Choosing What To Sell #3

Getting Started with E-commerce

Choosing What To Sell
& Locating The Manufactures

The success of you online venture begins when you decide what you are going to sell. If you already have a product in mind, use this section to refine your Internet marketing plan. If you are looking for a product line to sell, use this section to walk yourself through the selection process.

Almost any item sold in brick and mortar stores can be sold using a web-based store. Some items or product lines lend themselves more easily to remote sales then others. Items that are traditionally sold as installed items are a little more difficult to market online. Some of these items are, wood burning stoves, fencing supplies and billiard tables, as the customer usually request installation. There will be fewer buyers for this type of item on line, but there will also be fewer sellers. Some items such as computer products, which people buy based on price and performance, are naturals for online sales.

We are going to review what to consider when choosing a product line or category for inclusion on your web site. Your choice of product lines to sell will greatly affect the ease of running your business, the profit margins that you will be able to get, the amount of inventory you will need to carry and the types of promotion that will be needed to attract customers. As you read through this section you should began to get a clearer understanding of how the products you choose to offer, will effect the way your e-commerce store will need to operate.

Changing Your ThinkingÂ

Many on line ventures fail because the owners choose a product to sell, put it online and expect the customers to beat a path to their door. I am going to assume that you want to build a viable, growing, online retail store that can make some real money. And that may well require you to alter your way of thinking about on line shopping.

You must first decide that you want to be an online merchant and that you will provide all the service and meet the requirements that the customers and manufactures will demand. You will then need to choose products that can improve your chances for success.

Each product category will have entrenched players who have methods of doing business set up to protect the existing distribution system. Some of these obstacles will be, exclusive dealerships, minimum purchases, large opening orders, display requirements, protected territory, multiple pricing tiers and more. All of these are designed to protect the manufactures, the existing retail stores and the price levels at which products are offered. Your job will be to turn as many negative barriers to entry, into pluses for your new venture.

So as you can see, selecting a product category can effect the success of your venture. We will discuss some of the obstacles and how to possibly turn them into advantages. Most importantly we want you to start thinking of the barriers to entry as positives, when you over come the barriers they will also help protect your venture from new competitors, and help the consumers find you.

80/20 Rule!Â

One of the best ways to get customers to buy from you is by offering the largest selection of products. Once you are set up to sell a manufactures' product line you can offer the complete product line, as you are not actually buying the products until the items are sold. Approximately 80% of your sales will come from 20% of the manufactures product offerings. If you show the manufactures complete catalog you do not need to guess as to which is the correct 20%.

When I was in the fireworks sales business I had a 32-foot long road side sales stand that was well stocked. My competitor across the street had a 64' long stand with less product selection then we offered. He had simply duplicated the products on displayed, every 8' along the 64' length of his stand. He always had more customers then we did, even though he was higher priced with fewer offerings. People drove to the competitors stand instead of ours because it looked larger and appeared to offer more selection. Solution: We built two more 32' stands, making our stand a total of 96' in length, making us the larger store. Within two selling seasons our competitor moved away.

When your customer goes to your web site looking for a product and finds a large selection of sizes, colors, and styles you have a better chance of getting the order. A local store will be limited by the high cost of carrying the inventory and will try to pick the best sellers in a product line. You can make a fine living on the 20% of the people the local guy missed.

What do you like?

It helps to sell something you like or at least are knowledgeable about. For example an avid golfer might open an online pro-shop or a fisherman, a tackle shop. A biologist might sell lab equipment and lab supplies. The person's knowledge in their respected area of experience will give them the edge over the competition. If you do not have a field that you are already familiar with, at least choose something you like. You are more likely to spend the time learning about the products you offer if they are in your area of interest.

What Price Products?Â

Higher priced products have several advantages over lower priced products when selling on line.

1. The higher priced items allow for more flexibility when making pricing decisions. This is because you have more dollars to work with. For example, when offering free shipping higher prices means the cost of the shipping will be a smaller percentage of the selling price. If a $299. item cost $25 to ship your shipping cost is 9% of the sales price. If a $29.00 item cost $8 to ship, your shipping cost is 28% of the selling price.

2. The customer's savings from discounts you offer on higher priced items will be of a larger dollar amount and is more likely to encourage the customer to buy from you.

For example: If you offer 20% off an $800 item, the savings is $160 and most customers will consider that a nice savings. For that amount of savings they just might call you during your normal business hours and wait for delivery. If you offer 20% off of a $29 item, the dollar savings is $5.80 and the customer may take it if they can order easily, any time of the day or night and get the product shipped without delay.

3. Higher priced products tend to be of higher quality and that means less returns. Less returns means less customer service. Less customer service means less operating expense.

4. Customers seeking higher priced products tend to know what they want. They come to the web for a better selection from which to choose and to get more for their money, not necessarily to spend less money. They are just apt to take the savings and buy additional items or accessories. Or they might trade up to a higher priced item with more features.

5. The number of customers you need to attract to reach your sales goals is less with a larger average sales ticket.

6. Customers who buy higher priced items tend to have higher credit limits on their credit cards and the money is of less important to them. By that I mean, if you sell a customer who is financially fairly well off a product, and you need to correct an issue with the product, they will more then likely be willing to work with you. The reason for this is that well off people do not worry as much about the money. They expect quality and demand service, but they will allow you time to correct the problem. Someone who lives from pay check to pay check can not afford to loose any amount of money and will worry about getting taken advantage of, they tend to get upset quicker and make unreasonable demands. This is not always the case, but as a general rule, over the past 35 years I have found this to be the case more often then not.

Brand Names

Brand name products have several advantages that benefit you as a web based merchant. By brand names I mean, names that are well known in an industry, not necessarily well known names in general. For example, Kettler manufacturing makes very high quality tricycles, a shopper looking for a high quality tricycle will come across the name as they look around at the better toy stores. The shopper may not have known the brand name when they started looking, but learn of it as they shopped. You can learn the brand names in any industry by asking the manufactures reps, reading the trade magazines, going to the trade shows and asking store owners. Here are the advantages to offering name brand items.

1. Key Idea! Customers search by brand names. Shoppers, who have decided what they want to buy, search the web by typing in the brand name of the product they have chosen. Shoppers who are just beginning their search or are undecided will type in a generic name. For example, a shopper could type in tricycle in a search engine, or they could type in Kettler tricycles. The results of the two searches will be very different. You can use this to your advantage.

2. Name brand manufactures are experienced shippers. They will get lower shipping rates and have less freight damages. Both of which save you time and money.

3. Name brand manufactures will be experienced in handling customer service issues, spare parts issues and they will have good sales literature for you to work with.

4. Because name brand products tend to be of higher quality you will have fewer customer returns.

5. Name brand products allow the customer to more easily determine the savings they get when doing business with you. The customer will be able to get a price quote locally and know that the name brand items quality will be the same from your on line store.

6. With name brands you need not offer money back guarantees and there is less chance of the customer requesting one.

7. Name brand products are often sold through authorized dealers. This will make it more difficult in getting the manufactures to sell to you, but it is worth the effort. The harder it is for you to get a product line to sell, the fewer the number of competitors and the higher the profit margins. You will have to be persistent and it can take several years to accumulate the better name brand products. The manufactures will more then likely put restrictions on you such as, no prices shown on your web site, or minimum advertised prices.

With this many benefits to selling brand name products it is worth the effort.

Low Priced ItemsÂ

Low priced items require you to sell more units and handle more transactions to reach profitability. There is nothing wrong with this, but you will want to make the order process as automated as possible and you will want to be sure that you have a way to handle the shipment of lots of smaller orders. It is common for manufactures to have a drop ship fee for smaller orders. Be sure you know what the fees are and how the fees will effect your pricing, competitiveness and your profit margins.

Customers who buy small items expect quick delivery. Be sure the shipment of items will occur quickly. It is not unusual for customers to order one day and expect shipment confirmation and tracking numbers the next day.

Try to group lower priced items together so that the customer's average sales ticket is higher. For example, if you sell doll-houses, price the house higher if purchased alone and make a packaged price deal if they buy furniture with the house. That will lower the shipping cost and the drop ship fee cost as a percentage of the sale price.

What Product Lines?Â

By now you are beginning to get an idea of how the product lines you choose will effect your daily business operations. Still not sure of what to sell?

Get out the yellow pages and start down the list of categories in the index. Choose items that will appeal to consumer's rather then industrial items. Industrial products require a slightly different operation as the products are normally sold on open account terms. That will require access to more money to finance the accounts receivable. We have tried this yellow page exercise several times and have not gotten past "G" yet with out finding a line of products to sell. The last one we choose was greenhouses and that site will do very well this, it's third year. Try it; it will help focus your thinking.

Add On SalesÂ

Add on sales of related items can add greatly to your profitability. For example, if you sold a person a baby bed they would also need a mobile, bed sheets, pillow cases, pillows, bumper pads etc. Add on items can be sold at higher profit margins then the main item as the customer has already made the buying decision. Look for companies that offer complete product lines so that all the items can be shipped together. This will reduce your cost of handling an order and reduce shipping expenses.

Locating Products To SellÂ

Your search for products should be an on going process. Once you decide what product categories or product lines you want to offer, you will need to contact the manufactures or their representatives. The following methods will help you track down the manufactures.

Each industry has methods of distributing their products that have been in use for years. You will need to work with in the system that is in place. You will find this to be a slow process that at times will be frustrating. One of the most common scenarios you will run across is this. You will contact the manufacture, they will then forward your request to their manufactures representative that is assigned to your area of the country, and they will contact you at their convenience. What usually happens is, nothing. This is because, reps (manufactures representatives) are paid on commission, and they spend most of their time taking care of the existing accounts that pay their living. Taking care of new e-stores is not the best use of their time. On the other hand you represent the new market of the future and they know it. You need to keep contacting the manufacture until you get the desired response, this will take time, stay at it, and it does work. We have found that reps have been a big help to our company by bringing us new lines to sell and convincing the manufactures that e-commerce can be good for everyone. I have had manufactures say no to selling to us and the reps got the deal approved, and I have had the reverse happen. The main point is that you have to be the squeaky wheel that gets the grease. Ask them, and then ask them again, until you get that yes. Remember the harder it is to get a product line to sell, the less competition there will be.

1. Most industries have trade magazines published monthly. You can locate them by search the web, checking the research department of your local library, and by asking for old trade magazines from companies that sell the items you are interested in. Most trade mag. subscriptions are free. The manufactures that service that industry will advertise in the trade magazines.

Diamond Publications puts out some trade magazines, they can be reached at 818-400-6920, and they are but one source, keep looking.

2. Visit real world stores that sell the types of items you are interested in and pick up the product brochures. You can get the manufactures address, phone or web site information from the brochures and product information tags.

3. Search the web for trade associations. Write or call them for a list of manufactures or their trade magazine. They may also publish a buyers guide or trade show guide.
See helpful links for a Good place to locate trade magazines; the magazines are essential to helping you locate products to offer.

4. Key Idea: Find out by asking the magazine or association if they hold an industry trade show. These are usually held annually and are the best method of finding manufactures and products to sell. Sumner Communications, publishes a trade show directory they can be reached at 203-748-2050 they are but one source, keep looking.

5. Visit the merchandise trade marts located in major cities like, Atlanta, Dallas, Chicago, New York, Miami, LA and San Francisco. There are others such as the furniture market of High Point, NC. and Las Vegas. Manufactures reps have show rooms at the merchandise marts in these cities. Just barge right in and tell them you are looking for items for your web sites.

6. Ask everyone you talk to for any ideas on locating good product lines. People love to help.

7. Once you are talking to the manufactures reps, ask them to recommend any other product lines that they have.

Next?

After you have located the products you are interested in, you will need to determine if the items will offer high enough returns to allow you to reach your sales and profit goals.

"Once you get past your inner fear of failing, it becomes exciting"
Jim Glasgow