INTRO (Male Voice Recording): Welcome to YourMarketingPodcast. This is Series One – How to Start a Successful eCommerce Business in Less than 30 Days. In this step-by-step guide, you will learn how to quickly launch an eCommerce store and start seeing those sales roll in! And here’s your host…Ishani DePillo.

Ishani: Hello hello, This is Ishani DePillo. Welcome to the 2nd podcast of the series “How to Start a Successful eCommerce Business in Less than 30 Days. I’m so happy to have you.

We had such a great start to the podcast. In the first podcast, we covered how to best identify a product to sell. The podcast was full of great tips for discovering a product  to sell. You could trend-hunt or use your own passions and interests to come up with a product to sell. If you haven’t heard it yet and you are struggling to still come up with a product to sell, I highly recommend starting with that podcast first and coming back to listen to this one.

Okay, so hopefully, you already have a product idea in mind for your eCommerce store, maybe even a couple of different ideas that you’re contemplating? 

And That’s awesome, because today’s podcast, the second podcast in the Series, is all about evaluating your product’s demand, competition, and profitability.

I am going to show you how to assess the true demand of your product idea, how to strategically (and discreetly) spy on your competition, and how to crunch those numbers to ensure your product is going to be profitable.

Profits are really important not only because you need to make money, but it also helps you grow your brand to make even more money. And while money isn’t everything, it does give you the freedom to do what you love to do. Whatever that may mean to you. Anyway, as I mentioned, I will be addressing product demand, competitors and profitability all of this in this podcast. It’s a LOT so bear with me and let’s dive in.

Skip to: Let’s get started with the first concept: product demand. 

• How many people actually want your product? 
• What is the current demand out there for a similar product? 
• What can you expect in the future? 

 Those are some tough questions to answer. Especially if you don’t know how or where to find the answers.

Thankfully there are a couple of helpful tools out there to find the product demand:

• The first one that we are going to look at is the Google Keyword Planner. It’s a free tool and super easy to use. But there’s a catch: In order to use the Google Keyword Planner, you will NEED to have a Google Ads account. You just have to enter information about yourself and your business, and you’re in. Then do a search of keywords that relate to your product to see the number of monthly searches by keyword. Ideally, the higher the search volume, the better. Because that means your product already has demand… meaning that people are actively looking for the product. Anything over a thousand is generally worth exploring in my opinion.
• Another product by Google, that could help you identify product demand is  Google Trends. This is also a free tool and it will show you how much your product has been “trending” for the last few years. You can see whether the interest for your product has grown over time using Google Trends. It’s very helpful in making sure your product is on the rise, rather than on a downturn.
• The two tools that I mentioned by Google are Free, but we also use a paid service called Ahrefs. Let me spell that for you, it’s – A-H-R-E-F-S.com. This tool is pretty affordable and they are currently offering a 7-day trial for $7. And you can use their Keyword Explorer to find searches related to your product, and then get the search volume. It will even give you additional keyword ideas. Save all the keyword research that you are doing because we will be using this information in the near future. So don’t forget to export and save. Another metric we like on ahrefs is the keyword difficulty. Basically the keyword difficulty tells us how hard it will be to rank in the top 10 organic search results on search engines like Google for any given keyword. It’s on a scale from 0 to 100, so anything below 30, is great in my opinion.  Because if your product has demand meaning it has high search volume, and it has a low keyword difficulty rating then you may have a chance of ranking for that keyword on search engines like Google and actually get free traffic to your ecommerce store. 
• Another tool that’s very popular is SEM Rush, especially amongst marketers. Some beginners may find it a little pricey though, especially if you are funding your own venture.  SEMRush is currently $99/month. Over 5M of us marketers use it. You can get a free 7 day trial, but you do have to enter your credit card information and remember to cancel within the 7 days if you decide it’s not the right tool for you. 

Those are some helpful tools to assess your product demand. But there are some other ways you can evaluate demand that are a lot more work, but could end up being very fruitful, if done right. For instance:

• You can run a Kickstarter, iFundWomen, or Crowdfunding campaign to collect funding for your product. There are some category limitations and you will have to put a lot of work into getting it set-up. AND if people are funding your creative product that’s a clear indicator that you will have demand once your product is ready to sell.
• You can test your product offline like at swapmeets, craft fairs, etc. We’ve heard a lot of brands have started out this way and have been very successful in translating to eCommerce. Our only concerns here are to realize the biases. If you’re a really persuasive salesperson, you might be able to sell better in person versus a website. Or if your product is hard to explain, it might sell better in person, especially if you don’t have assets like explainer videos or photos to get the concept across. P.S. we will be covering videos and photos in another episode. Just remember what you do in-person might not always translate to online very well; you have to make it!
• Another way to figure out product demand is to survey people. But you will likely have to do it anonymously so that they can give their honest opinion without having to worry about hurting your feelings. And if you decide to go down this route,  SurveyMonkey is a great tool to use. Another option is a focus group with individuals. Perhaps select people who have strengths in marketing, product development, funding, etc. 

Another method for assessing demand is by doing competitor analysis. And to be honest, you should get to know the competitors in the space anyway to see if your product can compete in the space. 

Even if you say “no, my product is truly unique”, you still want to do your research. A competitor can be someone with a completely different product than you are offering, but addresses the same pain points as you are trying to solve. So anything that’s remotely similar and competes with your product, that someone might contemplate and/or buy over yours, is considered a competitor. So I’m going to give you a really bad example here, but let’s say you want to sell stretchy jeans, you are competing with other brands on the market AND leggings, tights, and regular jeans.

You need to realize that they are still your competitors, they may not sell the same product as you, but they are definitely targeting the same audience as you. I’m not saying you need to fear them. But Instead may be you can learn from them!

So let’s dive a little bit deeper into competitor research. The first step in competitor research is obviously discovering who your competitors are:

• The easiest way is to just do a simple search on Google. Type in your keywords related to your product, and then see which brands pop up. Most of you know what a sponsored ad looks like on Google, but for those of you who don’t know The listings at the top, with the “Ad” label are paid ads also known as sponsored ads. They are going to be your main competitors because they are spending money on ads to gain traffic to their sites. You may even see Amazon on the top – don’t fret, we are going to have a whole podcast dedicated to paid advertising and we will show you how to get your ads up there as well. 
• Now click around and navigate to your competitor’s websites. You’ll want to keep a running list, and house all the competitor information in one place:
  • First thing’s first, look at their pricing. How much are they selling the product for? Are there specific quantities, or colors, or variations? Mark all of this down. It will be super helpful when you are pricing out your product later on and understanding where you fall on the pricing scale – are you on the higher-end, lower, or right in the middle? You’ll know right where you’re at after this episode; wink,wink.
  • Now take a look at your competitor’s value-propositions. Are they offering free shipping? 10% off email newsletter sign-up? Make note of their promotions and sign-up for their email newsletter while you are there to see what other promotions they run throughout the year. It’s good to mark future promotions you might want to run because you need to evaluate them in your product profitability calculations, like can you afford to offer free shipping? Can you offer a higher percentage off? All of this, we will cover in product profitability next. But start jotting down those value-props.
  • Evaluate their voice, their brand, their style, and the feeling you get when you visit their website. Why? You might want to emulate some of what they are doing right or maybe you want to try a whole different approach? Knowing how you differ is very important and “borrowing” successful ideas can only help.
  • Customer reviews – take a few minutes here to really read them. What are customers saying? What do they like about the product? What do they wish they could change? You’ve hit the goldmine if there are a lot of reviews. Why? Because 1. There’s product demand for your product, 2. Free customer feedback to make your product even better. Make time to go through those reviews and take away what you feel will help you crush it!
  • You could also head to SimilarWeb (it’s free) and analyze any of your competitors’ websites. You can get information on estimated website traffic, audience interests, and where they are spending marketing dollars. Just enter their URL and voile. This will be helpful in establishing a marketing strategy, which of course, we will cover in this series. 

Skip to: Okay, so now we have an idea of how much demand is out there for your product and you now have thorough knowledge on our future competitors. Let’s get to those numbers. Let’s discover your product profitability by starting with:

Gross Profit Margin (or GPM for short). Maybe you’ve heard this before or maybe this is a new concept for you. It’s a vital component of the eCommerce industry; you’re going to hear it a lot. And as a future eCommerce business owner, you need to fully understand it to be successful.

According to Investopedia, “gross profit margin is a metric used to assess a company’s financial health and business model by revealing the amount of money left over from sales after deducting the cost of goods sold.” Let’s simplify that even further: GPM is your sales revenue (the dollar amount you sold of your product) minus the cost of goods (how much you paid to purchase your product from the manufacturer), divided by net sales to find the GPM in terms of a percentage.

Let’s use this in an example. So you buy women’s watches from a manufacturer for $15/piece. Then you sell them on your website for $50. Your gross profit is $35 (fifty dollars minus fifteen dollars), divide that by fifty dollars, your net sales, to get your GPM of 70%. That means for every watch you sell, you make 70% in profit.

Now that simple example does not take into account a majority of your expenses. Purchasing the product is one expense, but you will have others like tariffs or third-party fees, cost of shipping from the manufacturer, subscriptions and dues for eCommerce software, packaging costs, and shipping to the customer (if you decide to offer free shipping). There can be a lot of expenses that go into your actual cost of goods. That means your 70% GPM is going to drop even further, as more expenses are taken into account.

When we were determining the product profitability for our Roam Often jewelry travel case, we put together a very-detailed document with all our projected expenses including our ideal GPM and then determined at what price we would need to sell our product to reach that profitability. 

Now, for eCommerce, it’s said you have to have a GPM larger than 10%. It’s just not worth it if it goes lower because the chances of your expenses eating up your profits are high. It’s just a large risk with little to no reward. Ideally, you’d want to be at 20% GPM or higher, but it comes down to…the market. Let’s pull out that competitor’s list again. What are others selling at? You have to be realistic. For instance, if other competitors are selling a similar product to yours at $40, you can’t come into the market with a price tag of $250 unless you can convince customers on why you are that much more expensive and why you’re worth that price. Maybe it’s the material you used? More functionality? The process of how you created it to make it last-longer? There has to be enormous value for your customer if you’re going to sell that high. And please realize that a price hike-up like that is going to have some challenges, especially with marketing and establishing trust. But we will save that for a later time.

Instead, let’s calculate now how much profit you need to make a living on the revenue from your eCommerce store. This is a great exercise to establish goals and objectives for the upcoming year. 

So let’s say, at your current job, you’re making 100K/year. You would love to quit that job and go at your eCommerce store full-force but you’d need to make that salary in order to do that. Your goal is $100k/year. Using the example from earlier of a 70% GPM and gross profit of $35 per unit. That means you have to sell 2,857 units/year in order to make a 100K/year salary. Now, you should obviously shoot higher than that because as your orders grow, your operations will grow and will need to support adding on additional employees or contractors. But that’s a good start to establish a goal for the upcoming year: 2857 units.

So let’s recap what we covered, since it was a lot:

• Does your product have demand? Check
• Are you taking away important lessons from your competitors? Check
• Are you going to make a sizable profit, way above or at least modestly above a 10% GPM? Check
• Can you make a living off of selling this product? Check

Great, now we have a well-researched product and can move onto the next phase of completing some business fundamentals – we promise, it won’t be boring. We’ll cover setting up a company and go over funding options. Stay tuned for next week’s episode.

And if you’re just starting out on your eCommerce journey, we urge you to sign up at yourmarketingpodcast.com/letsgo to receive email alerts with daily check-ins. It’s so easy to get distracted and derailed. And we want to see you launch your eCommerce store and crush your goals! These email alerts will keep you on task and come with even more resources because we can’t cover everything on the podcast. Thank you for listening to yourmarketingpodcast. See you next week!