While affiliate and Adsense marketing can make a nice profit for a web site, some web entrepreneurs are more interested in selling their own products. Selling merchandise online can often produce much higher profits than with any of the other income generation methods. At the same time, direct sales is also much more time consuming and labor intensive. Here is what you need to know before jumping in to the direct sales business.
Selling Online: Up Front Costs
Selling merchandise online requires that the entrepreneur invest and have in inventory a product to sell. Whether the product is plastic hair combs or high end audio equipment, some degree of capital outlay is required in order to be able to move on to the second step of actually building and operating a shopping cart style web store to sell it on.
In addition to simply buying the merchandise it is necessary to find a place to store it as the seller waits for the sales to come in. In the case of brand new web sites sales can be very few and far between for many months until the site gains Page Rank and popularity among shoppers. Always consider the carrying costs of any product that is to be sold and avoid the temptation to take out financing or loans to cover these up front costs.
Paying Money to Take In Money
In addition to the actual materials a vendor must also consider how to accept payments in an online environment. In almost every case the only way to do this is to accept credit cards which in and of itself incurs additional expenses. Some online sites such as PayPal and Google now offer secure online checkout opportunities for small vendors to use with little in terms of up front costs, but the credit card commissions paid on each sale can take a sizable chunk out of the site’s monthly profits. Even with online auction sites such as eBay, a percentage of each sale will go to the auction company and another percentage of the sale will go to the credit card processor. Keep this in mind when considering products to sell and never commit to products that cannot be sold at at least 20% markup or more as at least 10% will often be taken away in fees and other costs from each sale.
Of course each product and each merchant is unique. These numbers will not hold true for every online sales web site. As always, do a lot of homework and consider all of the numbers very thoroughly before committing to any direct sales idea.
