$1.5 earning per sale- is that worth pursuing

[thinkingbig]

Hi

i am about to develop an online store (contacted a professinal developer) but am having second thoughts. I would be earning $1.5-3 per sale of product. There is not shipping or postages costs involved. Just sending a code which will enable access to the product which is normally bought by physically going to the shop. Each item will cost around $12-18 and i know many people purchase it (in millions). I am just offering an alternative, convenient route.

I have started saving money. Right now i have saved up $7000 and my realistic spending is limited to $15000. Would it be cost-effective to spend that much for a website that is going to generate $1.5-3 per sale of product?

cheers

 

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[FDJustin]

Whether or not that much of an investment is worth it depends on the number of people you can get to buy from your website. That's a very low profit margin item, but any positive is good if you can sell enough of them.

So you have something millions of people purchase, that's great. Now... How many of them will bother to look for it online? Is anyone else selling it? Are they doing well enough, that if you join the competition and take a significant enough amount of the customers, is your return worth it?

It might take you some time to beat out your competition in rankings, and customer trust. Can you afford to be without your initial investment as you work towards this?

It might just be from being a little green on paying for website construction services, but... That seems like a lot of money to me for building a new site. Do you have any idea what your costs are, or are you just citing a budget?

A million one dollars are better than one million dollars. The former means you have upwards of one million people that have already given you money. You can get more from them.

 

[Inphinity]

As Justin has mentioned, it depends on whether your market research has shown that a large number of people are likely to buy it through your site. If you do not have to handle any actual product / shipping etc, and your only running costs are going to be domain registration / hosting, then the margin itself is fine - but you'd want ot be able to shift a lot.

 

[CactusWren]

Why would you spend that kind of money for a yet to be proven biz?

There are plenty of free options such as Zen Cart, OS Commerce or even others for about $300 (Interspire).

Once it can pay for itself you could move forward.

Plenty of threads around here on how to do it. Specially look for threads from Biophase, Mtnman and JonleeHacker.

Good luck!

 

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[thinkingbig]

thanks for the replies. The only think i am worried about using free open source software is that it may not look professional. Correct me if i am completely wrong.

@inphinity: not many people access the product that i want to deliver because the companies that deliver it charge an extra $2 on top the $15.00 if you go by the online route. I want to eliminate that extra booking charge and make money only of 10% comission. Also, there is no centralised website for what i am planning. Hopefully, these things can influence people.

What i am worried about are transaction costs. Does anyone know if paypal is the way to go (2.9% per transaction). Therefore, if i make $1.5, 4.5 cents will go to paypal, leaving me $1.45 per sale

I think i can sell heaps of this, that is the only reason i decided to pursue it

 

[CactusWren]

I think you are wrong about the professional look of open source products. But like anything its a matter of opinion, which is very easy to decide on if you spend 15 minutes looking at stores that use those programs...

 

[mottdog]

If the process is automated in some way to fulfill the customers order it could be worth it, but if you have to perform some steps on each order then it could push out the ROI. Figure out how long it takes to complete the order and use that to see how much your paying yourself with each hour of work. You maybe buried in paperwork to fulfill orders. So it needs to be automated so you can focus on marketing and research.

 

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[biophase]

How could you possibly spend that much money on a store that just emails out codes? You need a simple cart that has the capability of selling digital products.

 

[Inphinity]

my realistic spending is limited to $15000.

Ok, after seeing some other responses I realised I'd missed a key comment in your post the first time around.. this!

Surely you've forgotten a decimal point and mean $150.00 ?

For a basic cart/store that will just email the product (code in this case), that should be all you need to cover domain reg, initial hosting costs, and maybe a template or something if you want to go down that path.

If it works, and people start spending, then look at putting $$ into the site. $15k is a HUGE investment for a website.

 

[BurnBright]

What i am worried about are transaction costs. Does anyone know if paypal is the way to go (2.9% per transaction). Therefore, if i make $1.5, 4.5 cents will go to paypal, leaving me $1.45 per sale

I think i can sell heaps of this, that is the only reason i decided to pursue it

Someone will correct me if I am wrong but I also think there is a per trasaction fee of .30 -.20 so it would be 1.25 -1.15 net per sale. This in itself does not tell you if it would be profitable. You need to work out your ongoing costs to opperate the company/service and work back from there to your break even #of sales per x period of time. Consider the cost for advertising it also.

 

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[Chris W]

You'll never know until you try it.

While $15k doesn't seem like a realistic number, who knows you could still make a ton of money. Depending on the product, you may have stumbled on the next multi-million dollar idea. With clever advertising you could in fact be able to captivate those millions of customers to purchase this product through your website. $1.5 x 1,000,000 = $1,500,000

At the same time I don't really recommend that you spend all that money on something so simple. Save it for advertising or other projects in the future. Like other people have said, it doesn't take thousands of dollars to start a simple website that could be done with a couple hundred.

Hope this helped,
Chris W

 

[thinkingbig]

thanks for the replies, guys. I stated a $15000 max budget to include everything from development and marketing and advertising.

I was wondering if there is a way to setup a SMS server, whereby people can SMS my online store and get a code in return which gives them access to the product. It is convenient and although it has been tried by some companies, it is not that convenient. I talked to an IT friend of mine and he said that you can setup something like that, where a SMS from a person is routed to my online store, which can automatically dish out a code. Anyone if it is possible?

cheers

 

[Jason!]

Hey ThinkingBig,
SMS is a great route for business if you know how to run it properly. You can actually make an SMS gateway yourself and use a sim card from a cell with unlimited texting. As long as you aren't sending out an insane amount of texts you'll be fine. One issue you will come across however is that you can not use short code, you have to have them text a full phone number which comes off as a bit unprofessional.

I've talked to to the guys who run the SMS servers for ChaCha and their prices aren't too bad, main cost is a short code fee (not done through them) - $500/month for a random 5 digit, $1000/month for a custom. That can get expensive really fast so you may want to go from homemade to professionally hosted as your business grows.

Additionally, you mentioned advertising online. I've been a senior media buyer for a few different agencies for over 4 years now, would be happy to help you plan out your media spend if you'd like. Drop me a PM.

 

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[Lost]

What is the product and why can it only be bought with a code?

 

[Chris W]

What is the product and why can it only be bought with a code?

I don't think he wants to say what the product is but yea i was also wondering why the product can only be bought with a code? Any way you can tell us without giving away the product?

 

[Inphinity]

Sounds like something along the lines of pre-paid game time, or pre-paid calling time etc to me.

 

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