10 Steps for Evaluating a Business Idea – Part 1
All business ideas need to be evaluated in great detail before being implemented/invested upon. This holds true for online stores too and may be to a greater extent than retail stores. Although the reach is quite high with online stores, an idea that is not feasible may lead to loss. So, here are some pointers to help you evaluate whether your idea/product is good enough to start an online store for it. One common tip for all these steps – write down the negative aspects first!
1. Potential Market Size
This determines your profitability (Return of Investment or ROI) of the business you are planning to do. You must first know which group of people are going to use your product and how many such people are present locally and nationally/internationally. Based on this you will have an idea about the demand for your product. For eg., while a product such as tennis ball will bought only by those who play sports such as tennis or cricket, t-shirts would be bought by almost everyone (including those who play sports). For better profitability your business should be catering to a wide range as well as a large number of shoppers.
Always expect competition and know how to handle it. Before starting an online venture for the product you have chosen, research about its availability online (and offline as well!). It is helpful to understand the plus points and negative points of your competitor at all times. If there are already several stores selling it online then you need to evaluate whether there is anything in your product that makes it different from the ones already available; or if you can sell it in a different manner. If is not available online, then first try to evaluate why is it not available online (may be the risks involved, percentage of profit may be lesser, etc). If yours is a niche product then you will have an upper hand.
To make profit, the business idea that you are working on should be expandable to a good extent within a reasonable amount of time. You must have
enough resources (or layout the methods to acquire it) to both increase production (or acquisition; if you are not manufacturing the product) and supply it within a short time. Additionally, the product should be such that the number of buyers should increase over time (although not at a slow rate). If the target population is limited then scalability of your business is also restricted.
4. Local Availability
If the product you are planning to sell online is not available locally, then it may be a perfect one for the online store! People often search for products which they would have tried elsewhere and liked it greatly. It is also a good idea to sell products which are available only in one locality/region. Craft items such as Chennapatna wooden toys (available widely in Chennapattna and surrounding regions only) is one such example. Nevertheless, some of the products which are widely available locally can still be sold online provided you market it well (online grocery stores for eg.,).
5. Target Customer
Knowing your target customer and understanding their limitations is highly essential for running a successful online store. If your target group is teenagers then you should know that they will often not be able to make online pay
ments (using credit cards) and cash on deliveries may often be rejected if their parents disapprove the purchase. On the other hand if your product is aimed for the elderly, you should be aware that many of the elderly people may either not have access to computers/internet, or they may not be internet/computer literate/savvy.
These are the few basic aspects that you need to evaluate before deciding on your online store. In the next part, I will be covering about other important aspects such as overhead costs, selling price, product durability, repeat orders and online eCommerce partner. Share your views about the article and your queries about any of the aspects discussed here. Will try to answer them all!
The author Dr.Lirish Chinnappa is the founder of Coorgshoppe.com, an online store that sells cool stuff from Coorg. He also moonlights as a dentist and writes for various technical papers around the world.
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