Can I Make Money Selling Online?

It seems that almost every day we are approached by potential clients who want to set up an online store so that they can sell their products online. While it is true that there are literally thousands of success stories involving online businesses, it is also true that for each success story, there are probably 5000 failures. If you are contemplating taking your business online, you should consider the following before "taking the plunge". 

Is your product or service priced to make money? There is a definite "sweet spot" when it comes to pricing on the Web. Items that are too expensive reduce the chances of an "impulse buy" (customers definitely will think twice before spending hundreds of dollars on an online purchase). On the other hand, if your product sells for $3.99, much of your revenue is going to be eaten up by credit card transaction costs and packaging.  Items that sell in the $20.00 to $50.00 range seem to have the best ratio of quick sales to profit. Of course, your actual profit depends on your other costs.

Is your product or service unique?  If your product is basically identical to a product which can be found at thousands of other online locations, you will be fighting an uphill battle. As an example, the "collectible" market is extremely saturated on the Web. A search for "Precious Moments" figurines on Google yielded over 533,000 websites that sell the figurines online. To convince the customer to buy from you, as opposed to the 532,999 other sites selling the same merchandise, is going to take a considerable amount of time and expense.  On the other hand, if you sell something that is not readily available elsewhere, you will have a much higher chance of success.

Is there a demand for your product or service?  This may sound like a funny question, but the reality is that you can’t sell something if nobody is interested in buying it. Make sure that there is a market for what you sell. Conversely, just because everyone else sells the same product does not mean that you will be successful.

Can your product be shipped quickly and inexpensively?  This is a sore point for many online buyers. The quickest way to lose a buyer is to price an item at $35.00, only to let him/her know at the end of the checkout process that the shipping for the item is another $20.00. Also, people shopping the Web are doing so for convenience and fast response. If the item can’t be shipped quickly, there is no reason to buy it from you. 

Do you have a "real-world" presence?  Your online store will be much more successful if customers can relate it to an actual location. There is a "security blanket" factor in knowing that they could drive to your store and see the product, even if it is a thousand miles away. While "online-only" businesses can be successful, they face a much harder and more expensive battle to succeed.

Are you prepared to invest in your business?  Just because your online business exists in a "virtual world" does not mean that you don’t have the same expenses that you would in a "brick and mortar" store. You will have to spend as much, if not more, to develop and market your business. There is a lot of competition out there. Instead of competing with the store down the street, you are competing with businesses around the world. Amazon.com, an example of an online business that is considered successful, spends an estimated $1,500,000.00 per year on maintaining and marketing their site. In addition, you will have the usual expenses associated with running a business, such as inventory, hiring an accountant and attorney, retail sales permit, etc.

Are you willing to make the buying process as easy as possible? 
Again, people shop the Web for convenience. Accepting credit cards is a must. If a customer has to mail a payment to you and wait for you to receive it, the incentive to not buy the product at the local retailer is lost. If you have a "brick and mortar" presence, you probably already have a merchant account. While services such as PayPal allow you to accept credit cards without a merchant account, the buying process becomes more complicated and the customer may become frustrated, and may find another site to buy from. To be truly successful in Web retailing, the customer must be able to find the product he/she is looking for, and with a few clicks and keystrokes be able to complete the order and wait for their purchase to arrive.

October 1, 2004

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