biophase
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I have wanted to make this post for a while. I see so many people write, "I found a product with great margins" or "I found a cheap product that I can sell for a good profit, but the shipping is expensive".
You guys don't see the big picture. There is a reason the wholesale AND the retail prices are where they are. You NEED to understand that SHIPPING and DUTIES and HANDLING and EASE OF SELLING are all calculated into the profit margin of a product.
This is why the prices are where they are.
Example #1
You find a product that is $5 from the factory and everyone is selling it for $100 on Amazon. Guess what? There is a reason for that. Do you think that everyone is just trying to milk the consumers and get maximum profit? Why isn't someone else undercutting them and selling for $50 only?
The reason is probably because the $5 product costs $25 each to ship by sea and there is a 100% tax on this product. So by the time it gets to the USA, it has cost $35. Now it costs the business another $10/unit to ship to FBA. Meanwhile, once it gets to FBA, Amazon takes $15 commission from the $100 price tag and charges $25 to ship. When all is said and done, the business makes a whopping $15 profit ($100 - $15 - $25 - $10 - $35).
So stop looking at the factory price and the Amazon selling price in a vacuum. Don't think that you've found this product that nobody else has ever searched for on alibaba. The prices are the prices for a reason.
Example #2
You find a product that is $2.50 from the factory and sells for $15 on Amazon. It's a small product that you can ship by sea for $.50/pc and taxes are 10%. Your total landed cost is $3.25. It costs you another $.50/pc to ship to FBA warehouse. You sell for $15 at Amazon and Amazon takes $5.50 commission and shipping. When all is said and done, your profit is a nice $
$5.75 ($15 - $5.50 - $3.25 - $.50).
39% margin, Not bad right? Why isn't everyone else selling this product? And if they are, why hasn't someone undercut the pricing to say $12 and make only $3.50?
Well you go head first into this product and then find out that it is very hard to organically rank for this product. You can't even get past page 4. So you run PPC and find out that the clicks are about $1 each. You convert at 20% so it's costing you $5 to get one sale. Now you are only making $.75/unit.
Worse yet, your competition decides to drop down to $13. They can do that because they are selling 50 units a day and ranked on page 1. On top of that, because they sell so many, they are getting the units for only $2 from China and shipping them over for $.20 a unit. So they could even go down to $11 if they wanted to.
You remain at $15, but now you only convert 17% so you actually lose $.25 per sale. You drop down to $13 and convert at 20% again, but now lose $.75 per sale.
So next time you see something with a nice healthy margin, stop and think about why the prices are where they are.
You guys don't see the big picture. There is a reason the wholesale AND the retail prices are where they are. You NEED to understand that SHIPPING and DUTIES and HANDLING and EASE OF SELLING are all calculated into the profit margin of a product.
This is why the prices are where they are.
Example #1
You find a product that is $5 from the factory and everyone is selling it for $100 on Amazon. Guess what? There is a reason for that. Do you think that everyone is just trying to milk the consumers and get maximum profit? Why isn't someone else undercutting them and selling for $50 only?
The reason is probably because the $5 product costs $25 each to ship by sea and there is a 100% tax on this product. So by the time it gets to the USA, it has cost $35. Now it costs the business another $10/unit to ship to FBA. Meanwhile, once it gets to FBA, Amazon takes $15 commission from the $100 price tag and charges $25 to ship. When all is said and done, the business makes a whopping $15 profit ($100 - $15 - $25 - $10 - $35).
So stop looking at the factory price and the Amazon selling price in a vacuum. Don't think that you've found this product that nobody else has ever searched for on alibaba. The prices are the prices for a reason.
Example #2
You find a product that is $2.50 from the factory and sells for $15 on Amazon. It's a small product that you can ship by sea for $.50/pc and taxes are 10%. Your total landed cost is $3.25. It costs you another $.50/pc to ship to FBA warehouse. You sell for $15 at Amazon and Amazon takes $5.50 commission and shipping. When all is said and done, your profit is a nice $
$5.75 ($15 - $5.50 - $3.25 - $.50).
39% margin, Not bad right? Why isn't everyone else selling this product? And if they are, why hasn't someone undercut the pricing to say $12 and make only $3.50?
Well you go head first into this product and then find out that it is very hard to organically rank for this product. You can't even get past page 4. So you run PPC and find out that the clicks are about $1 each. You convert at 20% so it's costing you $5 to get one sale. Now you are only making $.75/unit.
Worse yet, your competition decides to drop down to $13. They can do that because they are selling 50 units a day and ranked on page 1. On top of that, because they sell so many, they are getting the units for only $2 from China and shipping them over for $.20 a unit. So they could even go down to $11 if they wanted to.
You remain at $15, but now you only convert 17% so you actually lose $.25 per sale. You drop down to $13 and convert at 20% again, but now lose $.75 per sale.
So next time you see something with a nice healthy margin, stop and think about why the prices are where they are.
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