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Startup ecommerce retail shops come in many shapes and sizes so I’m going to give you some food for thought when considering what you may (or may not) want to investigate selling.
Working from my eCommerce checklist we’ll cover:
1 – Legal
2 – Weight / Value Ratio
3 – Market Conditions
4 – Competition
Legal: If you are a small business then getting into legal disputes is simply out of the question therefore avoid any products that would fall into the “taboo” categories such as sex, drugs, violence, gambling for sure. To take this one step farther you may also want to avoid or at least tread carefully in regulated areas such as perishable goods, financial markets/advice, international imports/exports and the like. Every entrepreneur worth their salt will venture into uncharted and risky territory from time to time. Just make sure you plotted a course and thought it through before you set sail.
Weight / Value Ratio: Online retailing has changed the old retail rule of Get Big Fast (GBF). The logistics of yesterday are gone, instead of one massive 30 story department store serving 40 square miles we have millions of small home-based vertical niches serving the entire globe… almost. There is still a place for large local retailers because we cannot yet ship a gallon of milk for 30 cents in under an hour. This is your weight / value debacle. Diamonds = good, Dog Food = bad. This does not just apply to tangible products either. Mortgages are ideal, once electronic signing is globally accepted in the capitol markets you’ll have essentially a $2000 product where the only deliverable is a PDF. As a rule of thumb I steer clear of anything where the cost to ship it is greater than 30% of the wholesale price.
Market Conditions: This one is obvious and although everyone thinks about it not everybody thinks ENOUGH about it. You must go deep here, size up the past market size and penetration, graph it out and project it forward. Research, research and more research until you are comfortable with even your conservative projections for the products market growth. I like to think from the stand point of the manufacturer and take a top down approach, how many units, margins, how many distribution channels, etc.. Crunch numbers until you have plugged every hole you can think of.
Competition: Finally checkout your competition and keep this in mind “Small is the New Big.” [ Seth Godin ] I recently did an in depth evaluation on Beach Towels which naturally puts me up against monsters like JCPenny’s. I was going deep with my keyword research looking to find a hole I could exploit - low-and-behold while searching “kids beach towel” the top Paid Search Result 404’d. As a small business you will pay attention to the details and can exploit this low hanging fruit. Your primary weapons in order are Paid Search, Referral, Organic Search and Direct traffic. Evaluate the competition from that point of view and find your hole.
Tags: ecommerce class, How to Pick a Product, Online Retailer, Small Online Retailer