It all starts with sales price. Before an e-commerce seller can accurately predict anticipated margins, it’s critical to understand what a realistic sales price is for each product, in each channel and in each region. It can feel like a lot of work but it’s an important process to go through to avoid costly overstock fees.
Roy H. Williams, the author behind “Wizard of Ads” trilogy, once said that ‘If you’re not worried that you’re pricing it too cheap, you’re not pricing it cheap enough.’
In this post, I’ll mention the 5 top factors you should consider while estimating future sales price.
- Product Identifiers. Use product identifiers like the UPC, EAN, ISBN, MPN and even the ASIN to ensure that you’re looking at the right products. It sounds simple but it’s important to start at the right place with the right product to avoid wasting time in the wrong place with the wrong product. Please notice, that if the product has different variations (e.g. size, color etc) it probably has different identifiers as well, so even though they might look very similar, you can find yourself looking at the wrong product.
- Your Competitors. When exploring products on different online marketplaces, look into the highest-performing merchants who have great feedback. You should use the rates they use as your reference point for selling price to make sure you’re setting a price that’s reasonable (and competitive) for that specific marketplace.
- Additional costs. The fact you can purchase a product at a cost of $50 and you saw that it was sold for $70, does not necessarily mean that you’re going to have $20 profit. What about the additional costs, related to selling this product? Marketplace fees, PayPal fees, taxes, shipping costs and clearance costs?? Let’s discuss about the last three components I have just mentioned:
- Taxes: Taxes can have a huge impact on your costs which means they can have a huge impact on your sales price. Make sure you’re carefully examining tax rates and import laws in each country you’re selling.
- Shipping costs: Depending on what kind of products you’re selling, your shipping costs can vary greatly. For example, heavier items and more fragile items like televisions can be very costly to ship. On top of this, different online marketplaces have their own unique approaches for handling shipping expenses. They might add these expenses to your selling price, or charge your customers directly. Whatever channels you’re considering, when exploring shipping costs you’ll always need to factor in the product’s weight and dimensions, and the buyer’s origin.
- Clearance costs: If you’re going to use third-party clearance suppliers like PayPal for accepting payment, you’ll incur additional related expenses like marketplace and clearance fees, import tax, VAT, shipping and more.
These three main cost categories don’t factor in other expenses e-commerce merchants will incur from additional fees like eBay’s or Amazon’s Final Value Fees, or FVFs. Each channel will have different FVFs, and some marketplaces might even have different fee structures for different categories of products.
- Operating expenses. Somebody has to attach the shipping label to the product. Who is going to own the customer service (I will write on the importance of customer service in a separate post)? Who is going to operate the returns and submit monthly reports to the accountant?
- Prices trends. Benjamin Frankling said that in this world, nothing can be said to be certain, except death and taxes. I tend to agree, and to add this absolute truth as well: prices always go down. This is why you better have done in-depth research before you buy inventory because that will help you predict the price curve in a better way.
Finally, with insights into the actual sales prices you’ll use for the various products you want to sell across the different marketplaces you’ll want to use, as well as an understanding of what the associated costs will be, you can calculate your margins.
Hurray! You now know whether the process of going global with your set of products will be worth your while.