Ecommerce niche - Pull the plug?

[JJ]

I'd love to hear some advice about whether I should just find another niche (and how to think about a niche better), or if I should continue in this niche.

I've started an ecommerce (my first experience with this) store selling toys to help kids learn math. I thought this would be a good niche that addresses a pain point for a lot of people - learning math, or parents helping their kids learn math.

I'm starting to think that my niche has turned out to not really be a niche. It seems like I've just picked a section in Toys R Us (all the math toys and games) and tried to market it. I've found 2 products that are not really found in other toy stores that have normal retail margins and small order requirements, but retail price is less than $30 so I'm starting to wonder if doing the work to get traffic will be worth it. I'd love to hear some advice about whether I should just find another niche, or if I should continue with these math toys.

Besides the 2 unique products, I've negotiated a drop shipping arrangement with another ecommerce store, but my discount is quite a bit less than 20% so my average expected profit is like $3 per item :sigh:. Would the site even be worth selling at some point?

pm me for the url. should this thread be moved to failures/lessons learned?

P.S. I have read and keep re-reading Biophase's threads.

 

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[kraze]

I've found 2 products that are not really found in other toy stores

You should take this approach in finding a niche...products that can't be found at your local walmart.

I've negotiated a drop shipping arrangement with another ecommerce store

Avoid doing this if at all possible and get in contact with the manufacturers.

The $3 profit might be okay if you're selling a hot commodity and pushing volume, but for what you have, I would move on.

 

[JJ]

Thanks I'm going to shut it down and move on.

I'd like to understand this better - could you explain why to avoid drop shipping from another ecommerce store?

Some manufacturers I contacted are either not drop shipping or they charge an arm and a leg, like $7 per item sold (excluding shipping) on a $12 margin.

 

[wade1mil]

Some manufacturers I contacted are either not drop shipping or they charge an arm and a leg, like $7 per item sold (excluding shipping) on a $12 margin.

A $5 margin from the dropshipper is a 66% increase over only making $3 from another ecommerce store.

Manufacturer (Mattel) > Wholesaler (dropshipper) > Retailer (ecommerce store) > You (another ecommerce store)

You have two middle men that both make a profit, which eats up your profit. Buying from another retailer basically makes you an affiliate marketer, but with the expense of an ecommerce store.

 

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[Ãœbertreffen]

Thanks I'm going to shut it down and move on.

I'd like to understand this better - could you explain why to avoid drop shipping from another ecommerce store?

Some manufacturers I contacted are either not drop shipping or they charge an arm and a leg, like $7 per item sold (excluding shipping) on a $12 margin.

I think you pretty much answered your own question. Some are not even drop shipping. The rest are charging a drop-ship fee on top of shipping which leaves little room for profit. You also have no wiggle room. You would have to be 100% sure your shipping costs you charge are correct or it could eat away even more of your profits. Home delivery can be more than shipping to a business, counter in insurance and so fourth. Obviously if you do by weight and dimension on your stores you should be fine but it's just something to think about. Take into consideration operation costs and so fourth and if you're not selling enough product you're going to be in the hole. Not uncommon but you would have to focus on volume to get ahead.

Some manufacturers in industries I know about actually ship out their own product. Many drop-ship to the Contiguous United States and some will actually ship overseas with your labels/customs invoices or they will use their own. Some are gigantic companies as well. There will be companies that charge drop-shipping fees. We had one company where we would buy-in and hold inventory as well as drop-ship when needed. They tacked on the fees or some will tack on even larger fees to drop-ship and we move our business elsewhere towards a competitor of theirs or just focus our interests elsewhere. If they want us to continue to push volume they'll reconsider their actions. If not, no harm done.

While some brands we carry have huge profitability or some that don't it's your company and your choice. Pick who you want on your side and filter out those not worth while. Drop-shipping if you're direct can be a great thing. Sometimes buying direct gives you the benefits of drop-shipping, co-op advertising, free freight orders of X amount of dollars when you order in yourself (which you could then throw to a fulfillment service if needed or get a part-time shipper). If you're just starting out it doesn't hurt to ship out your own product for awhile if you have the capital and get some of the benefits manufacturers may provide to you.



- Devin

 

[Ãœbertreffen]

In addition, starting out you may have lower margins unless you're going direct and do more volume. If you purchase more at a time or do a certain amount of volume is there any chance your profits could rise?

Is there a reason why you have to drop-ship? I would take it into my own hands if I was you and you have something to go off of. Sounds like you can save a lot of your profits by going this route, correct?



- Devin

 

[JJ]

if you purchase more at a time or do a certain amount of volume is there any chance your profits could rise?

That was part of my plan. Right now I don't have any results to show so I figured I might as well just do something and if I can be successful and increase volume, then later on like 6 months down the road negotiate for a larger discount from the supplier (ecommerce dude).

Manufacturer (Mattel) > Wholesaler (dropshipper) > Retailer (ecommerce store) > You (another ecommerce store)

Thanks for articulating that for me. It's a simple diagram and probably seems like "no shit" to most, but I'm starting to realize that too much of my thinking is spent in lala land. Common sense does not often result in common practice right?

In theory I was thinking that I could use this model to get started with almost no cash, then (after about a year) use all of my profits to get all of the inventory (drop ship or fulfillment) from the manufacturer or wholesaler.

Thanks for your input, time to move on... I'll request to move this thread to Failures.

 

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[JasonR]

Sounds like you didn't want input - you were just looking for an excuse to quit. My honest analysis of this thread.

 

[andviv]

I'll request to move this thread to Failures.

Not sure if that is the right place for it... Let us think about it a little bit.

Thanks for sharing.

 

[JJ]

Sounds like you didn't want input - you were just looking for an excuse to quit. My honest analysis of this thread.

That's fair I could see why you'd think that - looking back that's how I presented it. Why should I keep working on this path?

Biophase said niche selection is the key so I was thinking I need to work harder to find an actual niche to serve. But I'm trying to learn and my ears are wide open, and JasonR is certainly farther down this path than I am.

 

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