Pricing Your Products

In our scramble to find a way to offer the lowest prices on the Internet, we often overlook the basic steps that we should be taking BEFORE we even offer a product for sale.

We also overlook something even more important: you don’t HAVE to have the lowest price in order to make great sales. Following are some things I do before and after determining my bottom line. I sell by having products drop-shipped for my sites, which works VERY well, but these steps should be covered no matter your distribution method.

Should you be selling this item now?

Snowboards don’t sell well in the summertime. You may have a hard time moving a pair of roller blades in January. Don’t waste your time and your site space marketing products out of season. Ask your supplier for a little historical information regarding the best time to sell their products. Believe me, to everything, there IS a season. They have the figures. If they don’t want to share this info with you, find another supplier.

Identify your costs

Profit isn’t just the difference between wholesale and retail. You have other costs to consider. Think about every penny you spend in order to get that product to the customer’s door, and plan accordingly. For example, your merchant account probably costs you about 2.2% plus 30 cents per transaction. On an item you’ll sell for $20, that’s 74 cents. Don’t forget that calculation when pricing the item. Are you warehousing the item? How much is that space costing you per item per month? Did you spend money stocking up on shipping materials? How much per unit? What about advertising? Monthly hosting costs? You may need to project some estimated sales in order to arrive at some of these figures.

This may seem very complicated, but it’s really not. Just take the figures one at a time, and you’ll arrive at a wholesale cost plus an amount that, when added together, becomes your initial ESTIMATE of “cost of goods sold”. Identifying all your costs is critical if you want to price your products properly.

Check out the competition

Search on the item you plan to sell. Check out the competitors’ prices. But DON’T get caught up trying to beat the wrong competitor. You need to stay within your “venue”.

My stores are built in Yahoo Shopping (http://store.yahoo.com). 90% of my traffic comes from there. When I seek out my competitors, I look for other businesses like mine ONLY in Yahoo Shopping. Then I compare.

If I’m thinking about selling a product, and I get 1,500 hits in 400 stores on that item in Yahoo Shopping, forget it. If I get a hundred hits in 20 to 40 stores, I’ll look into it further.

So check out the competition, narrow down your product list, make a note of the five lowest prices you find, and then ask yourself another question:

Is anybody going to buy this thing?

This doesn’t have much to do with pricing, but it should be said.

When considering products, there’s unique, and then there’s too unique. Yak Cheese may sound like something that nobody else has for sale on the ‘Net. There’s a reason for that. If you sell more than 3 boxes a year, I’ll EAT some.

Unique is Rain Barrels made in Maine. It’s Exotic Cheeses imported from Italy. Silk Parisian Lingerie. Things you don’t see every day, but would be proud to give as a gift.

Then there’s “common”. Everybody and their grandmothers are selling Alabaster Figurines on the Internet. Do they sell? Sure, in a limited fashion. Do you want to sell them? Not if you want to make any real money.

In my experience, unique products, like Rain Barrels and Parisian Lingerie, DO sell. So do Coleman Sleeping Bags, and Conair Hair Dryers. BRAND NAMES sell. Look at your potential product, and ask yourself honestly if YOU would buy it on the ‘Net.

Set your price

Take the five lowest prices you collected on a product in your list that has survived the above. Calculate your estimated cost, then subtract that from the lowest price. If you don’t see at LEAST 15% profit, don’t bother.

If you do, there are a couple of ways to proceed. You can undercut the lowest price in your “venue” by a bit, and hope to “kick off” the product and get yourself noticed. Chances are, though, that the following week you’ll find that someone has undercut YOUR price by just a bit. That becomes a losing game.

I generally set up a couple of “loss leaders”. These are desirable items (in my general product line) that I sell dirt cheap just to bring in customers. Then I price the rest of my products at the second or third lowest price in my venue. The customers come in for the loss leaders, and then I can market everything else to them via email. I spend a lot of time making my site look better and easier to navigate, and pay a great deal of attention to my customers.

That makes me more reputable in the eyes of the customer. You’ll find that people don’t mind paying just a little more if they feel comfortable in your store. They don’t like to worry that they’re buying from a “hack” who may not deliver. Nothing says “hack” like a cluttered, confusing storefront.

Follow up

After you’ve sold an item for a month or two, revise that “cost of goods sold”. Measuring past performance is just as important as setting the correct price to begin with. If sales drop, recheck your competition. If that’s not it, drop the product, or shelve it until the “season” comes back around. Don’t get sentimental about your products, and NEVER just let your store sit there in limbo once it starts to make money. This is a dynamic business; stay on top of it!

A last word (or three)

Retail pricing on the Internet is so fraught with permutations that it would be impossible to cover everything here, even if I KNEW everything. The steps above are just the basics of a process that works for me. Hopefully something here will strike a chord and work for you as well. Patience and persistence are the keys to a successful Internet business, so hang in there, and don’t quit the day job for at least a couple of weeks. ;o)

I hope this helps in your future marketing decisions.

What a Lawyer Must Prove to Win a Product Liability Case

Thousands of injuries occur each year in the United States from defective or dangerous products. Victims of dangerous defective products have legal protection under product liability laws throughout the country. These laws govern the legal rules that determine who can be held liable for the defect or danger to consumers.

In general, products sold to the public are required to meet common expectations of consumers. When those products have an unexpected defect, common expectations of consumers are not met.

More than one party could be held liable for injuries that occur from consumer use of a defective product. This includes all sellers that are part of the distribution chain for making the product. Parties that are potentially liable for a defective product include the manufacturer, parts supplier, wholesaler and the retail store from which the product was purchased by the consumer.

The type of defect will determine who is responsible for a liability claim. All of the specifics related to a product liability case may differ among states. However, there are certain elements that a lawyer must prove to win a product liability case for his or her client. These elements include:

  • Injury and/or loss was caused by the product
  • Product was defective
  • Manufacturer’s error led to flaw in product
  • Manufacturer failed to warn consumers about potential dangers
  • Product was used correctly

Product Caused Injury and/or Loss

An actual injury or loss is a crucial element for a lawyer in proving a product liability claim. Specifically, the injury or loss must be a direct result of the product’s defect. In some cases, demonstrating the link between an injury and product defect is straightforward. In other cases, proving that the defect caused the injury or loss is not so easy.

For instance, a client was injured in a car accident while driving a vehicle prone to flipping over. If there is evidence that the client was speeding when the accident occurred, the manufacturer could argue that reckless driving – not the design of the vehicle – caused the accident.

However, a client could suffer third-degree burns when a brand new electric tea kettle explodes because of a hairline crack. The client did nothing out of the ordinary while using the tea kettle and could have a strong injury claim.

Product is Flawed Due to Manufacturer’s Error

In addition to proving that the product caused an injury or loss, the lawyer must also prove that the same product is defective. For some cases, the defect could be the result of a problem at the manufacturing plant. For others, the defect is within the product design, which means that the entire product line is dangerous for consumer use.

A lawyer might have a harder time proving that there was a flaw in the product design. The most likely scenario is demonstrating that an unreasonable design created the danger. However, a product that has potential danger is not automatically a judgment against the manufacturer or supplier when an injury occurs.

There are times when designing a product in a cost-effective or reasonable way is not feasible. Consider the potential dangers of vehicle air bags. While they can cause serious injury to a driver or passenger, they can also save lives in certain collisions. Car manufacturers would argue that when alternative outcomes are considered, air bags are not unreasonably dangerous.

Manufacturer Failed to Warn Consumers of Potential Dangers

Typically, a lawyer might have a better chance at proving an injury or loss occurred from a defective design when the average consumer is not aware of the dangerous quality. A ruling in such cases may depend on whether the manufacturer failed to warn consumers of the potential dangers. The manufacturer or supplier must show that instructions and warnings were reasonably sufficient.

In this case, a client might suffer third-degree burns from an electric tea kettle because the steam valve is concealed by some part of the product design. An average consumer would expect to find a visible spout from where steam is released. Instead, the steam valve is placed in an inconspicuous area, which strengthens a defective design claim.

Proving defective design is problematic if the tea kettle included bright red stickers printed with the word “caution” and the user manual included warnings about the steam valve position. The legal question now becomes whether the warnings were adequate.

Injured Client Used Product Correctly

Generally, the lawyer’s client must use the product correctly; that is, the way the manufacturer intended the product to be used. Continuing with the tea kettle example, an example would be if the explosion occurs when used to heat water for an outdoor kinds’ pool is not the intended use.

If the kettle explodes and causes burns, the lawyer may not be able to prove manufacturer liability. The manufacturer is not required to make the tea kettle safe for use with an outdoor pool.

However, this does not mean that use of every product must conform to the manufacturer’s specifications. The key is proving whether the average consumer would or would not use the product in the same manner as the client. If so, the lawyer has met the reasonable expectation of use requirement.

Winning a product liability case involves deciphering often complex circumstances and establishing a good legal theory. A lawyer who is knowledgeable of product liability law and the litigation process will craft a strategy to prove the case. An immediate investigation into the facts surrounding the case could expose obvious defective issues. Further, expert testimony is often essential in proving that a defective design caused an injury and/or loss.

Choosing a Niche Product to Dropship

Time and time again I recommend that you choose a niche product to dropship from your website or sell on eBay. But how do you choose your niche? The following are brainstorming tips to help you come up with a niche product that can be sold online.

First: Check Your Purchases. Many prospective online entrepreneurs try to think of really out-there products like unicycles or bamboo knitting needles so they can enter a market that isn’t too saturated. This is a good idea in some respects, but one of the most important factors when choosing a product is to choose something that people actually buy online. One way to brainstorm this type of product is to think what you yourself buy online.

In the past month, I’ve bought three second-hand novels written by Mildred Walker, a pair of studded motorcycle boots, a Hebrew-printed t-shirt, tickets to a murder mystery play, a pair of Cubs swim trunks, and a calligraphy set. Not surprisingly, almost all of my purchases represent niche markets. Why is that? Because with the exception of a few broad categories like electronics, most items bought online are niche products. This is because common, general products can easily be purchased at physical locations close to your home. You go online to find unusual items that can’t be bought at the mall.

Second: Check Logistics. Let’s assume that I want to dropship my products, not purchase them wholesale. This means that some of the products I purchased last month are out of the running for my niche inspiration. Used books aren’t generally dropshipped, and neither are theater tickets. Shoes and clothing are usually sold wholesale, but in this case the items that I bought might still be appropriate since they weren’t common apparel and accessories. The studded motorcycle boots might be a good candidate for a dropship niche product for a few reasons: first, they are a product that’s not easily found in local stores. I bought those boots online because after searching the three malls in my area I couldn’t find anything quirky enough to satisfy my Sarah Connor Chronicles obsession.

The studded motorcycle boots are a good pick for another reason: they’re a theme product that I could easily build a whole product line around. With the boots as my central product, I could have a goth/punk/emo website, a motorcycle apparel site, or a studded leather accessories site. Finally, while I might not be able to find this product through a dropship supplier, they are expensive enough that I could possibly use a wholesaler to dropship them. Let’s say my wholesale supplier has a $100 order minimum: if a single pair of studded boots costs $125, I can likely have single pairs shipped directly to my customers even though the supplier is ostensibly a wholesaler.

Stay tune for more tips on choosing a niche to dropship products.