Calculating Product Cost For Profits

Calculating Product Cost For Profits

Before settling on the prize, calculate the overall product cost break even point why told Lyndon the following cost, along with all the costs associated with your product: product costs, shipping fees, credit card processing fees, listing all hosting, website fees, and any associated labor.

As an example:

Product costs: five dollars, shipping cost: one dollar, credit card processing fees: $.25, listing fees: a dollar 25, labor: plus $.25, overall production costs $7.75

Accounting for product profit goals

After you determine how much you can sell a product for an order to break even on that product, the next step is to decide the gross profit you need on the product to meet your net profit goals. Notes meant profit is the money that is left over after paying all your cost, including marketing expenses and fixed overhead cost but you’re smart. To calculate how much you need to sell it for to and the desired net profit, take the following steps: one such a monthly net profit for the sale of all products. For example, you want to $6000 a month net profits from sales of your entire product line. Add your nonprofit cold so your total Watley operating expenses to calculate your gross profit goal.

Opportunity services are your monthly marketing and overhead costs, such as hosting fees, celery lawyers, and Solon. Gross profit is the mark up the amount you sell the product for an excess of what you pay for it.

, Suppose what your monthly marketing expense our $2000 and your overhead expenses are $2000 gross profit pool would be $10,000: 6000 miles plus $4000.

Mike down your monthly gross profit going into monthly gross profit goals for each product. For example if you’re selling for products you may have a goal of $2500 gross profit per month for each product to meet your total gross profit of 10,000

Estimate the total number of each product you expect to sew per month.

For example if you want to earn $2500 on the sale of 500 items, $2500 divided by 500 equals five dollar item and profit gross.

Add the gross profit per item you arrive at instep five to the overall cost you calculate in the previous.

For example, if a product cost you $7.75, and you’ll need to earn five dollars per item to meet your goal profit goal for that product, $7.75 +5 dollars equals $12.75. Bottom line, a 500 units to meet your gross profit for for this particular you’ll need to sell it for no less than $12.75.

Repeat step 6 foot each of the products at them total gross profit of all your products are sure that you’re up let the gross profit go and, in turn, you’re not profitable.

While calculations like to make for sound business decisions internally, you need to weigh your bottom-line prices against the current market. Another words, what are other people charge it for the sale items, question mark while people actually purchase this product at the spices you propose?

Pricing your product


Pricing your product

Settling on a price for each product you are selling isn’t a clean mathematical challenge. I’ll stall reach it was often only sell products at a loss for the opportunity to up sell profit products. However, you need to crunch the numbers to clear idea of how much you stand the game or loose from the sale of crunching numbers also hope you’re home much a customer may be willing to pay. Charge too much, and you lose a customer; charge to little and you don’t make a profit.

Checking out the competition

Online shoppers often find what they want and they search for the price best price. They don’t always buy from the retail offering the lowest price, but they do compare prices so you should too. To start your pricing Sulu thing, check out some of the following sources:

Similar websites: search for websites that sell similar products and take notes of their prices.

Comparison-shopping insurance CSE: CFCs I like search engine’s: but for products only. Some of these include cool product search and next when you arrive at ACS East search for products just selling to see a wide range of competitive price points.

The auction sites: some sometime browsing for your products to see how much the same or similar items are selling for at auction is at auctions.

Big sites like Amazon and Zippos: while you’re obviously a smaller business e-commerce Giants, check the sites to see the pricing going up against.

Taking customers and value into consideration

Competing on price alone against competitors who often so much less than you can be tough battle. When setting prices, consider additional factors, including the following:

Customer motivation, what motivates your target market to make a purchase? Are there more concerns about price or dealing with a reputable retailer? Are there purchasing a money’s no object status item? Are there willing to pay more to get better service after the sale?

Your value add:

customers purchase more than just a product; they persistent experience. Think about what value your business ads be on the product. Some examples include stellar customer service, free returns, that’s really some excellent merchandising, installation instructions, and other educational training resources. If you’re providing an extra something that of the stores aren’t, don’t be afraid to charge for it.

Pricing is admittedly more art than science reading task with even the most experience retailer, but with the information you feed hear you well prepared to avoid these two major pricing mistakes:

Over pricing: overpricing leaves to lost sales and trust. In the world of e-commerce, your competition sites are just a few clicks away, and all my chakras are definitely compare prices. Thus, resist any “would this be a fair price to me as a customer?” ”

On the pricing: while pricing your product lower than your competition maybe something, pricing wars lower profit margins for everyone, including you. Customers may even mistake you low-price point for a cheap product, and worse, the scalp.


Exploring Drop-shipping options


Exploring the Drop ship Option:

When you start choosing products to sell, you eventually need to narrow your selections to products that you can buy, sell, and ship easily and profitably. If you don’t have the funds or desire to order products directly from manufacturers and store them in your house, a popular option is to use a drop shipper.

Drop shipping allows all you to list products, take orders, and pass those purchases to the drop shipper.  The drop shipper packages the item and ships it directly to the customer who ordered it. The customer thinks the product came from the store and usually doesn’t realize that a drop shipper was involved. Drop shipping offers several advantages over the traditional wholesale models including the following:

  • Low-risk: You pay for a product only after you sell the product so you risk only what you have tied up in the listing the product for sale.
  • No inventory cost or clutter: You never touch the product so you don’t have to pay for storage or have products in your garage or basement.
  • No packaging or shipping process: You outsourced your warehouse and shipping departments to the drop shipper. Most drop shippers also process returns.
  • Wider selection: As an online retailer, as opposed to a brick-and-mortar establishment, you have unlimited shelf space. You can offer a wider selection of products. You can sell products of any size or weight.
  • Easy product testing: If you’re not sure whether a product will sell, you can try to sell it first, without having any stock. Then, if you get an order and gain confidence in a product, you can order it in bulk and shift to an inventory strategy, if you decide that is cheaper.

You can pursue a drop ship strategy in two ways:

Deal directly with individual drop shippers who carry a limited product line or with a drop ship aggregator who has established relationship with numerous drop shippers. When you’re getting started you’re probably better off drop ship aggregator, because aggregate offer the following benefits.

  • Wider product selection: You typically have a catalog of more than 1 million products from over 100 drop shippers.
  • Simplicity: You have one drop ship aggregator to deal with, instead of having to manage separate accounts with numerous drop shippers, each of which has a different way of doing business and listing products.
  • Lower-cost: A drop ship aggregator often has more leverage than a mom-and-pop retailer when negotiating prices with individual drop shippers. This more than offsets what the aggregate of charges.

Here are a few of the more popular and well-established drop ship aggregators:

Once you find a drop shipper that’s right for you, dig into their website/catalog to decide exactly which products you want to sell, considering what will appeal to your target market, how it fits in with your desired brand, and how your product mix will impact your bottom line.


Deciding What to Sell


Deciding What to Sell

Whether you’re just stepping into the arena of online retailing for the first time or you’ve been selling for some time, you face two big questions: what should you sell? And how much to sell it for? Nobody can answer those questions for you, but in this section, we offer advice on how to answer them for yourself.

  • Selecting products that are passionate to you.
  • Scoping out trends and niche markets.
  • Learning about drop shipping suppliers
  • Setting prices to for profitable sales.

Let Passion Be Your Guide.

When choosing what to sell let your passion motivate your choices. Make a list of your interest and hobbies – what excites you? What gets your blood pumping? If you’re into fashion magazines and blogs, selling apparel and accessories might be a good choice. If you spend your time tinkering with computers, maybe you should look into selling software electronics. If you’re a dog lover consider searching for the perfect dog items to launch your own doggie boutique.

You’ll be spending a lot of time with the products you choose to sell. You will be securing inventory, posting product listings, writing marketing copy, and shipping products around the world. By choosing products you’re crazy about, you’re more able to recognizing and serving our customers’ needs when you are selecting and marketing these products, while establishing yourself as trusted expert in the field. The best part is, turning your passion into profits allows you to find joy in your work, which should be one of the reasons you are pursuing an online business.

Deciding What to Sell: Engaging in Market Research

When deciding what to sell, consider who is going to buy it. This is called your target market. The customers who consist of your target market have needs and desires. Identify those needs and desires, and you’ll have an answer to your question of what to sell.

Next, we reveal various ways to size up your target market and identify products that have the most potential.

While you’re looking for inspiration, keep the following advice in mind to avoid the most common “product-selection” pit-falls:

Instead of thinking about what to sell, consider what people want to buy. Make sure there is a demand for your products. Think about the demand side of the supply and demand economic equation.

Don’t focus on products that are currently popular. The most popular products to buy, are usually the most common products to sell, meaning competition is tough. Explore niche markets and consider complimentary selling products that help customers get more out of those popular products they already own.

Think big picture. Just because a product will sell fast doesn’t mean it’s the most profitable product for you. Make sure that the product meets the following requirements:


  • Make sure it’s legal
  • Shipping Cost
  • Restocking process
  • Target market
  • Profitable

Finding trends

Although pursuing hot-selling products can be tempting, you need to keep your finger on the pulse of your target market to gauge demand and recognize your market’s needs. Here are some easy and readily accessible resources to get you started on your market research:

Newspaper/magazines: Lifestyle sections of major newspapers and advertisements in popular magazines. The big companies who are paid big money to advertise these products have already identified hot trends.

Trade journals: If you want to sell niche products, check out industry-specific publications. Trade journals can provide lots of insight into what products and trends are popular.

Drop-shipper and wholesaler directories: Go online to check out the product listings for various drop shipper and wholesalers. Simply google “Drop-shipper and wholesaler directories “. Drop-shippers typically vibrant product photos, along with pricing information to help inspire and steer your decision.  We will talk more on drop-shippers later.

Retail stores: Don’t be scared to step into local stores to see which products are bestsellers and being heavily promoted.

Other e-commerce sites: Can you think of an e-commerce site that inspires ideas for your own store?  Visit the site to see which products it features. Also look at the products that are receiving the most customer reviews.

**Be alert and thoughtful. You can spot trends simply by listening to what your people are talking about. Observe how friends and family spend their time, what they wear, games they play, places they go, and so on. When you’re surfing the internet, watching TV or listening to the radio remain alert to what people seems to be getting the most excited about.

Niche Markets.

8.jpgYou’ll be facing some stiff competition from major retailers in almost any industry, not to mention the elite e-commerce sites like Amazon and Zappos. One way to handle competition is to target a niche market. A niche market is a small part of a bigger market. Instead of going head-to-head with a retailer like Toys “R” Us, you may want to compete by promoting a niche products such as toy robots.

Niche markets are comprised of a smaller pool of potential customers. These shoppers tend to be much more passionate and loyal. Also, they can be easier to reach and engage with, especially via blog and social media efforts.

Take a look at fans of a classic sci-fi movies. Although they the number is small in regards to segment of the population, these diehards are willing to shell out cash for anything related to sci-fi brand: video games, vintage posters, life-size replica of their favorite characters, and anything else you can think of.

Connecting With Prospective Customers.

One of the best ways to identify your target market’s needs is to tune into perspective customers. If you choose an industry that you already have passion for, connecting with customers is much easier. You will be able to like the same Facebook pages they like, subscribe to the same newsletters, clubs, conferences and events, hang out at the same online discussion forums and so on.

**Listen for problems and distresses, which often highlights of unmet needs. After identifying an unmet needs, try to find products that meet those needs and then work toward making those products your niche. By providing solutions to problems, you establish yourself as an expert in the field.  You go beyond selling products and in turn customers will give you there trust and loyalty.

Next more details about drop-shippers and wholesalers… Stay tuned