How to choose products for an online store

There are many decisions that new e-commerce store owners have to make as they begin their new venture and move toward making the first sale. Shipping, payment processing, marketing and website optimization are all important concerns that require major decisions to be made. There's one area that is especially crucial for ecommerce success, however: the products a store sells. Business owners need to consider their approach to deciding what to sell and make sure to weigh all the factors involved, from the profit margin of the most common items being sold to interest in and understanding of the likely demographics.

Here's a look at a few of the most common questions store owners have to answer when choosing exactly what they'll sell in their new store:

Will it turn a profit?

No matter what motivates store owners, a business can't lose money and stay open in the long term. When it comes to choosing items to sell, calculating the profit of inventory and comparing it to similar products in other storefronts - and in local, brick-and-mortar stores - is crucial. Profit is a completely pragmatic concern, but it's the most important of any product and sales considerations.

Calculating profit is a straightforward equation. The costs associated with merchandise, including purchasing, storage, shipping and any marketing efforts, are subtracted from the sale price offered to consumers. If the costs to a business owner are higher than the sale price, it isn't profitable.

Some products cost more to store, ship and stock than others. Selling small, low-cost items means that delivery charges will likely be low - a cost savings that is passed along to the consumer. However, these same small products might break more frequently or arrive to the store owner in a damaged condition, requiring more time and effort spent dealing with a wholesaler. Storage concerns also come into play, ranging from adequately protecting inventory to temperature and moisture control.

No matter what a store owner decides to sell, there will inevitably be some area that requires extra attention. Weighing the pros and cons of ordering, storage and shipping before making a decision about what to sell will lead to a higher level of satisfaction and fewer problems with products.

Does it involve a store owner's interests or expertise?

Without some kind of emotional investment from a store owner, an ecommerce business isn't as likely to prosper. Involving interests or expertise is a wide-ranging concept and one that can be approached from many different angles. For some store owners, the interest or expertise involved is product-agnostic: They simply enjoy operating a successful business and making the decisions that maximize returns. On the other end of the spectrum, some entrepreneurs may only sell handmade products that they create themselves. Many other operators will fall somewhere along this spectrum. Having an interest in the products being sold in an online store often means knowledge of the demographic and of the industry that makes the items - valuable knowledge for a new store owner to have.

Unique or mass market?

The two major areas to consider are commoditized and unique products. Commoditized products are widely available in some form at brick-and-mortar and online stores. Examples include clothing, sporting goods, toys and tools. Unique products are handmade or otherwise not usually available for purchase from other retailers. Unique products are more compelling and carve a niche, assuming the store owner successfully raises awareness of the brand and product. Commoditized items have to be viewed and marketed from a pure price standpoint to compete with other retailers.

Can it be drop shipped?

Drop shipping can be an especially convenient option for store owners, especially when dealing with consumer goods produced in large quantities. By connecting with a vendor and passing along order information, retailers remove the need to personally receive, stock and ship some or all of their inventory items. Drop shipping allows businesses to start off with a smaller amount of money to dedicate to operations, lowering the barriers to entry. This strategy also has some drawbacks, however. These include relying on an outside business to complete orders and adding another layer to the customer service process that cause delays.

The final analysis

Ecommerce store owners need to decide for themselves what the balance of profitability and passion will be in their operation.