and easily.   If I got an order for 200 t-shirts in one day, I am going to be working for hours to fill the order.  I may not even have 200 shirts in stock.  But what happens if I sell 200 ebooks in one night?  Nothing.  I just collect more money.  What if I have 1000 subscribers to my newletter, do I have to do more work?  No. 

I think most readers know that my ecommerce site is not selling an eproduct.  Why?  Because I wasn’t able to come up with one to sell.  I am working on a an eproduct now but it may take me months to complete it.

Posted in Ebiz | 3 Comments »
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