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How to pick a profitable product – avoid these 3 key pitfalls


by The Wholesale Forums

Don’t count on the best-case scenario

When you talk to people who have bought a bulk of stock for resale, you can usually tell the most about whether their profit expectations are realistic or not by how they talk about the value of the goods.

I remember talking to a wholesaler in his warehouse in Manchester - who had £20k of overstock trainers arriving who had purchased from a top 20 UK retailer. He kept repeating “the RRP makes it £120,000 of stock, so I’m looking to make £100k profit this month”. Now the buy price of ~17% wasn’t bad for the brand (you’d always be realistically looking at 10%-25% depending on the desirability), but anyone who has been in selling a long time knows you can NEVER expect to re-sell at RRP. He later confided he sold the whole lot for £31k – which actually left him with £5.5k profit after costs. That is a pretty good result, but he was disappointed because his expectations were wrong, and he had made all sorts of plans and promises based on his hope for achieving the best (unrealistic) case scenario.

Retail at any level is generally not about the magic success story that made someone a millionaire overnight, but about doing your research, understanding what the likely sale price will be and being able to take an educated and real guess about what the profit margin will be to make a little bit of money on every deal. That’s how brands build and stay stable, rather than over-reaching and disappearing over night.

Don’t be a passive cow in the herd

It is very sensible to make sure there is a market for your product – after all demand and supply are the backbone of any good business! But the other factor to always be mindful of, is the longevity of the demand… just because a product is hugely popular today, doesn’t mean it will be next week, let alone next month or year!

Think about loombands, fidget spinners and Tamagotchis. If you managed to buy those products at a good price, and sell as they hit the peak of popularity then you would have made a killing. But the industry was littered with stories of companies trying to sell off containers of loombands at £5 a pallet as they were stuck unable to sell the products, paying storage costs higher than the value of the goods.

These are extreme examples of the demand decrease phenomenon, but this can happen on a smaller scale to any product by lots of methods if you haven’t given your purchase due thought and diligence – for example, if your pricing gets undercut by a competitor, to legislation stopping your product being able to sell in different territories (think vaping, or we predict, CBD from non-quality sources).

Don’t forget about the service

The internet is not magic, just because you can sell globally without building a shop in every country doesn’t mean that you don’t have to provide a proper service. Any experienced seller will tell you the easiest way to stunt your own business growth is by discouraging repeat buyers and getting yourself bad reviews.

Remember, as tempting as it is, in some instances it is better to exceed expectation than to pretend you can be the fastest delivery, quickest refund or cheapest product. Lots of retailers tie themselves in knots, trying to meet next day delivery and receiving bad feedback when they can’t fulfil. Remember a rating of less than 99.5% on eBay is considered dreadful and will seriously impact your sales as you will be penalised by both buyers and your product appearance by eBay itself.

Even if you are not selling on a marketplace, with the increase of companies such as trustpilot, Facebook and Google reviews it is important to ensure that you have good reviews – if you provide a bad experience the first thing your customer will do is take to the internet to make sure their dissatisfaction is logged in the public sphere. According to Moz data around 9% of Google’s search algorithms is impacted by new customer reviews, and with 93% of consumers saying online reviews impact their purchasing decisions – your product sales can be as much (if not more) impacted by the service as the actual product.

Learn more with their community by visiting their website or attend our talk at the WhiteLabel Expo in the Business Services Theatre on Thursday 28th Nov – How to Make Money Selling Online or at Stand 1462

 

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