Personalised business insurance
In theory, anyone can sell pretty much anything online. But if you want your ecommerce venture to be a success, you need to put quite a bit of time and thought into choosing your products.
Here are eight tips to help you nail that decision and find the perfect products to sell online.
1. Define your ecommerce goals
There are many reasons to start an online retail business. While some people set out to build a lucrative ecommerce empire, others just want to earn a bit of extra cash on the side. And knowing exactly what you want to achieve can help you choose products that align with your objectives.
For example, if you want to be the next big thing in online retail, you may need to invest more time in finding niche products that can really help you make your mark and build a well-known brand.
On the other hand, if you’re looking for a low-maintenance side hustle, you may want to avoid products that are complicated to source, market or transport.
2. Reflect on your personal experience
There’s an almost endless selection of products out there, and narrowing these down can seem overwhelming if you’re not sure where to begin.
One way to hone in on the right product range is by drawing on your own interests and experiences.
Think about your personal life, career and hobbies. Is there a gap in a market you’re familiar with? Have you faced pain points that a specific product could solve? Have you come across any products that could be useful or appealing to another audience?
Building a business around personal experience can give you a competitive edge – you know the market and the audience, so you’re in a great position to decide what products to choose and how to promote them. But a personal connection to your business can also make selling online more enjoyable, with research showing that founders of hobby-based businesses often have better job satisfaction.
3. Weigh up niche and mass markets
Retailers typically take one of two paths: selling generic products to a mass market, or defining a niche and selling specialist goods to a smaller audience.
While both options can be profitable, they also come with challenges – so it’s important to weigh up the pros and cons of each.
Niche products usually have less competition, and you can often charge higher prices. But finding the right niche can be tricky, and having all your eggs in one basket can leave you exposed to changes in the market.
On the other hand, if you decide to sell commodities to a mass market, you can benefit from economies of scale and a much larger audience – almost anyone could buy your products. But you may find it harder to stand out and establish a unique brand that drives repeat purchases and brand loyalty.
4. Research your competitors
Once you have an idea of your target market, it’s time to scope out your competition.
Direct competitors are brands that sell the same products as you, while indirect competitors sell different products that may be able to solve the same problem, satisfy the same need or achieve the same goal.
If there’s a lot of competition, you may need to rethink your product selection. It’s extremely hard to compete in a crowded market unless you can establish a USP that would encourage someone to shop with you rather than a competitor.
On the other hand, it’s worth digging a bit deeper if there’s no other brand selling a product like yours. Have you stumbled upon a gap in the market? Or is there simply no demand for that product among your target audience?
5. Consider the product life cycle
Every online retailer needs to get familiar with the five stages of the product life cycle: development, launch, growth, maturity and decline. Each stage has different challenges and opportunities, so it’s important to understand where your chosen products fall in their life cycle.
While products in the first two stages are likely to face less competition, you’ll need to think carefully about marketing and pricing strategies to ensure a successful launch.
The growth and maturity stages may be easier to tackle, as you know there’s a demand for your products and customers are familiar with what you’re selling. On the other hand, you’re likely to be entering a more saturated market.
You’ll probably want to avoid products in decline unless you can think of a clever way to extend the product life cycle – such as leveraging nostalgia or positioning your brand as ‘retro’.
And if you’re establishing a niche based on a particular trend, you’ll need to consider how this affects the product life cycle.
While trending products can generate a lot of income in a short amount of time, they often fall into decline more quickly. So to establish a long-term revenue stream, you may want to diversify your product range and sell a mix of trending items and goods with more longevity.
6. Figure out shipping and logistics
When it comes to shipping and logistics, not all products are made equal. And you’re likely to pay more to ship and store items that require special handling and care.
For example, heavy goods typically use extra fuel in transit. Fragile products require extra packaging. And perishable items may need to be transported and stored in refrigerated rooms and vehicles.
You’ll also face some extra logistical challenges if you choose to import products from an overseas supplier, such as long waits for stock deliveries and extra paperwork and record-keeping.
These aren’t necessarily reasons to steer clear from certain products – but it’s important to think about what's involved so you can make an informed decision.
7. Calculate profit margins
Something you can’t afford to overlook is profitability.
As a general rule of thumb, a 10% profit margin is 'average', and 20% or above is considered ‘good’. But keep in mind that these benchmarks can vary a lot across industries and business types.
And, unfortunately, calculating profitability isn’t as simple as deducting the purchase price from the sales price.
You’ll also need to account for things like shipping, storage, packaging and marketing costs – which can all vary drastically from product to product. And if you import your stock, you’ll need to factor in customs duty and import VAT.
8. Read reviews
Before stocking up on any products, make sure you look into customer reviews. Try to find reviews from other sellers as well as end consumers.
This will give you different perspectives that can help you decide if your chosen product is a good investment, or whether it might create problems further down the line.
The next step: start thinking about insurance
Whether you settle on bespoke goods lovingly crafted by hand or mass-produced items to sell in bulk, all products come with risks. For example, a defective item could break and injure one of your customers. Or you could slip up on due diligence and import goods that don’t meet UK standards.
Product liability insurance is designed to protect you from these risks. It can cover legal fees and compensation costs if you get sued because of injury or damage caused by one of your products.
When deciding what to sell online, you might want to start thinking about how much it will cost to insure different items, which insurers will cover your products and which exclusions apply.
Superscript's online retail insurance has product liability insurance built in – as well as more useful covers to protect your stock, equipment and profit. It can cover goods sold to the US and Canada, as well as products imported from China. Plus, you don't need to provide an itemised product list.
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This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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