While many people are finding some success by creating niche eCommerce websites, they are usually selling hundreds or thousands of different products. Having so many different products available in your online shop can be quite a headache. If you’re storing the products yourself, that requires serious warehouse and inventory management. If you use a dropshipping model, you still need to stay up-to-date with manufacturers.
The biggest headache is with so many products, you’re constantly managing hundreds of ads in your advertising campaign, as well as split-testing both product descriptions and price points for countless products. This is a lot of extra work that limits your ability to scale quickly.
The truth is, most of these stores make their money from a small handful of their products. Most of their inventory is just to fill the store and they rarely ever sell any of it.
If you want to skip all of the additional work and scale fast, create a one product online store.
A Winning Product and Scaling Success
By finding one winning product, you can focus all of your marketing efforts into the massive success of that item. However, you might be asking, what is a winning product?
A winning product is one where the revenue you make per item is greater than all associated costs. This means that the costs of acquiring a customer, inventory cost, shipping cost, and operational cost, must be lower than the price of the item. Ideally, you’re going to want a significant margin on your item because the margin will shrink a little bit as you scale up the sales of the product.
Once you have found a winning product, you can begin to scale up your advertising efforts and even experiment with ways to get your costs down through volume. Before you scale an advertising campaign, it requires a lot of testing and money spent on ads so that you know that your ad has a great conversion rate.
If you’re selling hundreds or thousands of products, it can be a long time before your advertising campaign is profitable and you can begin to scale your efforts. With a one product store, your laser-focused efforts will mean you can test and tweak to make your advertising campaign profitable sooner, allowing you to scale much faster and with a smaller initial investment.
Products and Price Points
Of course, not just any product will do. It’s important to focus on products that have the best chance of success in a one product store. There are a few important things you should keep in mind when you are hunting for your product.
First, your product needs to be somewhat evergreen. This means that if you’re going to rely on one product to carry your online store to massive success, you shouldn’t jump on the latest trend. Think of all the people who went broke because they spent all of their funds on fidget spinners and then were unable to sell them once the trend quickly died. Choose a product that you will be able to sell for years without the worry if a trend is going to end.
Second, your product should have a higher quality build. While stores selling hundreds or thousands of different items might be able to get away with selling lower quality products, your one product store needs to be known for it’s quality. This means it will be built of sturdier materials and last longer. You will lose a lot of money if you have frequent returns or refund requests. You’ll also be out of business quickly if your singular product gets a reputation for breaking or showing signs of wear and tear quickly.
Third, your product should have a higher price point with a high margin. Of course, some companies have been very successful selling millions of a lower priced product with a small profit margin. However, this is incredibly difficult, especially for a solo entrepreneur or a small startup. Higher priced products require fewer sales to generate the same revenue as lower priced products. What most people fail to realize, is that it’s just as easy to sell something of a higher price as it is to sell something cheap. Depending on the situation, it’s sometimes even easier to sell higher priced items due to the greater perceived value of a higher priced item.
Anywhere between $100-$500 is a great price point for a one item shop. Lower or higher can still work, so be sure to test your optimal price and product. However, make sure your price point is at least 5-10x your wholesale cost of the product. This leaves a good margin for customer acquisition efforts. The company that can afford to spend the most to acquire customers will usually win, therefore a high margin is essential.
Keep in mind, if your product is priced too high, you’ll usually need a dedicated phone sales team once you scale because customers won’t usually buy items for $2,000 or more without speaking to someone directly.
Testing Products Before You Go All-In
It’s easy to get excited about a specific product and want to jump right in. But, don’t go order tens of thousands of dollars in inventory without knowing if it will actually sell. The key here is testing products before you ever actually have inventory.
Create a simple sales pages using photos of the product from the wholesaler, or if you will be having a unique product manufactured, use photos of products similar to yours. You can build a quick Shopify store using a free trial, especially if you are eventually planning to use a dropshipping model. If Shopify isn’t your thing, build the site using whatever software you prefer. With your sales page, drive some advertising traffic to it. It’s better to spend a little more in the testing phase to be sure you have a winner. It’s a small loss if a test run fails compared to finding out your product won’t sell after you’ve spent a lot more on inventory.
If you have Google Analytics properly installed, you can track how many people click on the buy button. Once people have clicked, you can redirect that traffic to a simple “Sorry, we are out of stock” page. When doing your testing, make the assumption that anyone that got to the out of stock page would have purchased. Based on your advertising costs, your potential wholesale item costs, and the potential sales that you’ve tracked, you should be able to find out if your product is a winner before you’re in too deep.
As a bonus, you can have a simple email opt-in form on your out of stock page where potential customers can sign up and be notified when your product is back in stock. This works as a basic pre-sell campaign so all of that advertising testing costs aren’t completely wasted on data alone.
Top Four Traffic Sources
While organic traffic methods like SEO or social media marketing certainly have their place, we want to focus on paid traffic sources. By using paid traffic, you can massively scale quickly while keeping track of all the important numbers to ensure you remain profitable. Organic methods don’t allow the fast growth that we are shooting for here. Here are the top four traffic sources you should focus on:
- Facebook Ads – Facebook has great targeting options and almost 2.5 billion active users. With their excellent targeting algorithm, you will have an easy time getting your ad directly in front of the right kinds of customers.
- Instagram Ads – Instagram does really well with both images and video ads. If your product is aesthetically-pleasing to look at, Instagram advertising is worth trying out. Since Facebook owns Instagram, you’re going to have access to a lot of the same awesome targeting options as Facebook.
- Google Adwords – Google Adwords is great if you want to find people searching for your exact kind of product if you are good at finding the right keywords. Since these are people actively searching for information on products similar to yours, they are already in a buying mindset and your conversion rates will likely be higher than Facebook or Instagram. However, with that, the cost of advertising will be high due to the direct competition.
- Google Shopping – Google shopping is a great way to get your product photos seen directly by users who have shown buyer interest. Competition can be a little high for Google shopping ads, and unfortunately you will often have to compete with similar, lower-priced products. That being said, if you have a product that really stands out, Google shopping ads can be very profitable.
Regardless of your traffic source of choice, it’s best to focus on one. Master it and scale on that one platform before adding the other platforms.
White labeling Vs Private Labeling
Whether you are dropshipping or buying inventory to ship products yourself, you have some different product manufacturing options to consider.
White labeling and private labeling have similarities with a subtle, but important difference. White labeling is when you are selling a generic product that many different resellers are also selling. Private labeling is when a manufacturer labels a product specifically for your company.
While white labeling can be fine in the beginning, you should eventually make the switch to private labeling. You want your product to seem more unique and not the same as all of the other products out there. It’s important to be able to get your branding directly on the product with private labeling.
The other option is to have a product designed and manufactured from scratch, although this can cost a lot in both time and money, therefore it’s usually best to stick with the other options until your website has scaled enough to switch your focus onto manufacturing your own product.
Pre-Sell To Cover Initial Inventory Costs
While we have covered testing your product ideas before spending on inventory, you should also think about pre-selling your first batch of products.
This means running an advertising campaign to actually sell your product, with a specific, future release date. This is a similar method that Tesla does with their car releases. Certain people like being early adopters of new products and are happy to pay to be one of the first.
By pre-selling your initial customers, you can cover your first batch of inventory, and have a chance at being profitable right from the beginning.
The largest group of manufacturers is on Alibaba. Through this site you can find tons of product options, pricing options based on order volume, and reviews from other resellers.
You should order some sample products from any manufacturer you are considering before making them your exclusive manufacturer. If you are private labeling or having your product manufactured from scratch, you shouldn’t be selling anything without having some sample products in hand.
Fulfillment Center or Warehouse?
In the beginning, you should stick to fulfillment centers. This is one less thing for you to worry about. Many large fulfillment centers will accept your inventory directly from your manufacturer and ship to your customers. You can even have them repackage your inventory in branded packaging for a better customer experience.
Once you have begun to scale up your operations and are looking for ways to reduce costs, you can see if it is viable to rent your own warehouse and hire a crew.
One final strategy is to find other stores to sell your product for you. To make connections like this, go to events and trade shows in your industry. As you network with people, you may be able to find the right connection to get a larger online store to sell your product. The smaller profit margin won’t be missed with the massive increase in volume.