IN THIS CHAPTER

Taking stock of the items you should make available for sale

Using your research to validate decisions

Choosing price points that move merchandise

Creating a winning selection with the right number of products

You probably know someone who is a fantastic salesperson. Usually, this person is described as being capable of “selling anything to anyone.” Well, the Internet is similar to that top-notch salesperson. It can sell just about anything to almost anyone around the world — with your help, of course. As any good salesperson understands, however, you have to know a few tricks of the trade. The same statement holds true for selling online: To do well, you have to know a few tricks. In the case of choosing inventory, you simply need some additional information to give your business a boost.

How do you decide what to stock up on to give your business a leg up? To create the ideal inventory for your online business, always keep in mind these three points:

• Product: The goods or services you sell should be readily available for you to purchase and stock and reflect items of interest to your customers.
• Pricing: The amount you charge for your product must make it attractive to customers while providing you with a reasonable profit.
• Selection: The range of products you offer your customers is more than a matter of quantity. Offer variations of the same product so that your customers can choose from alternative sizes, colors, and styles.

Fortunately, deciding which type of product to promote — and at which price — isn’t complicated. In fact, several useful tools and methods can help you determine potential sales chart-toppers.

Finding Out What’s Popular

One thing is certain, the world loves data — and there’s plenty of it to be had. You may have heard terms such as business intelligence (BI) and big data. Both involve tracking, collecting, and analyzing all sorts of metrics or data points to form a more detailed picture about what’s happening in a particular area, such as what items are selling well during a specified time period. You can access this type of information from various sources, and sometimes it’s free. One place to turn for high-level sales data on a wide range of product types is Amazon. The mega online retailer moves a lot of products and readily shares which ones are selling best at any given time. (The Amazon Best Sellers list is updated hourly!) Using Amazon Best Sellers, you can explore any of its product categories to see which individual products are climbing up or down the chain of most-wanted items. Although you can’t access specific sales figures, you can see the following information:

• Numeric ranking of 1 to 100 in the top sellers list
• Product rating by customers
• Sales rank and recent movement up or down the list by percentage

Within each product category, you can also access a list of top 100 sellers based on categories such as Hot New Releases, Movers and Shakers, and Most Wished For. For example, looking at the Amazon Best Sellers list in the Camera and Photo category, you can sort by the top 100 products. Within the category, you could drill down to something even more specific in this category, such as Accessories or Camcorders. You could also check the Movers and Shakers subcategory to see which products are climbing the charts and by how much.

Although this view has limitations, you can still get a good sense of what people are buying because of the amount and diversity of products sold. Part of what makes Amazon a terrific resource for this information is that the mega retailer has more than three dozen product categories from appliances and jewelry to pet supplies and beauty. Within each main category there is also a detailed breakdown of subcategories. This allows you to be specific in your research. And if you dig into the buyer reviews for the top sellers, you can possibly get more granular product detail and why people bought the product or why they like it. Granted, it takes a good bit of time to read product reviews, but the task is worthwhile when you’re building an inventory of online products for your business.

Two other popular websites can provide a glimpse of the types of products that are selling well. Etsy (www.etsy.com), an online marketplace for handmade and vintage items and craft supplies, and eBay (www.ebay.com), the online auction site, attract lots of buyers for a variety of products. Both sites are good sources for helping you decide what types of products should be in your inventory.

A third-party site called Craftcount (www.craftcount.com) uses an application programming interface (API) from Etsy to track top Etsy sellers and top products by category. Stores with more than 1,000 sales are tracked, and the information is updated every 24 hours. If you think information about handmade items couldn’t possibly help drive your own inventory decisions, consider this: Large retailers have started turning to Etsy to look for popular products to stock in their own stores. Big-box retailers often work directly with top-selling Etsy store owners to reproduce their handmade bestsellers. If you happen to sell similar types of goods — from apparel to home goods — this type of report could prove to be a good source for beefing up your store inventory.

To research a much wider variety of products, you can turn to eBay. To access the sales data, however, you need to invest in a tool called Terapeak (www.terapeak.com). This tool provides a detailed view into the most popular products selling on eBay over a given period of time as well as which listings are resulting in sales. You can also access pricing recommendations and search for keyword recommendations (based on what words buyers are using to search for products). Although Terapeak is designed for current eBay sellers, it is also a source of insightful data for building a sought-after inventory of products for your online store. Terapeak pricing plans start at approximately $20 per month, but you can access a free trial, which may be enough to give you helpful information. Terapeak includes detailed data about Amazon sales, too. As a bonus, once you identify top-selling products, Terapeak helps you source the same or similar products on Alibaba (www.alibaba.com), which is a company that connects you with products and suppliers. Terapeak is a one-stop resource for research and products!

Putting Together All Your Research

When you’re starting a new business, it’s comforting to be able to validate your decisions. That’s exactly what market research allows you to do. If your searches show that a potential product or service is in high demand, it’s a signal that you’re on the right track. Or if you’re having trouble selecting products to stock your web inventory, the popularity listings in your research can spur your imagination.

Some established companies specialize in market research. Their background work is summarized in concise reports that forecast trends and buying behaviors. For the best results, search each company’s data bank of reports for titles or topics such as e-commerce, online retailing, and e-business. Although some resources provide free information, others are paid services. Reports can range from several hundred dollars to more than a thousand dollars. For that reason, take extra care to read the descriptions and the date of the report to make sure they have the most accurate and current information for your purpose.

The following companies specialize in market research:

• eMarketer (www.emarketer.com): Specializes in providing data and analysis on trends in e-business, online marketing, and emerging technologies. The site also offers free articles for limited periods, so check it frequently.
• Forrester (www.forrester.com): Offers information specifically about technology and business. Product areas and services include data and research reports, consulting services, and community programs.
• Internet Retailer (www.internetretailer.com): Provides a series of Top 500 guides for e-retailers, including the top 500 sites based on annual sales and the top 500 up-and-coming sites based on sales. Internet Retailer also offers free articles detailing online trends and news.

Pricing Your Products

After you decide which products or services you’re most interested in selling, it’s time to price your merchandise. Having delved into the results of your research, you probably have a good idea of which items have the best chance of selling. However, no matter how trendy or in demand your products are, setting the wrong prices might leave you with unsold inventory. In this section, we take a look at some pricing strategies and considerations to make sure that you move the merchandise directly into your buyers’ hands.

When you’re tagging your merchandise, the following factors are the most probable price influencers, or factors that affect your sticker price:

• Demand: Whether customers are seeking out your product because it either meets a need or is thought to be a desirable or trendy item.
• Competition: Not only who, but also how many, competitors you have, and what prices they have established for the same or similar products you’re selling.
• Market position: How you want your business to be perceived by customers in the marketplace. For example, an upscale store with high-end products might influence pricing strategies in one direction while a larger, warehouse-type of image might warrant a more competitive pricing strategy.
• Cost: How much you pay (your expense) to create or purchase the product before reselling it to your customer.
• Profitability: How much money you want to make each time an item is sold, after you’ve considered all expenses or costs associated with selling the item.

Product pricing is one of the most critical business decisions you make. Researching all the advice and pricing models offered in textbooks or by economists, however, can leave your head spinning. Keep it simple. The basic number for you to grasp is the product’s cost, which incorporates every expense associated with your item, including the wholesale price you paid (the raw costs of materials to make the product); overhead costs ranging from utilities to Internet service fees; commissions; and packaging and shipping costs to deliver the product to your customer.

Costs or expenses that don’t fluctuate are fixed costs and are often considered overhead (such as rent). Expenses that might change periodically are variable expenses. The price of your product should cover all variable expenses and help contribute toward your fixed costs.

After you understand the cost of what you’re selling, you can begin making pricing decisions. Use one of the following common pricing strategies:

• Cost-plus: This method requires you to total the costs of your expenses associated with the product and then add an amount you want to make as profit. The resulting dollar amount represents the pricing floor, or the lowest price you should charge.
• Value-based: With this strategy, you’re setting a price that reflects the highest amount you believe your customers are willing to pay for the product. Unlike the cost-plus method, this one considers market conditions, such as demand, competition, and the perceived benefits (or value) of your product’s features.

For example, if your cost for selling a coffee mug is $4.50, should you turn around and try to sell it for that same price? No, you have to make a respectable profit. That amount depends on how much you want — within reason, of course. If you decide that you have to clear $5.50 on every mug, for example, your price is set at $10.00 per item (cost-plus pricing).

By using value-based pricing, you might be able to set a higher price based on consideration of other factors. For example, how much are customers willing to pay for a coffee mug? In other words, what cost does the market bear? Perhaps, in the case of an Elvis mug, its perceived value is much greater than the perceived value of other styles of mugs. You might be able to sell each mug for $15.00 or more. Of course, even if your customers are willing to pay that much, they might find a better deal elsewhere. Your next consideration is to find out how much your competitors are charging for the same or similar products. If $9.99 is the top price on other sites, it might be unreasonable for you to expect to set a much higher price.

Now that you have the basic information needed to determine a baseline price for your product or service, you have to consider one more factor: your inventory.

Building Your Inventory

Choosing the best products and prices for your online business is certainly an important factor in starting your new business. You have to consider another issue too: Exactly how much inventory you should keep on hand, or how many different products you should have available for sale. The answer depends on not only the type of products you’re selling but also the type of business strategy you want to execute.

Savvy online shoppers are accustomed to an endless array of choices because they can easily jump from one website to another. These customers are quick to make a decision about whether your site’s inventory meets their expectations.

To keep the attention of most online shoppers, have a clear strategy for the type and amount of product you choose to offer.

We don’t mean that you have to carry hundreds, or even thousands, of products to find success online. But you can follow a few distinct strategies for building an appropriate online inventory. Each one comes with its own advantages and disadvantages, as discussed in the following sections.