What Products Sell Best Online?

What Products Sell the Best Online?

Dear Dropship Advisor,

My husband and I planned to start an eCommerce business that dropships products for babies and toddlers, but we are wondering how do you know what products sell the best online?

Thanks!

-eCommerce Enthusiastic

Dear eCommerce Enthusiastic,

This is a very important question for you to be asking with regard to your dropship business.  Many eCommerce entrepreneurs fall in love with the ‘idea’ of eCommerce – for its flexible work schedule or its promise of ‘overnight Internet millions’ (a fable)..others simply have a passion for a particular product and decide to dropship it.  Not too many dropshippers consider the viability of the product(s) they want to dropship.

There are many, actually, of a particular industry or product choice that will affect a dropshipping business’ potential profitability:

• Is this a branded product, a commodity or a uniquely new idea?
• Is it being searched for online?
• Are customers willing to buy it online?
• Are companies successfully retailing/dropshipping the product online right now?
• How competitive is the market for your potential customers?
• What is the average profit margin for a dropshipper of this product?

You’ll want to spend some time finding the answers to these questions and more in order to determine the viability of your dropship business idea.

What Products Sell Well Online?

One of the great things about the Internet (for marketers, at least) is its ability to track and store data.  You’ll want to analyze search metrics and sales data in order to determine if a particular product you’re hoping to dropship is likely to work well for your business.

Here are some of the most helpful resources available to you on the Web:

• Search Metrics:  See what keywords/keyphrases searchers are using related to your chosen products and how often by visiting the Google External Search Tool.  See how web traffic for searches related to your products has changed over time with Google Trends.
• Sales Data:  It’ll require a small financial investment, but it is well worth it.  Terapeak, an eBay company, tracks sales data across eBay’s entire network of used and new products.  The data is considered to be a good cross-section of overall eCommerce activity by the foremost eCommerce experts.  It’s a must-have for eBay sellers.  The data is quite amazing and the search feature is robust.  You can view data such as sales price, % of listings sold, % auction/% buy-it-now, avg # bids and much, much more – by item or by category.

We hope this points you in the right direction – at least to start with..

How Much Should I Pay for a Dropship Business?

How Much Should I Pay for a Dropship Business?

The process of valuing a dropship business is not all that different from the process of valuing any other business.  In simple terms, a dropship business today would be worth the present value of its future cash flows.

In order to obtain this figure, you would need to estimate future income that the dropship business would generate and discount them by the expected rate of inflation that you anticipate affecting the money (compounded appropriately for future years).

Why Would Someone Sell a Dropship Business?

My mother warned me to be cautious about people selling used things.  She would often buy them herself, but not after engaging in fierce devaluing/negotiation tactics.  She told me that there was always a reason that someone was selling something.  She’s right – there is a reason.  No one ever sells anything out of the goodness of his/her heart – that we would call charitable giving.

It is good to try to ascertain – either through overt or covert methods – the reason for the sale of a dropship business.  Perhaps the project has become too much for the proprietor (who doesn’t know as much as you do about dropshipping)..perhaps he/she took a full-time position..perhaps the website generates consistently low levels of traffic (an obvious red flag)..perhaps the site’s traffic cannot be monetized.

Valuing a Dropship Business

• First of all, you should ask for financial documents, including a profit and loss statement – also called an Income Statement.  This is a financial statement which indicates the revenue, expenses and net income (or loss) that an organization reported for a given period of time.  Get income statements (either in tax return or audited format, if you can – to ensure some level of third-party validation) from the last three years, if available and use these to predict future income and expenses.
• Make sure you verify the Domain Owner, Domain Age, its Traffic Rank, Traffic Characteristics in order to validate the seller’s claims about the domain’s value.

After you have gathered the inputs and calculated a number that you feel like is justified in paying for the website, keep it private!  Start (anchor) yourself lower, and begin negotiating.  Best of luck!