Photo by Charles 🇵🇭 on Unsplash
True, at the expense of bricks-mortar sales, the fastest-growing sector of retailing is direct-to-consumer Ecommerce.
Included are manufacturers that market their own products, private-label products and businesses that sell custom-manufactured products on their own sites.
Not to disillusion you, but not every product can sell profitably in a direct-to-consumer Ecommerce model.
Determining actual costs
To find out, you must first determine the actual cost of your products – from making them to selling them on your channels.
It entails a lot more than just calculating the difference between your selling price and your product unit cost.
You need to determine all costs of your products from the beginning to the delivering them to your end-user.
Supplier costs
Do you need a manufacturer?
Many entrepreneurs turn to the Thomas Register of manufacturers (thomasnet.com). Thomas is a platform to find suppliers and product-sourcing in the United States and Canada.
Packaging costs
Packaging costs can be enormous whether you need bottles and droppers, cardboard, labels, lids and seals.
Regarding Amazon, you have to use fulfillment by Amazon (FBA) as well catering to the preferences of convenience-minded consumers with Prime shipping.
Beware of Amazon’s FBA. There are clearly defined packaging requirements for many product categories, especially for liquids.
Handling come into play. Products have to survive a drop test. So, they need to be double sealed or otherwise packaged in safe, sealable bag.
Target pricing
The first step in determining your direct-to-consumer Ecommerce selling prices is to identify your target retail price.
How? After assessing your costs to make your products, look at operational costs.
Find out how much it will cost you for warehousing and shipping your products. That includes knowing the full cost of labor to process orders, sales channel fees, and the costs associated with maintaining a quality site to sell products.
Consider your competition. What are your competitors doing?
Marketing costs
No matter what your selling channel is, or doing yourself, marketing entails promotion or whether it be via Amazon or pay-per-click advertising on Google.
Remember all the costs you must absorb including graphic design, content marketing and public relations.
Ecommerce Startup Tips to Avoid the Amazon-Effect
Selling on Amazon
If you’re selling on Amazon, consider your fulfillment shipping costs. Amazon Fulfillment by Amazon shipping costs depend on product size, weight, and price, with fees varying from about $2.50 for small items to more than $200 for large ones; plus storage and potential surcharges.
Sellers using fulfillment by merchant handle direct customer shipping with their own costs. Fees are tiered (small standard, large standard, bulky, extra-large) and calculated per unit. There are higher rates for heavier or oversized items, and discounts for low-priced products.
Caution about Amazon
Congress has intensely scrutinized Amazon and Jeff Bezos, particularly the House Judiciary Committee, accusing them of lying to Congress about using third-party seller data to develop competing private-label products, potentially violating antitrust laws and obstructing justice.
In 2020, lawmakers found evidence contradicting Mr. Bezos’s sworn testimony, leading to calls for criminal investigation and potential obstruction charges, while Amazon maintains it didn’t mislead anyone. Investigations focuse on anti-competitive practices like boosting its own brands, harming small businesses, and poor worker conditions, with ongoing pressure from lawmakers.
See more pricing-strategy articles here.
Good luck in identifying all costs in your direct-to-consumer Ecommerce model.
From the Coach’s Corner, here are more Ecommerce strategies:
Ecommerce – How to Improve Conversion of Mobile Shoppers — To convert your mobile visitors to customers, you must understand their mindsets. You see, mobile shoppers have different goals and obstacles than desktop users.
How To Write Effective Online Listings — Here are valuable writing tips to help you sell online more profitably. Plus, a terrific infographic to guide you.
Vital Steps to Stay Ahead of Competitors in B2B Distribution — As a broker in the middle of the digital landscape, you know how easy it is to be replaced. Of course, staying relevant in the minds of prospects and customers is the key. Here’s how.
Sales Success: Flawless ‘Brand Personality Appeal’ Is Vital — How you can gauge your brand’s personality appeal – if it’s suitable to yield great sales. Here’s a checklist of 16 important factors to measure your brand’s personality.
Clothing Ecommerce: Stay Profitable Despite High-Return Rates — The mounting trend in Ecommerce of apparel returns by consumers — many are disingenuous — is like an outbreak of a disease. It scares clothing retailers as bogus returns decimate profit margins. Here are prescriptions for retailers — strategies to save time and money in dealing with returns.
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