What strategies exist to identify profitable dropshipping products?

Research, then more research, then a lot more research.

To find a profitable product you need to know the potential competition, what they are currently selling, and what they are selling the product for.

You need to know what areas have problems with no current solutions.

You need to know what products people are looking for and what they are willing to pay.

You need to be an expert so you can identify products that are currently being sold that may be marketed incorrectly. These are the kinds of products you can create an effective advertising campaign to reach the right customers in the right markets.

Take a walk thru your local mass merchant. What do you see? If you just see a big mess of assorted products, you need to look more closely. In a big brick and mortar store, every product in the store is placed there for a reason. Each store is organized by departments, and each department has an employee or staff at the corporate level that is in charge of each department. These are called buyers, category managers, product managers, merchandisers, or some other descriptive term. These are the “experts” that have done their research and determined what should be in the product mix or what should be offered for sale.

You need to develop your research so you become the expert with regards to your chosen product. Research and product knowledge are your strategies.

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?