Is e-commerce passive income?

E-commerce, especially with the acceptance and growth it has enjoyed over the last 20 years is still a great way to make money. But… and you know there is always a But with every question. E-commerce is about more than just throwing a few items to sell on a website or sales platform like Amazon or eBay. It is hard work and definitely not Passive Income.

Your success will depend on several things:

  1. Finding a unique product to sell. The competition for selling common items is intense. On all of the major sales platforms, you will find lots of sellers of similar products and razor thin profit margins unless you have something unique to sell.
  2. Developing unique and creative ways to advertise and market your product. You must figure out a way to make your products stand out from all the other similar products. You must give your customer a reason to buy from you instead of all the other competition. Write unique and creative sales copy. Take high-quality photos showing your products in their best way possible.
  3. Customer service. You must be able to answer customer questions in a timely manner, ship goods quickly, and handle any follow-up issues the customer may have. Be knowledgeable about your products so you can offer assembly or installation tips. You must appear professional and trustworthy before you can expect to give your customer sensitive information like credit card numbers.
  4. If you are going to sell from your own website you must market the hell out of your products so people know you exist. Customers can’t find you if they don’t know your name or if you even exist. You must be willing to use free marketing, social media marketing, paid advertising, email marketing, and whatever else it takes to drive traffic to your website.
  5. You must continually strive to improve. Add new products, seek out new marketing opportunities, and stay ahead of the competition.

Now when going thru all of the above points, nowhere do I mention passive income. E-commerce is not a passive business even with all of the advances made in the field of automation and performance apps. E-commerce takes hard work all the time. Researching and sourcing new products and new suppliers, writing and creating attractive advertising, and most importantly developing hands-on customer service.

Why you should try and sell higher priced items when you have a Niche.

Welcome to the world of retail. You will always have to remember that you have costs associated with any order. Then remember that it costs the same to process a $15.00 order as it does to process a $50.00 order.

When you have a niche, hopefully, you have chosen one that is unique that will allow you to sell higher priced items and make higher profits. If your product isn’t really unique or low competition, you really don’t have a “ Niche”.

You will pay someone to process an order, review it, make sure the payment has cleared, print a label and send it to your shipping department. They then must pick the merchandise from your inventory, choose the right sized box, package the merchandise securely, and ship it out. You then have to pay your customer service staff to notify the customer with a tracking number and to handle any customer service issues that might come up. You must also factor in the cost of potential returns.

Even if you are a solo operation and do all of these things yourself, you pay with your time and effort, because after all, time and your effort are valuable.

Here is a basic example. The numbers are just guesstimated to use as an example. I will assume you use Amazon to sell your merchandise.If you don’t use Amazon replace that selling fee with your sales, advertising, and marketing costs per order.

Item # 1 Sells for $15.00. The cost of goods, $7.50. Amazon selling fees ( estimated 15%), $2.25, order processing costs $3.00. carton costs, $1.00. Gross profit before fixed overhead and taxes= $1.25. That’s a lot of work to make $1.25.

Item # 2 sells for $50.00. The cost of goods, $25.00, Amazon selling fees, $7.50, order processing costs, $3.00, carton, $1.00. Gross profit before fixed overhead and taxes= $13.50. Decide for yourself. Which priced item would you rather sell?

You have to sell over 10 pieces of that $15.00 item to make the same gross profit as selling one $50.00 item. That is 10 times the effort and order handling.

Some people will say, “Let’s sell the low priced item and make it up on bigger sales volume”. It can be done but why work that hard?

You are young, you have a head full of ideas, but no money. How do you proceed?

Your young, your mind is filled with ideas but you have no money. Why not continue to work at your 9 to 5 job, use the time to learn about how a business is run and gain experience to help you when you are ready to execute some of your ideas? Take the time to live below your means and save as much as you can so you have some money to fund your ideas when you are ready. Everybody has to start somewhere and seldom do people have the skills to start at the top. Take your 9 to 5 job seriously, be curious and learn all you can, and you will find that you might even earn the respect of someone who can eventually be your mentor to help you succeed. Remember, you don’t find mentors, mentors find you based on what they see from your performance and dedication.

While you are developing your skills, take the time to firm up some of your ideas. Start making a plan or even a simple outline to determine what you want to do, what skills you will need to execute your idea, and how much it will take in terms of investment or time. Taking the time to commit your ideas to paper gives you something to build on, something to turn into an executable business. If you only keep your business ideas in your head they will never be more than simple ideas.

What should you do when you get a drop ship order?

When you use the drop shipping model for e-commerce here are some things you should always do.

  1. When you process payment send your customer a receipt of the transaction by email. If you are using a sales platforms like Amazon or eBay/ PayPal they will do this for you.

2. Process a purchase order to send to your supplier with customer shipping info so supplier can ship item. Do not include your selling price on this purchase order.

3. Make sure your drop ship supplier uses your company name as the shipper on the mailing label. This is really important. You are the seller. You want your customer to remember your company and come back to you for future business.

4. Once your supplier has shipped, send your customer the tracking number and a nice message like “we appreciate your business” or “thank you for your order”. Ask your customer if they would like to receive your news letter by email. Keep in touch with your customers regularly. Make sure you include your website link and maybe a discount promotion to encourage your customer to take a look at your website for possible new orders, new items, etc. This type of marketing is the cheapest advertising you can ever get.

5. If you can, try and make arrangements with your supplier to include some promotional literature or brochures featuring your company, website, products, and promotions. Good drop ship suppliers will do this for you. Most will not want to be bothered with this extra work.

Use every opportunity you can to keep in touch with your customers. Build an email mailing list. Send them regular mailings featuring special promotions, new items, customer testimonials, pictures of satisfied customers using their new item, etc.