3 things rarely talked about regarding online sales

Let’s seen what matters when we coose our products. First of all, you have to ask yourself some questions:

• Is your product in demand on the market? There are products that „work” really well in other countries but in Romania not as much.
• Are there other companies that sell similar products?
• At what price does your competition sell?
• Does your product have something different? An interesting characteristic?
• Are there many competitors in my price range? Are there big brands that have communication budgets that I can’t beat?
• Would the price I set be competitive on the market?

At ALGORITM we have a dedicated team which analyses and determines whether you’ve chosen the right product or not. There are analysis models which we use BEFORE you buy the stock. Through the pre-buying analysis, you won’t risk investing your money on a stock that won’t „work”.

How do you choose the products and how do you calculate the expenses? Here’s some mistakes to avoid:

• Rounded up numbers, „by ear”: „I’ll buy it with 0,88 euro and I can sell it for 2,4 euro. Sounds good”
• Forgeting some expenses: „the packaging costs me nothing, because I’ll do it on my own at home”
• Underestimating: „I know a guy that can do it all: packaging, IT, eMAG, anything I want”

Sounds familiar? Let’s see an example – product x:

• Has a price of 0,88 euro from the provider
• And a recommended retail price of 9 lei, but you found competitors that sell it for up to 12 lei.

Let’s calculate:

• PURCHASE PRICE AND TRANSPORT – how much does the product cost me?
  • Purchase price of 0,88 euro + transport price from Spain 0,1728 euro = 1,0528 euro, which equals to 5,2 lei would be the price up until it reaches your warehouse.
• Then, to this price you add the LOGISTIC EXPENSES which can come up to aproximately 10-15% or even more. It depends on your business model.
  • Do you have your own warehouse? Do you package the products at home? Do you have an outsourced deposit?
  • How much does the person that packages the products cost you? Keep in mind that you have a price too, even if you’re doing it yourself.
• Then you have the OPERATIONAL EXPENSES, which can add up to 10-30% depending on your business model and industry.
  • Operational expenses mean: your Wi-Fi and phone bill, accounting, gross salaries, courier, etc
• And lastly, add the MARKETING EXPENSES – which can ad dup to 1-2% in some industries, but in this case we’re talking about million dollar companies. So you can take around 5-10% into consideration, but based on the market we know that many clients estimate to a much higher procentage.
  • Creative bugets, the well known Google Ads* and FB Ads costs, campaigns, booklets or catalogs, events, etc

*Let’s be real, we all know someone who invested 2000 euros each month in campaigns and the results weren’t what they hoped for.

Lets recap:

5,2 lei + 0,77 lei + 0,77 lei + 1,2 lei = 7,94 lei expense / product, to which you add „something” and a TVA of 9%

**Important: this is a hypothetical , the exact sums differ from business to business. For a spot on price, each business owner needs to make their own calculations.

Business model 1 – selling online, personal website or Marketplace => LOW OR NO INCOME

Business model 2 – fast sale, for example in B2B as gifts (a lot of products at once) => YES YOU’LL EARN A PROFIT

BOTTOMLINE:

Do not neglect the correct calculation of prices and product analysis. And if you don’t have time or don’t know how to calculate, then know that at ALGORITM you can find a team that can analyze your product and what expenses you have. Be a winner! When you’re left with nothing… in fact, it’s just purchasing or calculation mistakes. Wherever you list your product, you have to pay a rent, a shelf fee or a commission.