10 Steps for Evaluating a Business Idea – Part 2
In continuation with the previous post about evaluating a business idea let’s look into the other aspects which need to be assessed before finalizing a business idea for an online store.
This is the most commonly missed aspect while finalizing the pricing of the product. Apart from the costs involved in purchasing a product and sending the product to the buyer, there are several overhead costs which need to be factored-in. Some of these include costs incurred towards:
- obtaining the product (including logistics in case you are not the manufacturer)
- stocking the products
- packaging and labeling
- damages (during storing, packing, or shipping)
- payment gateway (all gateways charge about 4% of the invoice value per transaction)
- COD (cash on delivery) charges (logistic companies charge a fixed amount or about 2% of the invoice value for cash collection)
If these costs are higher than the profit percentage you would be getting, then it is better to choose some other business idea. On the other hand, if you can find ways to keep these overhead costs minimal, then you can still go ahead and pursue the business idea.
The price at which you intend to sell your product should be assessed with caution. You can neither sell the product at a very high price nor can you give it at throwaway prices. This is especially true in case there are several stores already selling the same product you intend to sell. In such cases, you need to evaluate whether you can offer the same product at an equivalent or lesser price while ensuring that all your overhead costs are covered and you are making a reasonable profit. If you are selling a niche product, then you have an upper hand (until competition emerges).
This is one among the most important factors to be considered before setting up an online store. You must remember that even the best shipping company cannot control how your product is handled at all points of transit. It is almost like your product is running a cross country race where it has to pass through various levels of rough handling.
If the product you intend to sell is highly fragile or has a very short shelf life, then you may need to reconsider. You also need to keep in mind the cost incurred towards safe packaging and quick delivery. If your product can be priced appropriately to cover these, then you can go ahead and sell the product.
While products such as bathing soaps, toothbrushes are bought frequently, equipment such as music systems, ovens are less frequently bought by the same buyer. So, it is wise to sell a product which would be required on a regular basis (unless you are selling something unique which would attract newer customers frequently). Once a buyer is happy with your product quality and the price at which he/she is getting it, you can definitely expect repeat orders. Several online researchers have said that repeat customers are the ones who actually increase the business to a greater extent compared to new customers.
Online eCommerce Partner
Although this is the last point here, it is the most important one. While we spend a lot of time pondering over acquiring the products, its marketing and the profit one can expect, the time given to evaluate eCommerce platforms is often less. You need to choose your eCommerce partner wisely so as to minimize your efforts in setting up the store online, ensure its smooth operation while making good profits. Basically, an eCommerce platform should be easy to operate at the back-end and must have an attractive storefront. And above all, the pricing should be worth the features being offered.
Shopnix offers you such an option! On a Shopnix platform it is quite easy to upload your products, keep a track of orders, and improvise the storefront with simple widgets to make it attractive and easy to use.
Keeping these aspects in mind would help you evaluate whether your business idea is a feasible one or not. Although most of the businessmen prefer calculated risks while venturing into a new idea, entrepreneurs often go with their gut feeling or instincts! Nevertheless, knowing your risks is always beneficial as it can help you plan to overcome losses.
As always your comments are welcome and I would love to know your thoughts about this.
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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