Highest Margin Products For ECommerce Success
February 26, 2023
The world of eCommerce has seen immense growth in recent years. An unimaginable pandemic transformed ordering groceries online from a luxury into a necessity. Online sales increased by 40% just in 2020, as online merchants brought in 22% more money than in 2019. That made it the most successful year in eCommerce history up until that point.
Even though consumers can go back to stores now, a large and growing portion of them continues to do their shopping online. Millions of sellers have entered the market to feed this demand. The growing competition means that knowing what the highest margin products are can be the difference between succeeding in eCommerce, or not.
In this article, we will discuss:
- What Is a Profit Margin?
- What Factors Affect the Pricing of High-Margin Products?
- Production and Sourcing Expenses
- Demand vs Competition
- Transportation Costs
- The Price You Set
- 10 High-Profit Items to Launch Your Business With
- How to Find High-Margin Products
What Is a Profit Margin?
A profit margin is the amount of revenue from a certain product that the company keeps as pure profit. For example, if a business generated sales of $120,000 in a year it had $100,000 in total expenses, its yearly profit margins would stand at 20%. So, if it sells a product for $12 while spending a total of $10 in expenses to do so, that product’s profit margin would be 20%. This metric is essential to assess how profitable a product really is.
While profit margins generally vary from industry to industry, the average for eCommerce sellers stands at 10%. 5% is considered low while 20% is seen as high. Successful products can reach profit margins as high as 30% or 40% if you know what you’re doing.
What Factors Affect the Pricing of High-Margin Products?
Production and sourcing expenses
Any product’s potential to bring in money will depend on how much it costs to produce. The cost of manufacturing, storage, raw materials, machinery, employee salaries, taxes, customs and real estate all factor into this. Being able to source, transport, and sell your product for a lower price than competitors is a great first step toward high profit margins.
Demand vs competition
If you enter a market that is already saturated with lots of competitors fighting each other for customers’ attention, you are going to have a hard time establishing yourself. Even if there is a high demand for a product, a large amount of competition guarantees that they will try to take business off each other, for example by lowering prices. High profit margins will be extremely difficult to attain if consumers know they can find similar quality for less money. So you should try to enter the market with a product that is in high demand, but not too many sellers are offering.
Once your products have been manufactured, you need to find a way to get them to customers in the most cost-effective way possible. You should also keep customers’ expectations in mind, such as fast shipping. If your goods are fragile they will need improved packaging. Their size and weight will have a major impact on your transportation costs. Where you decide to store them will also affect how fast and expensive the shipping process will be.
Your product has to feel special, unique and well-made. It should give customers a satisfied feeling that makes them look past the potentially high price they are paying. If anything about it feels off, you are likely to see more returns, which will disrupt your profit margins. Even if competitors make a similar product, if consumers see that yours is of higher quality, they will respond positively. Maintaining high standards for your product quality is the best way to guarantee customer satisfaction.
The price you set
This is one of the most important aspects of selling high-margin products. Raise the price too high and you might lose customers to the competition. Lower it too much and your profit margins will suffer. To ace this step you will need to do thorough market research to understand how much your target audience is willing to pay. There is always a sweet spot, you just need to find it. Factors like marketing and current trends will strongly affect where it lies, so keep them in mind.
Good marketing can have a huge influence on how successful your high-margin product is. Creating a strong brand image that resonates with people will make them want to buy from you. Just look at how Oatly became a world-famous brand through extensive and smart marketing campaigns. Customers may become willing to buy from you over cheaper competitors because of the brand experience you offer. A good way to do this is by creating high-quality content that you put in front of a susceptible audience. Targeted ads on Google and social media are a good way to go about this.
Especially in times like these, it’s very important to stay on top of market trends and fads as they have a large influence on what can become a high-margin product. Think of the fidget spinner and how quickly it became something every kid at school had to have. However, keep a very close eye on trends as they can evaporate as fast as they emerged. If you react quickly enough, you can make big profits, but if you are too late, you might end up with large amounts of unsold stock.
10 Highest Margin Products to Launch Your Business With
Jewelry has continued to rank among the top products sold online. Moreover, it is not a trend that is subject to consumer mood swings. There’s always someone to buy something nice for, whether it’s a loved one, family, or simply oneself. Shipping is a significant advantage of jewelry since it usually comes in a small package, making it easy to store and transport. That means noticeable storage savings, while shipping costs are also on the lower side.
Beauty products are without a doubt one of the highest margin products available on the market. From skincare to makeup, they are almost constantly in demand. Also, the beauty industry is so wide-ranging that your online store has a large number of profitable niches to choose from. It could be hair, skin, or eye products, they all sell well. The global beauty and personal care industry is set to bring in revenue of around $572 billion in 2023.
Although it makes sense that sunglasses would sell better during the summer months when the sun is out, there are advantages to selling on the internet. Having a worldwide customer base can mean constant sales from corners of the globe where it is currently sunny. Did you know that the hottest months in Australia are December, January, and February? Understanding how to cultivate a global audience can help you sell even seasonal high-margin products year-round.
Women’s apparel is a huge industry that is set to grow by $242 billion over the next five years. High-end fashion eCommerce retailers earned profit margins of 30%, according to this 2017 study by the Wall Street Journal and Onestop Internet Inc. Incidentally, that was almost twice as high as brick-and-mortar stores selling high-end fashion earned. The opportunities in fashion eCommerce are clearly big. You can create your own clothing line and designs or find a supplier and sell their goods instead. To succeed at attaining big profit margins you should try to find your own niche though.
The global population continues to soar, and the demand for children’s toys has never really gone away. There are birthdays and several special occasions that make gift-giving a year-round phenomenon. As with the previous products, there’s still much competition out there, so you’ll need to appeal to kids and their parents in order to succeed in this sector.
Electronics are some of the most lucrative products in eCommerce. As technology such as smartphones, iPads, Bluetooth speakers, and gaming consoles become household staples around the globe, the demand for them and other devices is ever-present. The regular advances made in technology also mean that new gadgets that people want to own are constantly emerging.
As previously mentioned, smartphones are incredibly popular, and if the data is right, by 2027, there will be over 7.6 billion smartphone users in the world. A lot of these phones will need accessories like cases, wireless chargers, and headphones. Establishing yourself in this business can result in big profit margins with a potentially very large customer base.
The list of must-have baby products is endlessly expanding as new accessories are launched every day. Meanwhile, classics like strollers, milk bottles, cradles, and other items seemingly never go out of fashion. Every parent wants the best for their child, so if you’re able to create something they feel they need, there will be a demand for it.
Whichever product you want to start selling, making sure it’s something that people need in their daily lives is going to be a winning strategy. Like with previous items on this list, home appliances are an essential good that basically everyone needs. Consumers will be willing to spend a significant amount of money to ensure that they have refrigerators, dishwashers, dryers, washing machines, etc. at home. Smart devices entering this market in recent years has also only increased people’s drive to upgrade.
Fitness equipment and clothes to work out in
Fitness equipment is increasingly important to a lot of consumers as working out from home becomes a bigger thing. Not everyone has the energy or time to make it to the gym regularly so many people are investing in being able to work out at home. As health-awareness increases across society, this market is set to remain lucrative for eCommerce sellers.
How to Find High-Margin Products
If you are unsure about which product will score you the highest profit margin, take a look at JungleScout. This service provides unique insight into Amazon’s store metrics. That means you can see what products are being searched for the most in recent months or weeks, in full detail. It also gives you the ability to zero in on a certain product and identify how many competitors also sell it. With this information, you can create a list of products that have peaked increased interest from shoppers but aren’t being sold by many companies. Those are the perfect conditions for achieving large profit margins from your sales.
When you do decide on a product, it will take time and money to stock up on inventory and start selling. To nail this process, you may want to consider an 8fig Growth Plan. This means getting continuous capital injections that will help you invest in your ideas and gain momentum early on. Whether you want to devote funds to further market research about high-margin products or order inventory ahead of time so you don’t run out of stock, the decision is yours. And the best part is that our remittance schedule is tailored to your business, ensuring that you have maximum cash flow. If you would like to get a better understanding of these features, SellerApp wrote this in-depth 8fig review. Sign up to get your own customized 8fig Growth Plan and take your business to the next level today.
The 8fig Team is an experienced group of eCommerce writers and experts committed to helping online sellers grow their businesses through informative content and guides. Whether you're looking to increase sales or build your brand, we have the knowledge and expertise to help you succeed.