Your e-commerce business may be humming along, but are your financials in need of a boost in 2021? Are you ready to go bigger?
Online shopping has seen a spike during the COVID-19 pandemic, up 30 percent over last year, as people aren’t getting out as much as usual. And like many resellers, you likely know that even with the bump in online traffic, margins are getting thinner and thinner as e-commerce competition builds. You can only cut prices so much before no amount of sales will result in a significant return.
Increased sales volume is a good thing; however, your ultimate goal is to increase net revenue so you can be a profitable business. So how can you improve your bottom line?
One option is to find more products to sell, broadening your product offering to include product variants or completely new product categories where there may be less competition. Research is key here – finding opportunities that others have yet to seize. The right research will help you spot a trendy product in a market and make something better or lead the competition.
You could also push your existing products onto a wider audience on online multiple platforms. Amazon and eBay are just the tip of the iceberg these days. Etsy, Bonanza, Rakuten, and Ruby Lane are a few marketplaces you may want to consider if you feel stuck in one place. On the other hand, if you already have a presence on those platforms and believe you have the customer base and marketing chops to support it, you try your hand at building your own online retail site.
But there is another option that is gaining steam because it builds not only revenue, but long-term brand value: Selling your own branded products.
Why Sell Your Own Products?
As an e-commerce business owner, have you considered thinking outside of the box and expanding your business to include your own branded products? We’re talking about products you research, design (or redesign), manufacture, and sell. There’s nothing wrong with reselling other supplier’s products, but competition is fierce and it’s hard to build a brand when you are one of many resellers.
Consumers recognize brands based on their products. If they can find your products on multiple marketplaces from different sellers, there isn’t much to differentiate your company from the others besides price. Pricing products low may get you more sales, but your margin shrinks with every price drop.
In order for your brand to stand out and attract buyers who are willing to spend enough to give you a healthy margin, you have to create your own product(s) that appeal to buyers – and do it at the lowest cost possible.
If you manufacture products consumers want, they will seek your brand out of the crowd. Other online resellers may come knocking, too, making you both a valued brand and a wholesale supplier. This one-two punch is a great approach to cover all of your bases as you build a sustainable brand with multiple revenue streams.
How Can You Sell Your Own Products?
Bringing a new product to market sounds overwhelming to those who have never done it or failed in previous attempts, but by looking at the sheer number of products out there, you can get some perspective.
Nielsen reported that an average of 30,000 new products launch every year and one-third of U.S. consumers say they are actively looking for new products to try. If all of the companies behind those products can do it, so can you. It just takes the right resources to make it happen.
We are all familiar with the sobering statistic that up to 95 percent of new products fail. While this may be true, it can often be explained by one word: resources. You have to have the money, people, and technology to turn an idea into a consumable product, and many innovators lack the proper resources to bring the right product to market at the right time at the right cost.
Before you can sell your own products, you have to determine what your goals are. Are you wanting to create a brand new product and are willing to spend the time and money required to innovate? Or do you see a good opportunity and want to quickly make the next product and get to market as quickly as possible? The amount of money, people, and technology you will need depends on how you answer those questions.
One of the first things you need before you can develop a product is cold, hard cash. There are plenty of stories of boot-strapping entrepreneurs who found a way to invent a killer product, but even they came to a point where they had to put their money where their mouth was. Scrub Daddy, Spanx, and Snuggie are all multimillion dollar examples of companies that began with a simple idea and enough cash to bring it to market.
How much you have to invest into your new product idea depends on multiple variables, but you have to have money to do proper research, hire the right designers and engineers (if required), source the ideal manufacturer, package your product, and get it into the hands of consumers. Add to that patent costs, marketing costs, labor costs, and more, and you can see how easily costs can accelerate. To drive margin and revenue, your focus should be on cost control as much or more than innovation.
If you invest your money wisely; however, the payoff of adding your own branded products to your ecommerce business can be significant. There are plenty of ways to fail when it comes to product development, of course, so many choose to work with a company that has expert consultants and a network of resources to help them navigate the process. By doing so, you can save on costly “trial and error” design mistakes, negotiate better manufacturing contracts, and avoid other common pitfalls along the way.
A key point to remember is that as you build your brand, you build an identity. The more trusted and valued your brand, the higher the price you can command for your product(s). According to Investopedia, “Focusing on quality and branding as the means to increasing revenues and solidifying a customer base may be a company’s surest path to long-term prosperity.”
That brings us to the people you have on your team. No product can make it from idea to market with only one person, and the success of your product is highly dependent upon the people you bring onto your team. It takes a village, so to speak, and the more experienced and focused your team, the better the product design, quality, and viability will be – and lower your overall costs.
Whether you decide to iterate on an existing product or want to develop your own product from scratch, you will need a team behind you. You may require a team of researchers, creatives, sourcing experts, and a manufacturer, or you may just need people to answer questions as you go through the process. You can build your team yourself, using internal resources or hiring, or you can partner with a company that gives you access to their people and tools.
For entirely new product categories, you will lean heavily on your team, particularly if this is your first attempt at product development. If you are planning on making only slight modifications to existing products, you may only need help during a specific development stage. Either way, work with people you trust and have experience working on your product type.
Let’s break down the two product possibilities you may have:
If You Want to Work on Improving or Changing an Existing Product
There are plenty of existing products on the market that can be made better or at a lower cost. Research plays a significant role in finding winning products, but if you identify the right ones, you can quickly bring a new version of it to market.
With the right team of resources and research tools, it is easy to develop something different, even if it’s only a change in color or a slight design modification. Your research will determine whether the product is patent-protected. Once you land on a product opportunity, designers can work with you to create sketches, then 3D product renderings and the collateral you need to take to the factory.
The factory presents another opportunity. Your research may show that you could create a similar product at a lower production cost than the existing supplier. With so many global manufacturers competing for business, you can often negotiate better deals without sacrificing quality. And if quality is at issue per reviews, you may be able to find a more reputable manufacturer to make a higher-quality version.
It is important to understand that if you try this route, you need to understand the culture of where your chosen manufacturer resides. For example, China values face-to-face relationships and working with product owners who know what they’re doing and understand the process. If you can’t travel abroad, don’t have the cultural awareness to feel confident, or lack experience in factory negotiations, it is best to partner with a sourcing agent who can work on your behalf.
If You Want to Create a Completely New Product
When developing a brand new product, you will need to talk with an industrial designer or mechanical engineer to see if you can get your ideas fleshed out on paper. Sketches are relatively inexpensive and allow you to move forward with validation. It is more efficient and cost effective to bring people onto your team who have experience designing similar or exact products.
You can have the most detailed design in the world, but can your team of experienced pros will be realistic as to whether a manufacturer will be able to make it – and make it at scale. The more complicated the design, and the more components required to build your product, the harder and more expensive and time consuming it will be to produce.
The validation stage involves people outside of your team, such as friends and your network, even Kickstarter and IndieGogo, but are an important part of the process. Allow them to look at the sketches your team developed. Ask them if they think it’s a good idea and what changes they would make, then take their feedback to your team for a round of edits.
Once you have a final design, it’s time to choose a manufacturer. You can use sites like Alibaba, but keep in mind that you will still need to narrow your options to what you need specific to your product, as well as vet the factories you find there to make sure they are reputable. Not every factory is easy to work with, and not all are able to produce your product at the quality level, speed, or cost you want. It is best to meet with the factory representative in person and return for regular site visits to maintain the relationship and quality control.
Alternatively, rely on a sourcing expert to help you find the ideal, pre-vetted factory that is experienced in producing your type of product to reduce risk and costs. They will also be able to talk to and negotiate with manufacturers to get you the best pricing, as well as source a local representative to be your on-the-ground, frontline liaison between you and the factory. Their relationship with the factory can be critical in ensuring your product is produced quickly to specifications at the lowest possible cost and the highest quality.
Technology is reshaping our world; innovation is no exception. We are living in a world where, thanks to technology, it is easier than ever to research product ideas and turn one into a fully-fledged design.
Research is intensive, requiring tools that help you do more than determine whether your idea is a good one with market viability, but to evaluate whether there is an existing product out there that you can make minor modifications to make it your own. Where is there the best opportunity to get a healthy margin?
Some of the more sophisticated research requires tools like Helium 10, ZonGuru, Jungle Scout to see keywords and product categories doing well. You can also look at reviews of existing products and find ways to iterate on existing products to make it new. If you partner with a company to help you bring ideas to market, they will likely have a suite of their own tools that go much deeper and broader into product and market analysis.
Research and product development all have to happen faster to leverage opportunities and meet demand. The goal is to be able to create awesome new products in a short amount of time. The more streamlined and efficient your process, the more likely you can make that happen.
All of your research tools and data, designs, manufacturing contracts and quality control, workflow, logistics, and team collaboration should happen in one place. To control costs and the development process, and to improve transparency, you need a singular platform that connects all of the different aspects of product design and development.
You’ll Never Know if You Don’t Try
As with many things in life, practice often makes perfect. The more of your own products you bring to market, the more you will learn how to do it cost effectively and well. Every product will bring its own challenges, and truthfully, no product development process is perfect. But, if you choose the right people for your team, and you leverage best practices learned along the way, you improve each time.
Bringing your first new product to market is scary, but the reward can be exhilarating and profitable. By adding your branded products to your e-commerce business, you will diversify your revenue, have the means to build a valued brand, and increase your opportunity to construct a sustainable business.