Product Margin Challenge - Thoughts?

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Hey WF,

I've been thinking alot about a particular ecommerce issue for the last couple weeks and wanted to get your feedback.

Couple quick notes about our business
- We sell apparel and goods for the crossfit community
- We currently have over 1,000 plus products
- Most of our products are dropshipped to the customer

Here is the issue

We have several great vendors that offer great dropshipping margins (30-50%) off retail price. The rest offer anywhere from 10-20%

Would it make sense to transition into a situation where I only have the higher margin items as a buying option for customers? Or does it make sense to offer as many products as possible as options to customers?

Warmest Regards,

ryan
#challenge #margin #product #thoughts
  • Profile picture of the author mikehermy
    Hey Ryan,

    Here's the way I look at it... I don't care what the percentage is at all as long as the $ amount is worth it to me for the amount of time I am putting into that sale. If I am only putting 3 minutes on average into processing that order and there is no additional hand holding with the customer then I'd be perfectly satisfied with $5 profit. I don't really care what percent I'm getting.

    I'd just take a good look at how much money you are actually making and see if it's worth it to you and forget about the percentage you are making.
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  • Profile picture of the author CavemanEvo
    Thanks Mike for the input.

    Yeah thats always been my thought process.

    One thing I've kicked around is "bundling" some of the low margin products so each transaction is higher. For example, maybe the bundle is a pair of shorts, shirt,etc. with free shipping or some type of small incentive.

    Ryan
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  • Profile picture of the author kjamesnv
    In this situation I would emphasize your high margin merchandise by focusing on it more and giving it more prominent placements.

    Depending on your shopping cart, you can set the display order of different categories. For example if you have a "Shorts" category have the higher profit items displayed first.

    For merchandise under 15% margin I would shy away as much as practicable. By the time you factor in credit card fees, expenses, returns, marketing etc, there won't be much left for profit.
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  • Profile picture of the author RobertLong
    Pricing of any product will make a great difficult. We don't about how we are going to have on margin price for buying any item, but we only make a sense to customer satisfaction and grow our business, if the above margin price will not good be for customer as well as for your business and it will not be good to have that price rate.
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    • Profile picture of the author mikehermy
      Originally Posted by RobertLong View Post

      Pricing of any product will make a great difficult. We don't about how we are going to have on margin price for buying any item, but we only make a sense to customer satisfaction and grow our business, if the above margin price will not good be for customer as well as for your business and it will not be good to have that price rate.
      Nailed it Robertlong, NAILED IT!
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  • I agree with the comments above.

    You always need to do math in these situations.

    Let's say you have 50% margin on some of your products, but that 50% margin is 10 cents.

    But your 10% margin is 200 bucks? However, we also don't have other data, like how well your items are selling.

    Many people create websites and assume traffic will get to them and the items will sell.

    With a 50% margin, (and if it was 10 cents) I wouldn't ever list it - even if it was selling 100 a day because of the labor cost and opportunity cost to process it.

    You're way better to look at the hard numbers, and hard data in this case and to ONLY list something that ACTUALLY has some numbers behind it.
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