How do you decide what to sell on your Shopify online store? Five main criteria can help you pick out the best products to sell online:
Popularity and demand
Profit margin
Seasonality
Competition
Your product knowledge
Popularity and profit margin helps you estimate the revenue potential of a product. Seasonality helps you estimate annual sales potential as well as plan the timing of marketing campaigns. Competition and product knowledge help you evaluate the feasibility of making sales.
Popularity and demand for products
Demand defines the size of your market. Your potential sales revenue is a function of your market share and the price you earn per sale. Because of this, demand is a crucial consideration when evaluating a product's profit potential to sell on your online store.
Conduct market research to verify product demand and popularity with specific target audience segments. Use resources such as your internal sales data and analytics, customer surveys, Think with Google, market research reports, and Census Bureau data.
Profit margin
Revenue potential is only part of the story because you must cover the cost of producing and selling your goods through your online store. The portion of your sales you get to keep is your profit margin. There are several formulas for calculating profit margin, depending on whether you focus on the cost of goods sold or other expenses such as operating expenses.
All formulas boil down to a ratio of the difference between your sales and costs divided by your sales. Look for products with low production costs relative to the selling price to earn a good profit margin from your online store.
Seasonality
When estimating a product's annual sales potential, one factor to consider is whether the product has any seasonal sales peaks. Seasonality affects the volume of your annual revenue from that product and when cash from sales of that product will be coming in to cover the costs of your operations.
Consider whether your product will be in demand year-round or fluctuate in different seasons. As a marketing strategy, you may wish to sell different products at different times of the year to compensate for seasonal cycles.
Competition
Even if a product has high demand, making a profit from it may be difficult if competition is intense. You should evaluate your ability to sell your product in the face of potential competition. Use your market research to identify and analyze your existing competitors and gauge how difficult it would be to break in.
Look at how your competitors position their products with their marketing strategy and which features and benefits they emphasize. Consider the uniqueness of your product and whether it brings any differentiating features or benefits.
Your product knowledge
Selling your product requires knowing it well enough to present its benefits to your market and persuade them it meets their needs. Consider your familiarity with your product and its target audience. Review your product's features, applications, and benefits, and how these align with your target audience's wants. Use this to gauge whether you have the knowledge to compete successfully in the space and promote the product through your online store.
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