Revenue: Low costs, high profits from site merchandising!

By Ted S · May 26, 2004 ·
  1. Ted S
    Tired of watching other sites turn a profit selling their own merchandise while your Cafe Press store barely brings in enough to justify checking the statistics? Afraid that stocking your own merchandise will put you in the red? When I decided to create a web store the start up costs looked daunting but for just $300 I got up and rolling selling small-stock merchandise at a 300% profit and you can too!

    Start with the products

    The first trick in small stock merchandising is identifying a set of core products which you will stock and sell on your store. For cost reasons you should probably start with a single t-shirt design/, mug and either stickers or mousepads (keychains, license plate holders and plastic drinkware items are also acceptable). T-shirts serve as the staple item of any store; users flock to purchase them while the cost ($150 for 24) is extremely low. Mugs are another popular purchase that complements t-shirts and also have a low cost ($5) and high resale value. Mousepads and stickers are more of novelty items but there is no reason why you can't include a few of them in your initial purchase as a nice gift or promotional item.

    Buying the right amount

    Since the goal of this article is to get you started for under $300 we recommend purchasing 24 tshirts ($150), 15 mugs ($75) and 15 other $5 or under items for a total cost of less than $300. Obviously if your traffic is high and your wallet can afford the extra pinch purchasing higher bulks will net in lower prices just keep in mind that while running out of product when you have 20 pending orders is a pain, ending up with 50 cheap t-shirts is certainly not an acceptable alternative. Every manufacturer provides price breaks at preset volume levels; reach up for the higher volume (lower price) level and your profit return will be even higher. Keep things smart and start small, moving up as your demand increases but don't jump the gun looking to save on huge bulk discounts, the idea is to small inventory sell, not open a wharehouse.

    How much to charge

    The cost dilemma effects sites both big and small; on one hand you can't over charge for a product or no one will buy it but at the same time you want to make the maximum profit return. As a general rule do as others do; if a t-shirt on a similar site goes for $19.95 don't sell yours for $29.95; if the market allows it, aim for a 2.5-3x profit ratio turning a $6.40 wholesale shirt into a $15-$20 retail item. If you stick to this model you will see a serious return on even the smallest number of sales (100 shirts over a year would yield you $1000 - $1500 in net profit). Just remember to gauge your user base and your product types; cheap t-shirts for college students should go for less than high quality polo being sold to golfers.

    Setting up the store

    Since merchandise isn't a big ticket item there is no reason not to setup a basic shopping cart. So long as your shopping templates look like the rest of your site users will feel comfortable with the process and because of the lower sales volume associated with merchandise products, loosing customers to paypal should be a non-issue. If things grow or if you really want to look the part opening a real merchant account and upgrading your store to a full fledged shopping system will help boost your sales rate but for most sites it's not an initial concern.

    Triggering the first sale

    Getting the first word out is the hardest part for most websites so instead of watching users trickle in from a small link, welcome them all in with a campaign no one can miss. The rule for getting the word out is very similar to a physical store: discounts and sales work, hoping they find you doesn't. The day you launch your store (after you test it) announce a contest to get exposure (give away a free package with all your items) and discount the prices on everything for that day and that day alone. Your store link and corresponding welcome message should be prominent and bold (remember, you are selling your store to users as a part of your site, not as spam or an advertisement). After you've been running for a few days settle things down to a standard link and rotating banner, by now word of mouth should be doing the work for you.

    Creating a cycle of growth

    Like most businesses, merchandising is best accomplished when you create a cycle of growth. Your initial $300 investment should easily turn into $600 or more in profit, which if put back into products, can continue to grow and grow. So long as you can drive demand and traffic to your store there is a reason to grow it out. As you self more products take the revenue and put it right back into more products so you can order larger bulk quantities of 50 or more items as to lower the per-unit price and increase your profit margins. Putting your profit back into the store also means you can expand your product line offering polo shirts, travel mugs, hats, stickers or dozens of other products and with more variation comes larger and larger orders. As you continue to fuel this cycle you will see your net profit rise until it reaches a level where you can begin to keep a portion for yourself while comfortably covering the costs of your store and of future growth.

    Keeping the traffic coming

    Assuming you follow the cycle of growth your orders will naturally grow in size as customers find more to buy but in small or closed sites you may discover your order frequency diminishing. There are several ways to revitalize a store without requiring much effort. First off check the promotion of your store, on many sites webmasters place a link on an obscure toolbar which user's never notice; rotating a banner for your store or direct linking to the store from a prominent part of your site should help increase business. Offering specials such as buy one, get one half off can also bring in sales (remember, people purchase things when they feel they are getting a good deal, regardless of how good the deal really is). If linking and discount promotions isn't enough consider finding some matching niche manufacturers and offering their products as a dropshipped solution to your customers. This is where the real power play comes in for merchandising -- any store can offer shirts and mugs for loyal users but if your site is about Anime DVD movies actually selling DVD's through your trusted store can be a serious profit boost. Unlike affiliate systems or cobranded solutions, harnessing an existing store in conjunction with a dropshipping partner allows your users to trust that they are purchasing from a site they know without requiring you to spend thousands on serious product inventory.

    Wrapping it all up

    Merchandising a store rarely makes anyone rich but when you think about a community with 5,000 active users it only takes 1% (50 users) buying a tshirt at $20 to bring in enough profit to cover most site's hosting and software costs for long into the future and if you can double or triple your orders or order amounts as many sites do the take home profit is even higher. Keep in mind however that not all sites are ready for merchandise, only those niche sites with existing, loyal users (and lots of them) convert into sales so think before you buy!

    Finding a supplier

    There are thousands of companies that sell tshirts, mugs and other merchandise products which means odds are there is a provider is local to you. Personally I recommend you try www.ndesigns.net simply because I've used them in the past and their service and pricing can not be beat for silk screening tshirts, embroidery and mousepad printing. ndesigns.net is also the company which we based our prices off of for this article and as you can undoubtly tell, you can't get any lower without sacrificing some quality!

    - http://www.moderninsider.com/article55.html by Ted S published May 19th 2004. This article may not be copied or reproduced in part or whole without the authors written consent.

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