Healthy margin per product

by Aart95
17 replies
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What do you think is a good percentage of margin of a product's total price?
Where do you usually aim for and why?
#healthy #margin #product
  • Profile picture of the author marketingspot
    If you will have at least 30% net profit then i think it will be the healthy profit margin. And others may vary.
    Thanks
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  • Profile picture of the author Hearn
    Depends on the price and your market. For $2 items sold in US for example I would go for 400-500%. Over $10 I would go for 100%. You have to find a balance between:

    -what's worth to you processing an order. This comes with the risk of item being out of stock, finding another supplier, refunds, package lost etc.
    -the item also has to sell, people will impulse buy until specific price

    Check your competition and split test. There is no one size fits all but if you automate the price you have to come up with a formula.
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  • Profile picture of the author ZanyZebra
    Originally Posted by Aart95 View Post

    What do you think is a good percentage of margin of a product's total price?
    Where do you usually aim for and why?
    Your product is not dumb.

    It's not inert, in terms of a market and therefore margin. It should be alive and kicking and moving around. Move your price (therefore margin) up and down, create a thoughtful pricing strategy (a strategy meaning a plan to achieve different margin objectives that react to different market changes).

    Pricing, of course, will largely determine your margin. So to answer your question directly:

    20%

    50%

    100%

    Why?

    Because at different times of the year, against ever changing competition i will move my prices up and down (and thus margins).

    At times a 20% margin is terrific for me (eg when I am running promotions in order to aggressively take market share).

    At other times a 100% margin may be appropriate (and doable) as I take advantage of a market share that has been built around good reviews.

    There are even times when I have a negative margin (deliberately) and extremely happy, it meets my objectives and builds market share.

    Think of margins as dynamic and not dumb. They are not ends in themselves. They serve your business objectives and should move to fit with them as they change.

    Hope this helps.

    Good luck with your venture.
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  • Profile picture of the author MW Ghostwriting
    It depends on where your business is at. If you're dropshipping, 15% profit is a good level, however by no means is any lower acceptable.

    You'll encounter cost of goods sold. Just look at the total cost to you and compare it to what you're marketing for. There is a good guideline.

    Your competition will tell you a lot. If you get an average of what your competition is selling the same product for, including price and shipping, you'll get a good idea of what you should be selling it for.

    You can adjust this slightly to get a better profit margin, however with drop shipping at 15% minimum profit margin (assuming that you're selling products for between $50 and $250), you won't want to adjust it too drastically.

    There will usually be minimum prices that you can sell for. Use this to your advantage, as this will mean you're dealing with a quality supplier, and also that neither you or your competition will be engaging in price dropping.

    Sincerely,

    Mark Weisse
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  • Profile picture of the author Oziboomer
    Understanding how to run a business to make a profit is an essential skill for anyone who wants to succeed.

    Providing advice about profit margins and what you should charge for products you sell would only be misdirecting you.

    The best advice is to understand what returns you need to make to have a business that rewards you adequately.

    Many people end up in business and don't have a clue.

    Advice about looking at what the competition charges is poor advice because you don't know what overheads or expenses the competition has.

    You may not understand their competitive advantages nor their business model.

    Much like Zany Zebra pointed out there are different situations where they would charge different prices for the same products to either generate more reviews, leads, customers or to maximise profits.

    There was something I learned early on when I went into business in 1992 and that was "there is always someone whether smarter or dumber than you able to sell cheaper"

    Don't fall into the trap of basing "YOUR" prices on what other people are doing.

    One simple thing you can do is workout how many hours you are putting into generating an income.

    If you work X number of hours and you want to have Y amount of income it becomes easy to work out on an annual basis how much you need to be paid for the time you invest.

    Once you know this number you can work out how much profit you need in "all the sales"

    Then you work back to what you need to generate from any specific sale.

    If you don't understand what you really need to make then how can you determine your prices?

    If you have a regular wage and you are just seeking to add an additional income stream then you may be happy to accept "sub-par" profits because you already cover your living expenses from you trading time for money.

    When you don't have an "employer" paying you regularly you need to think differently.

    You must think of making adequate profits otherwise why would you waste your time when you could just get remunerated for trading your time for money.

    You need to decide if you are going to have a real business that provides an income for you to improve your life or if you just want a hobby.

    I've always earned my own money since I was 22 and I'm now nearly pushing 50 but I have a home, a boat, a 4wd, take vacations, have businesses that support my lifestyle.

    It is not all milk and honey.

    You need to manage your efforts whether it be online as a retailer doing drop shipping, FBA, direct retail or offline...it doesn't matter what the model or the business is.

    To succeed you must understand what your metrics are...not someone else's.

    This is why looking at competitors is really a flawed method because in many cases they are just looking at everyone else and doing the same.

    Change your point of view and look at what it takes to grow your business profitably.

    Learn how to do that and then expand and succeed.

    Best regards,

    Ozi
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    • Profile picture of the author MW Ghostwriting
      Originally Posted by Oziboomer View Post

      Providing advice about profit margins and what you should charge for products you sell would only be misdirecting you.

      ...

      Advice about looking at what the competition charges is poor advice because you don't know what overheads or expenses the competition has.

      You may not understand their competitive advantages nor their business model.
      I disagree, Ozi. This information is valuable and would be a mistake to ignore, as it shows what people are paying for the exact same product at other places. Whether or not your competition is making money off of it is irrelevant.

      It does provide a good idea of what you could charge for the exact same product. It isn't misleading, because if people are buying products at an average of let's say 8 other prices found at different sources, such as eBay or Amazon, as well as quality web stores, it shows what others are willing to pay.

      You can adjust this to reach an appropriate profit margin. However, if you are drop shipping you aren't making as much of a profit, and a minimum of a 15% profit margin is sound guidance.

      Sincerely,

      Mark Weisse
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      • Profile picture of the author Oziboomer
        Originally Posted by MW Ghostwriting View Post

        I disagree, Ozi. This information is valuable and would be a mistake to ignore, as it shows what people are paying for the exact same product at other places. Whether or not your competition is making money off of it is irrelevant.

        It does provide a good idea of what you could charge for the exact same product. It isn't misleading, because if people are buying products at an average of let's say 8 other prices found at different sources, such as eBay or Amazon, as well as quality web stores, it shows what others are willing to pay.

        You can adjust this to reach an appropriate profit margin. However, if you are drop shipping you aren't making as much of a profit, and a minimum of a 15% profit margin is sound guidance.
        This is why, even if drop shipping, you need to differentiate your product from the competition.

        That may be through bundling products together to get a different package price.

        Grouping products differently or using unique descriptions.

        In the case of taking Walter's advice and buying better, labelling and branding products to be uniquely your own product you will get higher gross profit margins.

        Are you talking about net profit margin or gross profit margin in your example?

        Net profit margin is calculated by finding the net profit as a percentage of the revenue.

        Gross profit margin is the difference between revenue and cost of goods sold, or COGS, divided by revenue, expressed as a percentage.

        Kind regards,

        Ozi
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        • Profile picture of the author MW Ghostwriting
          Originally Posted by Oziboomer View Post

          This is why, even if drop shipping, you need to differentiate your product from the competition.

          That may be through bundling products together to get a different package price.

          Grouping products differently or using unique descriptions.

          In the case of taking Walter's advice and buying better, labelling and branding products to be uniquely your own product you will get higher gross profit margins.

          Are you talking about net profit margin or gross profit margin in your example?

          Net profit margin is calculated by finding the net profit as a percentage of the revenue.

          Gross profit margin is the difference between revenue and cost of goods sold, or COGS, divided by revenue, expressed as a percentage.

          Kind regards,

          Ozi
          Ozi, yes you are going to have to figure in COGS to get a gross profit margin. If you're drop shipping, you're realistically going to be selling a product (or model) that others are selling, which is actually to your advantage.

          The reason is marketing messages. Coca Cola products are continuously advertised, otherwise people will grow luke-warm and eventually cold to the product. The fact that others are selling the same product as you (as you are drop shipping from a wholesaler), means that it has greater brand awareness, and should not be viewed as an absolute negative.

          Yes, you can adjust your price. However, there will also variable be MAP pricing and other policies which should be taken into consideration. Of course creating a solid product line is a good idea, however it doesn't change the fact that customers will have a general idea of what to spend on a product.

          People don't generally buy $1,000 pencil sharpeners. If you're first in front and supply quality as well as solutions to people's problems, the convenience of buying something over the internet will in many ways bypass their expectation of a given price.

          Comparative pricing is nevertheless still valuable. It will give you a general idea of what other sellers are pricing the identical product (or product model) for, and give you a valuable guideline with which to set your price.

          Bundling usually means selling more products, but with a lower profit margin per product. Using 'unique descriptions' seems like an obvious thing to do, as these are ideally crafted to please a given demographic as well as provide Google with SEO satisfaction.

          What this means is that you're selling them on a given set of qualities (what they want), and showing them how it will solve their problems.

          Sincerely,

          Mark Weisse
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  • Profile picture of the author Importexport
    When I was running my importing business that I franchised in 4 countries, I would not bother with sales that didn't give me a return of at least $150 per hour. I passed on this advice to my franchisees, and most followed it, but some tried to compete based on what competitors were doing.

    Before long they realized that they should only go after sales with big margins as my company's operations manual taught them, otherwise they were just working for the business instead of the business working for them.

    I agree with Oziboomer that it is not a good idea to offer advice about what profit margins you should aim for because that would only misdirect you. He's also right about understanding your own business metrics, not someone else's.

    Find a market where you know what you can sell, how much you can sell it for, and what all of your costs will be. Don't just jump on someone else's bandwagon.

    Profit starts with buying, because if you don't buy at a good price, you are pushing a rock uphill trying to generate a decent profit and a good living.

    I have taught hundreds how to safely source and import small (and large) quantities direct from the manufacturers in China and other countries with margins of 300% to 500%. Some of them have posted details on this forum.

    Walter Hay.
    "If you think education is expensive - consider the cost of ignorance."
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    Use emotions and perceptions to build a great brand. Ask me about my book LabelsThatExploit. For safe sourcing and easy importing from 41 countries globally, see https://provenglobalsourcing.com
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    • Profile picture of the author Shellg
      Originally Posted by Importexport View Post

      When I was running my importing business that I franchised in 4 countries, I would not bother with sales that didn't give me a return of at least $150 per hour. I passed on this advice to my franchisees, and most followed it, but some tried to compete based on what competitors were doing.

      Before long they realized that they should only go after sales with big margins as my company's operations manual taught them, otherwise they were just working for the business instead of the business working for them.

      I agree with Oziboomer that it is not a good idea to offer advice about what profit margins you should aim for because that would only misdirect you. He's also right about understanding your own business metrics, not someone else's.

      Find a market where you know what you can sell, how much you can sell it for, and what all of your costs will be. Don't just jump on someone else's bandwagon.

      Profit starts with buying, because if you don't buy at a good price, you are pushing a rock uphill trying to generate a decent profit and a good living.

      I have taught hundreds how to safely source and import small (and large) quantities direct from the manufacturers in China and other countries with margins of 300% to 500%. Some of them have posted details on this forum.

      Walter Hay.
      "If you think education is expensive - consider the cost of ignorance."
      I am one of the hundreds walter has taught and I am selling at 5 times my landed cost. I was very close to jumping into dropshiping but I saw some of Walters post and I asked about his book in the product review part of warrior forum and the reviews were great so I bought the book. What he says is right.
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      • Profile picture of the author MW Ghostwriting
        Originally Posted by Shellg View Post

        I am one of the hundreds walter has taught and I am selling at 5 times my landed cost. I was very close to jumping into dropshiping but I saw some of Walters post and I asked about his book in the product review part of warrior forum and the reviews were great so I bought the book. What he says is right.
        For some people, drop shipping is an excellent option. I don't wish to down Walter's teachings in any way, however I would like to point out that not everybody has the money to play around with and buy in bulk.

        I agree with everything he's saying. At the same time, drop shipping is an effective way to start a new business without risking thousands of dollars (or more), build an organic search presence, move on to advertising and also light bulk/bulk.

        Sincerely,

        Mark Weisse
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        • Profile picture of the author Importexport
          Originally Posted by MW Ghostwriting View Post

          For some people, drop shipping is an excellent option. I don't wish to down Walter's teachings in any way, however I would like to point out that not everybody has the money to play around with and buy in bulk.

          I agree with everything he's saying. At the same time, drop shipping is an effective way to start a new business without risking thousands of dollars (or more), build an organic search presence, move on to advertising and also light bulk/bulk.

          Sincerely,
          Mark Weisse
          Mark, I think you have been influenced by the myth of it being necessary to buy big quantities if you want to buy direct from manufacturers in China and other countries.

          There have been many successful business startups by my newbie importers, who have had very limited funds to buy inventory. Shellg who posted above is one who has told me that she only had about $300 to outlay on her first order, and that had to include freight.

          Others have written to me or posted on the forum about starting with a few hundred dollars, and making great margins.

          Many of those who have succeeded while starting very small have used my "Just in Time" ordering system, that is a modified version of the system used by big auto manufacturers to keep inventory costs down.

          It's true that advertisers on B2B sites usually specify big MOQs, but by using the right approach you can get most of them to supply small quantities at prices that still allow big margins after all costs.

          One issue that hinders newbies in finding low prices for small orders of quality products is the presence on the big B2B sites of many thousands of traders masquerading as manufacturers. The newbies think they are buying direct from the factory, but they have blown a large part of their potential margin by dealing with these traders in disguise.

          In most cases the very small startups specialize in a single product at first, and as they plow profits back into their business they gradually diversify. It might not seem as glamorous as offering hundreds or thousands of products as is often done when dropshipping, but these people have carefully chosen their products and don't need to use a shotgun approach.

          Walter Hay.
          "If you think education is expensive - consider the cost of ignorance."
          Signature
          Use emotions and perceptions to build a great brand. Ask me about my book LabelsThatExploit. For safe sourcing and easy importing from 41 countries globally, see https://provenglobalsourcing.com
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          • Profile picture of the author MW Ghostwriting
            Originally Posted by Importexport View Post

            Mark, I think you have been influenced by the myth of it being necessary to buy big quantities if you want to buy direct from manufacturers in China and other countries.

            There have been many successful business startups by my newbie importers, who have had very limited funds to buy inventory. Shellg who posted above is one who has told me that she only had about $300 to outlay on her first order, and that had to include freight.

            Others have written to me or posted on the forum about starting with a few hundred dollars, and making great margins.
            Walter,

            I'm not arguing that importing is a bad idea. I'm simply pointing out that you can build a successful business by drop shipping quality products from anywhere in the world, in the beginning.

            I can tell you it's not a 'mislead' comment. I know it's true because I've done it myself, and so have hundreds of others, and those are only the ones that I know of, personally.

            Yes, it's true that there are a lot of scam wholesalers and middlemen on the internet. You'll deal with that whether you're importing or drop shipping. You'll also require a bit more than a few hundred dollars to establish a legal business structure in order to protect your assets, and advising against doing so is very dangerous.

            Now, I won't assume that's what you mean...

            In most cases the very small startups specialize in a single product at first, and as they plow profits back into their business they gradually diversify. It might not seem as glamorous as offering hundreds or thousands of products as is often done when dropshipping, but these people have carefully chosen their products and don't need to use a shotgun approach.
            I never did encourage anybody to offer hundreds or thousands of products via drop shipping. In point of fact, that is quite the exact opposite of what I would recommend, as is the same with anybody who builds a successful product line via an internet store.

            Sincerely,

            Mark Weisse
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            • Profile picture of the author Importexport
              Originally Posted by MW Ghostwriting View Post

              Walter,

              I'm not arguing that importing is a bad idea. I'm simply pointing out that you can build a successful business by drop shipping quality products from anywhere in the world, in the beginning.

              I can tell you it's not a 'mislead' comment. I know it's true because I've done it myself, and so have hundreds of others, and those are only the ones that I know of, personally.

              Yes, it's true that there are a lot of scam wholesalers and middlemen on the internet. You'll deal with that whether you're importing or drop shipping. You'll also require a bit more than a few hundred dollars to establish a legal business structure in order to protect your assets, and advising against doing so is very dangerous.

              Now, I won't assume that's what you mean...

              I never did encourage anybody to offer hundreds or thousands of products via drop shipping. In point of fact, that is quite the exact opposite of what I would recommend, as is the same with anybody who builds a successful product line via an internet store.

              Sincerely,

              Mark Weisse
              Thanks for your helpful comments Mark. I think we are largely in agreement.

              I know that many have done well with dropshipping, but I just wanted to highlight the fact that those with limited capital can do well by direct importing.

              There are huge numbers of people who are keen to start an online business but they are very short of funds. I agree that they should set up a legal structure to protect their assets, but I also know that they are going to plunge into business regardless of that, mainly because they want some income and they feel that they can't use their limited finances on what amounts to insurance.

              I help them get started profitably, but I remind them that as sellers of consumer products they are vulnerable to litigation and they do need to protect their assets.

              I know you have not promoted the idea of offering huge numbers of products, but that idea is widespread among budding online marketers. Most just follow the crowd and don't do proper market research. They figure that the more products they offer, the greater their chances of making sales.

              I urge people to think for themselves, but you will constantly see posts from people who just want to copy others.

              One of the best success stories among my book users was a person who was copying others but realized he could do better. Like so many others he was buying products from an importer and selling them at market stalls. He bought my book to learn how to buy direct, and quickly increased his margin by a huge amount.

              Then the story took an interesting turn. Other stall holders asked him could he supply them. The upshot was that he gave up selling at the markets and now operates a wholesale business supplying stallholders across the country.

              He didn't have a legal structure for protection when he started, but soon after he began direct importing he told me he had set up an LLC.

              Walter Hay.
              "If you think education is expensive - consider the cost of ignorance."
              Signature
              Use emotions and perceptions to build a great brand. Ask me about my book LabelsThatExploit. For safe sourcing and easy importing from 41 countries globally, see https://provenglobalsourcing.com
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  • Profile picture of the author Sara20
    As for me, it is the main question what is the quality of this product! I think that a price it is only a numbers! That is why, be more attention and choose only the best for you!))
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  • Profile picture of the author westgateok
    I always shoot for around 30%, but I have some items that are a little less and some more. Overall though I feel 30% is a solid margin.
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  • Profile picture of the author kimanierick
    It depends on what you sell. If you have some good channels and you are selling some goods that many people need but few people offer, and you are buying them for a fraction from the retail price other people offer the product for, you can have a greater margin, so you can make more money. But if you are selling things that can be find very easy on online and you are not a wholesaler you will have to be satisfied with the market's more common margin and that is 30 percent. Also, that is not so bad, if you are selling a product for 100 dollars you will earn 30 dollars from a sale.
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