When we went to the Toy Fair in NYC, we encountered more low-cost item sellers than ever before. Though many of these products were super interesting, these days we just don’t take on clients who sell lower cost items.
Pretty often though, we get questions about how to sell low-cost items on Amazon, or eBay. Is it lucrative? Is it worth my time and effort? What about those penny used books I see all the time?
Well, up front, we’d say: no, it probably isn’t worth it. And those books… well, they make money up in other areas, which probably won’t work for you. Even so, don’t despair – after we go through WHY selling these items doesn’t work, we have some ideas and methods that might make it possible for your product.
Why it’s pretty darn tough
Let’s say you have an item that retails for $3 in stores. It’s popular, and you’ve built a lot of customer loyalty over the past few years. You feel ready to sell online, and want to try to shoot for similar pricing on Amazon as in brick and mortar stores… But guess what: it won’t work.
- Minimum Amazon fees means the math just doesn’t add up. Amazon has a lot of little fees that eat into your margins. Especially if you’re doing FBA (which you definitely should be… if you want to succeed).
At Whitebox, we often tell our clients that you need to assume a basic $3 fixed fee per product… regardless of price. And that’s just the start. It doesn’t include the 12-15% commission that Amazon tacks on, depending on the type of product you sell. And, if you’re selling across channels – you also have to factor in weight fees, per item fees and per order fees.
- Packing Materials & Kitting Labor adds up. Obviously, this varies depending on the size and weight of your product, but it can be especially difficult for bulkier, but cheap items or fragile ones. And, depending on the complexity of kitting your items, you may end up paying a “kitting fee”. Whitebox, for instance, occasionally charges a kitting fee to items that fall under $20 and have significant kitting procedures.
- Returns become even more of a nightmare. Returns are always a pain. When you’re working with super slim margins that come with low cost items, returns can make or break your budget… and every return can be a real drain on your overall success.
- Setting a price point can be a big challenge. Pricing is one of the first challenges you’ll face with low-cost items. Even if you’ve got the established customer base, will they make the leap to buying your product online? If you sell your product for $5 in stores, but have to up the cost to $12 online, it might not attract many buyers. It's worth thinking about your brand, and how you want your customers to see it. *Here are 6 tips for pricing your products on Amazon.
- The add-on item route. If less than $10, it’s possible your product may be shifted to “add on” status. While you might be able to hold the price point your consumers will want, this can really eat into your sales, since customers face the inconvenience of the $25 threshold to get your item delivered.
But what if I really, really want to sell my item online?
We know that sometimes, getting your product out there is one of the most important parts of succeeding as a brand. Afterall, brand loyalty to a product sold solely in brick and mortar stores only takes you so far. We’ve got a few strategies to pushing past the razor-thin margins of selling low-cost online.
- Consider upping to price. Sometimes, people are willing to pay twice as much, or more, for the convenience of home delivery. This is really down to your item, and the brand image you’re aiming for.
- Multi-packs. While selling the product individually online may not be viable, multi-packs can really work out for some products. Especially if you’re selling something consumable, selling in batches of three or more might make your margins much better. And, it brings in the “Costco” type of customer that is shopping online to get deals on bulk buys. *Here is a blog post we wrote that goes in to more details about multipacks.
- Go the add-on route, anyway. An item might fall into the “add on” category, which while a pain to customers and not helpful to you, is effective in offering yourconsumers low low prices that lend itself to brand loyalty.
- Let someone else sell it for you. Whether you let this item go through Vendor Central (assuming Amazon is willing) or you take the risk of working with resellers, sometimes it can be worth it to get your item out there… and not deal with the losses of low-cost ecommerce fulfillment on your own.
- Lose money. Sometimes you want to sell something at a loss, and consider it an investment. Consider this like giving out free samples… Obviously you don’t make money off it right away, but people may return to buy larger, more profitable quantities. This might fit in to your brand image, if you consider yourself a "low-cost leader" type brand.
Maybe this post has you feeling a bit sad. Maybe you feel like giving up with selling your low-cost product online. Guess what? That’s okay too. Depending on your company, you might have other products that are more profitable options. Or, you can continue with your brick and mortar store for now… and take the ecommerce leap later.
If you’ve got some questions about your product in particular, and whether it’s a good candidate for online sales, we’re always open to chatting. We know that every product presents unique challenges, and we'd love to talk to you about options.