Editor’s note: This article was first published in June 2014, and its company examples are from that year, including Daneson as a recently founded online toothpick shop, Luxy Hair with 700,000 YouTube subscribers and subscription services for condoms and shirts at the prices quoted.
There is not much difference between the steps you need to take in a physical business and in an online one, so when you look for a product to sell, you have to do exactly the same research. In the same way, products that are too original will not always work better than products that have been selling well for a long time.
This is the key question many new entrepreneurs ask themselves: “What can I sell online that will actually work?” Finding the right product or service is the most important step in building a profitable business, so whenever we have a product in mind, we will ask ourselves the following questions. They will tell us how likely our business idea is to succeed or fail.
How big is the potential market for my product?
A very broad market is not always better, because you will probably face more competition in it, but a market that is too small can also hurt you. I know, it is obvious, but let’s define our market.
Is my product aimed at women, men or both? If it is only for women, how old would the women buying it be? If the product is aimed at teenage girls, you should know that they probably do not have a credit card or a PayPal account to buy it online. Likewise, if we aim our product at the elderly market, we face the added difficulty that these customers may lack the basic technical skills to buy online.
Should we target the average customer or a select market?
One example of a profitable business offering an exclusive product to a very limited audience is Daneson, which sells luxury toothpicks through an online store built on Shopify. Toothpicks are an everyday item, so who would buy toothpicks online? Perhaps nobody would buy ordinary toothpicks, but high-end toothpicks are another story, as this recently founded company is proving.
Who is your competition?
Are there no competitors, a few competitors or many? Contrary to popular belief, a market with a lot of competition is a good sign, because it shows the market is very profitable. But of course… you will have to do something different or innovative to stand out from your competitors.
For example, Luxy Hair was not the first company to sell hair extensions online, and the market was already saturated. They knew they had to do something different. In their case, they turned to free tutorials on YouTube. Two years later, the YouTube channel had 700,000 subscribers, and today they are one of the largest online retailers of hair extensions.
Will it be a trend, a passing fad or a growing market?
Be honest with yourself here, because a scalable business and a fad call for completely different strategies. Deep down, the creator of Silly Bandz bracelets knew his business would be a very short-lived fad, so the strategy was to sweep the market, collect the millions in profit and say goodbye.
One way to find out whether our market is trending is to use Google Trends, which shows how often users search for some of the keywords related to our product or service.
Can the item easily be bought in a local shop?
If your product can be bought at Carrefour, Mercadona (a Spanish supermarket chain) or the corner shop, we will probably have serious trouble getting people interested in buying it online. For example, I don’t think anyone plans to buy toilet plungers on the internet. Of course, if you find a way to make the product outrageously cheaper or more distinctive, that could change things, although it would probably be too complicated.
What will my product cost the end customer?
Many people forget that selling online can involve various fees as well as shipping costs, so we need to know exactly how much it would really cost to ship the product within the country and even internationally.
You need to take into account your product’s weight, size and fragility.
Once you know what your product’s final price would be, search Google and look at possible sellers on eBay or Amazon to see what price they are charging for your product or a similar one. In many cases you will have to negotiate with shipping companies to reach a reasonable deal, bearing in mind that you do not yet have the sales volume to negotiate from strength.
Remember that if you are going to sell a very similar product at a higher price than the competition, you will probably fail unless your product stands out from the rest in some way.
Can I offer a subscription model?
I recently heard about a company that offers condoms by subscription from 5 dollars a month. This increasingly fashionable model has clear advantages: we know in advance what sales we are going to have, and we get paid up front. The businesses doing best with the subscription model are undoubtedly clothing businesses, where some executives pay 50 dollars a month and receive 3 dress shirts every month. (See: 3 examples of subscription service businesses.)
Will it be a “seasonal” product?
Many products barely sell during the year and make 80% of their revenue on one specific date. Once that is clear, we need a strategy concentrated on those dates and focus all our efforts on them. But we have to work out whether a full year of expenses pays off for such short selling periods.
For example, some companies only sell in summer. Others sell only at Valentine’s Day and Christmas, but offer impressive discounts to catch their customers’ attention and sell at other times of the year too, while working all year round to grow their customer base so they can focus when the time comes. If you want to know at what times of year your product is in demand, use Google Trends again, where you will find the ups and downs in interest throughout the year.
Could it face restrictions?
Before you dive in headfirst, make sure the product is not at the centre of a controversy over chemical compounds banned in some countries, or any other story that could force you to close without recovering your investment. When we discussed the most profitable business models, we explained that the strategy for problematic products should be to grab the money quickly. The most profitable business model in the long run is, without a doubt, the scalable business.
In short, I would venture to say that the ideal product to sell does not exist, but the ideal strategy to sell any product does.
Some examples of original products:
Featured image: Old Photo Profile, CC BY 2.0, via Flickr.
