Is there a business in selling cheap products online?

[Durian]

I plan to be the largest online retailer of a specific food product. This goal formed a few weeks ago when I realized there is basically no competition ONLINE (emphasis on "online"). The product sells in store for around $5-20. I'm truly excited because I am able to get the product for 1/10th of the price from my sources. Anyway, that's not the point.

I'm worried that shipping costs will be the death of this business idea. I mean, shipping costs will be like $5-10. That's 100-50 percent of the price of the product itself. Unless of course the customer is buying in bulk.

So my questions:

1. Will it sell online?
a. Customers are able to find it in stores but its kind of hard to find.
b. I would be selling it for a cheaper price than in stores.

2. Would customers be willing to spend like 50-100 percent (depending on how many they buy of course) of the price of the product in shipping alone? How do you keep shipping costs down?
a. Again, this depends on whether or not they are buying in bulk.

3. Is there a business in selling cheap products online?
a. I would make a nice profit margin, but the profit per product is not that large, so I would
have to sell in huge quantities. (That's why I have a goal to become the largest online
retailer of this product)

4. Should I dropship or warehouse? Is there another option? (This ties together with my shipping question)
a. My sources are all over seas. Would it be smarter to dropship or have a warehouse at
my current location to keep inventory.
b. Dropshipping would cut shipping costs down but the dropshipping company will cut into
my profits.
c. Warehousing will increase shipping costs (and a whole array of other expenses) , which also cuts into my profits.

I thank everyone who took the time to read this and also reply. This will be my first business so I am very new to this. Thanks in advance for all the support everyone.

Cheers

[conor_mcg]

Have you looked into tax and import duty?

A few years ago when I first thought about online sales (and was very young) I thought Chinavasion was a god send. I was selling replica ipods and making a huge profit. Then my unsophisticated mind didn't know that nothing is as good as it looks and 35 days later i got 3 letters requesting most of my money back in Import duty. i instantly stopped when i realized I would also need to pay income tax.

In terms of will people pay the shipping, it depends on how good is the product and is it going to be available from there local shops? i wouldn't buy a big mac online if it was going to cost more to deliver than to just drive to maccas.

Basically I think your costs are going to add up so you have to sell the product for the same as the shops.

Dropship works in some cases but I've found in research that if your really trying to start a long term business then warehouse is the best way forward.

hope this helps. I'm still learning so if anyone can correct any mistakes here?

[Durian]

Thanks for your input Conor. Your reply raises another question.... How do I determine whether or not there will be a market for this specific product online? Surveys? Interviews? Like I said, the product can be purchased from some stores but it's actually quite difficult to find. Seems like everything is going online lately, but I'm just not sure if the product in mind can sell on the internet. Sorry for being all secretive with my product...

Let's say I'm thinking of opening an e-commerce store for energy bars. Yes, athletic customers can and do purchase it quite easily from their local supermarkets. But, would it be more enticing for customers to shop from a website that carries a humongous selection of energy bars rather than a supermarket with a limited selection? Also, they can do this from home without exerting one bit of energy (TERRIBLE example because customers in search of energy bars would much rather run to their local supermarkets).

[conor_mcg]

Haha i would have to say that is the most ironic example ever but I get what your saying. Of course there is nearly always going to be people that like to shop online for there products but its how big the market is and how available. e.g. They may be no dedicated site but are you able to buy it from an online supermarket? Not sure where your from but in the UK we can order all our food from a supermarket online in one go instead of having to buy each product from a different site.

It's a tough one to research especially if your not willing to say what the product is.
Surveys are always good. Print out 200 and take them round your local area. Best way would be to do the survey in an area where the product is sold and one where it is not.

Find reviews on the product as well. Do people love the product? Whats the sales figures for the places it is sold?

If its a healthy product is your version getting all the correct healthy parts or is it an imitation?

A big question for you is how are you going to market this? do people know about the product? its one thing re-selling Big macs but another selling a product that knowone knows about. Aslso is the product good enough for repeat business and how much repeats?

[Durian]

I sent you a pm

[Daniel Moghaddam]

How do I determine whether or not there will be a market for this specific product online? Surveys? Interviews? Like I said, the product can be purchased from some stores but it's actually quite difficult to find. Seems like everything is going online lately, but I'm just not sure if the product in mind can sell on the internet. Sorry for being all secretive with my product...

Hi Durian,

Google have a free tool which shows you how many people are searching for a keyword every month.

In this case, it will let you know how big your market is and if it's actually worth doing.

Just search "keyword" in google and it's the first result which comes up - "Keyword tool - adwords"

Hope that helps you and good luck,

- Dan