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?