What is the best business model to use? Retail, Wholesale, Drop Shipping, or Consignment?

If there were only one better choice between the business models listed, why would any other form of business exist?

Each of the choices have positives and negatives attached to their business models.

If I had to make a choice I would pick either wholesale or retail as the types of business I would pursue. Both require a major investment to develop the business and this is a positive thing. It makes the entry into this market model more difficult so competition is more limited. Once you have established your business and begun building a customer base, as long as your service,quality, and selection of product remains top of the line, your business should grow and prosper. Sure, certain product categories may come and go, but loyal customers tend to remain very loyal. Just keep building and adding to the product lines you offer. Use unique sales copy, and photos if you are an online seller and develop a very professional presentation and image.

Drop shipping is a good business model in some specific cases,and is very useful for product test marketing, selling a low competition Niche products, or offering items for sale that are big, bulky, hard to ship, or expensive. Because there is low investment involved to get started in the drop shipping business you will tend to face a lot of competition unless you have an exclusive agreement with a supplier of unique products. n this category you will see many companies offering a tutorial on how to drop ship, companies offering subscription services that will allow you to purchase products from them, or even companies selling lists of potential drop ship suppliers.

The consignment business can be very profitable if you have access to the right consignment merchandise. It consists of a lot of closeouts, refurbished merchandise, returns, and good individuals are offering for resale. Often, when the existing inventory is finished, there is no replacement available. So while it is an opportunity to offer low-cost, high-profit merchandise, it may be difficult to create a sustainable business since the product mix may be constantly changing.


How to advertise to your customers for FREE!

In my opinion, it is in the best interest of any business to keep in contact with their customers every chance they get. I find it hard to imagine why any company would fail to take advantage of free advertising directed to their existing customers.

This contact includes package inserts with brochures, new item announcements, discount coupons for future orders, links to your website, promotional materials like refrigerator magnets with your website address, and if you are lucky enough, paid ads (like the Food Ads mentioned in the question) from companies looking to use your customer base to promote their business.

In addition to package inserts, e-mail marketing to previous and current customers, blog posts, social media and any other possible way you can think of to keep connected with your customers should be used. It will be about the cheapest advertising you could hope for and much more targeted and productive than PPC or SEO paid marketing since you are dealing with actual customers.

Any potential business you can redirect from a selling platform like eBay or Amazon puts more profit in your pocket since you can avoid paying the selling fees these platforms charge.

How Do I Sell My Products For More Than My Competition?

Black Friday Promotions. Just A Cost Of Doing Business.

Many people ask how retailers can afford to sell some products so cheap on Black Friday? They often ask if retailers sell product made of cheap components to lower cost?

 Always keep in mind what the return policies are for the retailers selling the product, and the warranties offered by the factories producing the product. How much would it benefit a retailer or factory to go to the massive expense of producing a product, shipping it thru the distribution chain, advertise and market the product, and then sell a cheap piece of crap, knowing that you have to honor the return policy or warranty.  All that will happen if you sell a product made with cheaper components is to make a customer angry, and a satisfied customer is worth way more to a major retailer than any profit they might make from selling a single piece of merchandise. Happy customers come back to the store and buy more. Angry or disappointed customers tell a lot of friends and family members about bad quality.

The products are not necessarily made of cheaper components, but often are made with fewer features to meet a certain price point. Many Black Friday items are sold at, or even below cost to build store traffic. Every major retailer has an advertising and marketing budget, and Black Friday promotions are just considered a cost of doing business.

How should I determine pricing for my products?

Should you just add a percentage to your cost of goods or should you individually price your items?

In my personal opinion, it is a mistake to simply price items based on a percentage applied to a cost of goods. This practice sometimes results in items being overpriced and non-competitive when compared to similar items and it also results in many items being underpriced when compared to what the market will allow. This is called leaving the money on the table in retailing circles and cuts into your profit margins.

The psyche of the consumer is a complicated machine. Many people have a very good idea of what pricing is competitive, what items are underpriced, and what items are overpriced. These are the market basket shoppers. The market basket is not always similar from one consumer to another but based on an industry, the items in an average market basket tend to be remarkably similar among most consumers. These are the items that you must always price competitively. Even if a consumer is not buying an item in his market basket, if your price is too high it reflects badly on a store’s price image.

My advice is to become an expert in your chosen product category for the items you sell. Price your items to the level the market will bear. Overall, you will make more profit in the long run, be more competitive, and not leave too much money on the table for your competitors to snatch up. It is more work to price to the market, but if done properly, the results more than make up for the extra effort.

How to attract more customers to your website

 Someone recently asked me about how to improve his website.  The answer deals with Hoverboards, but the advice is usable for any type of product.  Here is my answer.Thanks for asking me to answer. I took a look at your website and it has a nice clean look. It’s easy to follow and see the different products you are offering. In my opinion, however, you have made a lot of common mistakes people make when presenting their product.

I have to assume you are either a tech guy or know a lot about hoverboards. You give pretty complete details and specs, but I have to ask you,

What the hell is a hoverboard?

You don’t tell me anywhere on your website, what they are, what they do, how much fun they are, and why I should buy one, especially buy one from you.

You are an expert, trying to sell your product to other experts. Experts already know all about the product and what it does. This is a very common problem among people that have never tried to sell products at retail before. They know the product very good and assume everyone else knows the benefits too. You give the tech specs and features but no benefits. Experts won’t be the customers buying from you, they have other suppliers. You want to capture the attention of the people that don’t know about hoverboards.

As others have noted, your prices are only just competitive. The hoverboard market is very competitive and growing. You need to give potential customers some reason to buy from you rather than anyone else. How are your hoverboards different or better than everyone else’s? If the differences are significant enough you may be able to charge a higher price. After all Chevy’s and Cadillac’s are both cars. Why can Cadillac sell a car for more than a Chevy? If you give potential customers enough motivation or reason to buy from you, you won’t have to be the lowest priced guy on the block.

Another issue with hoverboards is the electrical safety factor. There have been many stories lately about battery packs catching on fire or chargers burning up. You state quality and safe hoverboards on your site, but you don’t state why yours are safe. UL certified? Extra quality control checks during the manufacturing process?  You need some way to make your customers feel safe and secure.

Here are my recommendations:

  1. Build a landing page. make it fun and energetic with plenty of photos of people having fun using hoverboards. Make hoverboarding a family adventure.
  2. Tell your hoverboard story. What hoverboards are, how they work, how much fun they are, how safe they are. Use plenty of features and benefits.
  3. Tell your customers why they should buy from you. Tell your service story, tell your tech support story, your great shipping story.
  4. Make your website a one stop shop. Sell accessories and safety gear. Helmets, knee, wrist, elbow, and hand pads. Make it cool to be safe.
  5. Add the marginal products, Hoverboard drifters, hoverboards with balance bars, 4 wheel hoverboards for us balance challenged oldsters.

Tell your story, build your brand, and make your website the go-to site for excitement.

What online shoppers are looking for.

At the basic level,online shoppers expect the same things all shoppers want. Quality products, a pain-free shopping experience, a competitive price, and good availability or quick delivery. For online shoppers, they also want to be kept informed on all stages of the ordering and delivery process.

  1. Quality should be to a level of consumer acceptability. The product should function as advertised and be as advertised.
  2. Products should be easy to find by search and indexed correctly
  3. The ordering process should be transparent and the customer should know before he puts an item in a shopping cart what the shipping charge will be, the expected order process times, and what shipping methods are available.
  4. Prices should be competitive. You can charge a customer more than the normal competitive price if you give them valid reasons to buy from you. You offer better service, better return policy, better technical advice, an overall better shopping experience.
  5. Order processing and delivery should be as quick as possible. Amazon is offering same day delivery and next day delivery in many major metropolitan areas. Customers expect to receive their order in 3 to 5 days using normal delivery methods. No one wants to wait for 2 or 3 weeks or more for delivery. If you have long lead times, say for example you custom make a product, make sure your customer knows how long it will take.
  6. Customers want to be kept informed. Provide them with tracking numbers, keep them advised about problems or delays.
  7. Answer Customer service inquiries promptly
  8. Accept returns and make the process easy.

How do you make sure you won’t get sued when picking a name for your business?

 These tips apply to the USA.

  1. Do a search for similar names.
  2. Check with the Secretary of States office in the state you want to register in for business registrations.
  3. Check the federal copyright and trademark database for similar registrations.

Search trademark database

Regarding different but similar spellings. It may not be worth the trouble you can encounter if the owner of the name you copy wants to vigorously enforce his tradename. The legal fees will eat you up to try and defend yourself. Avoid using similar type fonts, colors, and any designs the original trademark may use.

Companies spend a lot of money on marketing and advertising and want to protect their investment. Your product may be different now but the company may have new products under development similar to yours . Also, many companies want to avoid any confusion your name may cause, especially if the company holding the tradename feels your product or service may harm their reputation.

I am not a lawyer so please consult an attorney in your jurisdiction for proper advice. My advice is only given from the standpoint of my own experiences with start-ups and advice given by my attorneys. They do know best. You can pay them now, or you can pay them later. It’s all up to you.

How can you find suppliers for your e-Commerce business?

Yes, there are many better ways to find drop ship suppliers other than paying for a list of suppliers that may or may not be up to date. I would also avoid paying a fee to get the rights to buy from many of the companies that advertise themselves as drop shippers. When you do a quick comparison between what they want to charge you and what your competition is selling the exact same products for on Amazon, you can see there is not much room left for your profit. These type of companies attract a lot of customers that want to do business the easy way without any effort so they attract a lot of competition to the types of products they sell. These types of suppliers don’t really care who sells their product. Once you have paid your fee, they have made their money, and if 20 or 30 sellers on Amazon are selling exactly the same product, using exactly the same photo and ad copy, it makes no difference to them who gets the sale, as long as someone sells. Amazon and eBay are the same way. They don’t care who sells the product but just hope someone does so they collect their selling fees.

Depending on where you are located, I would choose as my first option attending a trade show for the product type you are interested in. Trade shows are available for all types of products and are often held in major cities around the world. When you attend a trade show you get to see first hand a large assortment of products and meet people from the industry you are interested in. You can discuss your requirements, pick up catalogs or DVD’s listing their products and discuss drop shipping.

If you are not able to locate a trade show in your area or are unable to travel to a city where a trade show will be held, I would next visit the website for the exhibitor or association sponsoring the trade show. Often they will have a list of exhibitors on their websites together with contact information and company website addresses. It is a great way to get a list of suppliers by product type.

I would take the time to subscribe to any trade or association magazines or e-zines offered on the trade association website. These magazines are a great source of industry news and new product introductions and often have articles about issues faced by the industry. They are often also free to subscribe to.

Search engines would be another option to finding suppliers, however, their effectiveness has been diminished by the trend to give companies that pay to advertise better rankings, thus making the search results all but worthless in many cases.

Some people recommend Aliexpress as a place to find drop ship suppliers, but I rank Aliexpress really far down the list of preferences. The suppliers you will find there normally have long delivery times and service can be sporadic. Often these Aliexpress companies do not carry inventory and would be drop shipping your order direct from the factory. Delivery may take anywhere from 2 weeks up to 7 or 8 weeks depending on their inventory level and the shipping service they use. Remember, the trend in eCommerce is for speed of delivery. The slow delivery may cause customer service issues with your customers, extra work for you to read and reply to their questions, and order cancellations if they decide they don’t want to wait so long. If you use a sales platform like Amazon or eBay, order cancellations and customer complaints may lead to your sellers account being canceled.

How do I measure an Ad’s effectiveness?

The key performance indicators for product description in e-commerce are sales. Sales are the entire name of the game. You don’t list products for sale to get exercise, you don’t list products on your website to see how many items you can list, it’s not a contest after all. You list product on your e-Commerce platform to sell merchandise, and then to make a profit.

There should be 2 main areas to use KPI. To use KPI you need to do research and testing.

  1. You need to make sure your marketing efforts are driving targeted traffic to your items. Use A/B testing by inserting unique promotion codes on various types of advertising efforts. General traffic and website hits are great, but targeted traffic from potential customers pays the bills. If you pay for advertising, you better be sure you are measuring the ad performance to make sure you are getting your money’s worth.
  2. Make sure your advertising is actually selling the product, not just listing it. Look at selling platforms like Amazon and eBay. You see item after item using exactly the same selling copy and photos to list their items. Who gets the sale? Often the guy that is placed at the top of the pack by Amazon’s listing algorithm, or by the guy that is a nickel cheaper. Amazon even makes it easier by writing the ad for you if you have a UPC number. Write your own, unique ad copy using features and benefits, and how the product will help your customer solve a problem, make a task easier, or some other benefit. Use unique photos to make your ad look different than everyone else’s. Measure different ad performance by assigning unique product numbers to each ad you test. Track hits and sales per hit for each unique ad.

Measure your paid ads, using clicks per ad, and sales per click . Utilize various ad copy approaches to test effectiveness. Next, measure individual ad performance using A/B Testing of ad copy A versus ad copy B techniques. This should be enough for most small e-commerce sellers. If you grow and use different marketing approaches like direct email, etc, of course, other tests should be done to measure effectiveness.