In order to have a profitable product, a company must generate more revenue from it than it spends on getting it made and to the customer.
Product profitability is an important factor for businesses to consider because it can help them make informed decisions about which products to produce and sell, and how much to charge for them.
If a company can identify products that are profitable and generate high margins, they can focus their efforts on selling more of those products.
Conversely, if a company discovers that certain products are not profitable, they may decide to discontinue those products altogether.
A Profitable Product for a Profitable Company
Product profitability is essential for any company looking to be successful in the long run.
There are a few different ways to measure product profitability.
One common method is gross margin, which is the percentage of revenue that a product brings in after subtracting COGS (cost of goods sold).
Another way to measure product profitability is by calculating the contribution margin, which is the amount of revenue that a company earns after subtracting all variable costs associated with producing and selling a product.
This includes costs like materials and labor, as well as any shipping or delivery costs.
How to Identify Your Most Profitable Products to Sell
You need to be able to sell your product at a price that leaves you with a healthy profit margin.
Another important consideration is competition. If there are already a lot of businesses selling similar products, you’ll need to find a way to stand out from the crowd. This could involve offering a lower price point, superior quality, or unique features.
Size and weight are also important factors to consider, especially for ecommerce businesses. Shipping costs can eat into your margins if your product is too large or heavy.
Finally, you’ll need to think about seasonality.
Is this something that people will actually want to buy? Is it seasonal? How often will people need to replace it?
Answering these questions can be the key to product profitability success.
High-Margin Products are Best
What are the attributes of high-margin products?
A high-margin product is an item that, when sold, will result in a high profit margin. A high profit margin is usually considered to be 30% and up.
Products with high profit margins should be sellable without putting customers off.
Attributes of a sustainable high-margin product:
- High quality: as with any product you sell, the quality is important. If customers are not happy with the quality of what they have bought, they are unlikely to come back for more. And if they do, it will likely be to complain or request a refund. To avoid this, make sure the products you select are of excellent quality. This will help to ensure customer satisfaction and repeat business.
- High demand: there is no point in selling a product that nobody wants. Not only will this result in little to no sales, but it will also be a waste of your time and money. To avoid this, make sure the products you select are in high demand. This way, you can be confident that there will be customers out there willing and able to buy what you are selling.
- Limited competition: another important factor to consider is the level of competition. If there are already a lot of businesses selling the same or similar products, it can be tough to make your mark. To give yourself the best chance of success, aim to select products that have low competition. This way, you will have less competition to contend with when marketing and selling your products.
- Easy to ship: another important factor to consider is the shipping. Products that are large, bulky or fragile can be expensive and difficult to ship. This can eat into your profits and put customers off buying from you.
- A high enough price point to make a profit (but not so high that it makes it hard to sell.) Of course, you need to make sure the products you select are priced correctly. If they are too expensive, customers will be put off. But if they are priced too low, you won’t make enough profit. It is important to strike a balance between these two factors to ensure you are making a profit without pricing yourself out of the market.
- Easily marketable: you need to make sure the products you select are easily marketable. This means they should be easy to promote and sell online. Ideally, they should also be relevant to your target audience and have a wide appeal.
- Durable and sustainable: last but not least, it is important to consider the durability and sustainability of the products you select. Products that are built to last and are sustainable will not only be more popular with customers but will also save you money in the long run as you will not have to keep replacing them.
High-margin products are an excellent way to boost your business profit margins and grow your business. By selecting products that have the attributes outlined above, you can give yourself the best chance of success.
Trending Products to Sell in 2022
There are two main categories of trending products: commoditized and niche products.
- Commoditized products are those that are widely available and have little differentiation between them.
- Niche products are more specialized and offer unique features or benefits.
So, which is the best product to sell online?
The answer may surprise you: it depends.
If you’re selling a commodity product, then it’s all about price and convenience. You’ll need to offer the lowest price possible and make it easy for customers to purchase your products online with a few clicks.
On the other hand, if you’re selling a niche product, then you have the opportunity to really stand out from the competition. You can focus on quality, customer service, and building a brand that customers can trust.
At the end of the day, there is no such thing as a perfect product and there is no one-size-fits-all answer to this question. The best product to sell is the one that best meets the needs of your target customer base.
- Jewelry is always a popular product, and with good reason. People love to accessorize and there is a lot of money to be made in selling jewelry.
- Beauty products are another profitable product to sell, especially among women. From makeup and skincare products to hair care, there is a huge market for beauty products.
- Bamboo toothbrushes are an Amazon product that is quickly gaining popularity. These Amazon best sellers are environmentally friendly and people are willing to pay a premium for them.
- Sunglasses are another winning product that people are always willing to spend money on.
- Watches are also a popular item, especially luxury watches.
- Women’s apparel is always in demand, and there is a lot of money to be made in selling clothing and accessories for women.
- Fitness equipment is another type of product that can be very lucrative. Yoga leggings and water bottles in particular.
- Kids’ toys, video games, and board games are also trending products, especially during the holiday season.
- Pet care products are always in high demand – people love their pets and they’re willing to spend big bucks on keeping them healthy and happy.
- Candles, essential oils, coconut oil, and aromatherapy purifiers are some of the products people love to buy.
- Phone accessories are always popular, especially as new phone models are released.
- Home office products are also high demand products right now as more and more people work from home.
- Finally, information products (such as ebooks and online courses) continue to be best selling products on Amazon.
High-Demand Product Ideas to Sell Online
Coming up with profitable product ideas to sell can be tough. You want to make sure that the product you can sell is unique, but also that there is a market for it. If you are just starting your journey, you can use Profit Frog’s profitability modeling capabilities to help you with the research.
If you’re looking for product ideas to sell, here’s some inspiration:
First, think about what you’re passionate about.
This can be anything from fashion to cooking to gardening. What do you love to do? What are you good at?
Chances are, there are other people out there who feel the same way. Figure out what your niche is, and then start thinking about products that would appeal to that market.
Second, take a look around your home. Is there something that you use every day that you can’t live without? Something that makes your life easier? Again, there are probably potential customers out there who could benefit from your business ideas as well.
Finally, don’t be afraid to think outside the box. There are always new trends and technologies emerging, so there’s always room for new product ideas. If you can tap into a trend early on, you’ll be ahead of the game.
Different Products for Different Ecommerce Business Models
When it comes to choosing products for selling online, there are a lot of different options to choose from. However, not all products will be a good fit for all business models.
For example, if you’re dropshipping, you’ll want to focus on products that are light and easy to ship. On the other hand, if you’re doing retail arbitrage, you’ll want to look for products that are in high demand but low supply.
To help you get started, here are a few product ideas that will work well based on the business model you’re using:
- Private label products: these are label products that you source from a manufacturer and put your own brand name on. A private label product can be a great option if you’re looking to create a unique product offering that differentiates you from your competitors.
- Dropshipping: a type of ecommerce business where you don’t carry any inventory yourself. Instead, when a customer orders from your store, you simply place an order with the supplier and they ship the product directly to the customer. A Dropshipping business is a great option if you’re starting an ecommerce company, as it’s relatively low risk and easy to set up. Plus, you don’t have to worry about storing physical products. Shipping cost is your main expense.
- Print on demand: a type of ecommerce where products are only printed once an order is placed. This can be anything from t-shirts to mugs to phone cases. Print on demand is a great option if you’re starting an online business and looking to sell unique or custom products without having to invest in inventory management.
- Wholesale: a type of ecommerce where you sell products in bulk at a discounted price. This can be a great option if you’re looking to sell products that have a high search volume but low supply. Plus, selling in bulk can help you get better margins as well.
- Retail arbitrage: a type of ecommerce where you buy low cost products from retail stores and then sell them online for a higher price. Plus, it’s relatively low risk as you’re only buying products that are already being sold successfully by other retailers.
- Amazon products: Amazon products can be a great option for any type of ecommerce store. Amazon is one of the largest online marketplaces with millions of customers worldwide. Selling on Amazon can help give you access to a vast audience of potential customers. Plus, Amazon has a fulfillment program called Fulfillment by Amazon (FBA) which allows you as an Amazon seller to store your products in their warehouses and they will handle all the shipping and customer service for you. Selling Amazon products can be a great way to scale your ecommerce business quickly and easily.
Is My Product Profitable? Using Profit Frog to Find Out
If you’re introducing a product or want to measure a product’s profitability, Profit Frog makes analysis easy.
Together, we’ll add a new product to Profit Frog and see how long it takes to make a profit.
Carry’s Appliances Product Profitability Example
Imagine Carry runs an appliance business.
She has a storefront, and also runs an online business. A year ago, she started selling high-quality washers.
She wanted to include dryers, but didn’t have the resources, so she started small. Now, based on her sales, she knows she can add dryers of the same brand to her product portfolio.
But when will it be profitable?
We can find out by adding her business first.
Once we do, we’ll see a dashboard with no data. We can manually enter information or upload an Excel sheet with our data.
Using Profit Frog, you can add everything from your business, like all your products, expenses, and critical information. For this case, we will enter information only for the dryers.
We see three categories. Since Carry has an existing business, we’ll only add increased expenses and information on the new product.
Carry adds things like delivery costs for local online orders, the purchase of new equipment, increased labor hours, and more. The total expenses for new equipment investments and variable costs for the first month are $82,500 and then $70,500 monthly.
Adding a Product
Carry then adds the dryer as a product. It costs $300 to purchase. We add it to the COGS. Any other costs of the goods can be added to this number. In this case, we are sticking with the purchase price of the machine as the COGS.
Carry adds her customers for the new product. Based on her washer sales, she is forecasting her projected growth. The sales price will be $1,000.
We hit enter and tada!
Carry learns that it will take a couple of months to get out of the red, make a small profit, and then gradually grow throughout the year. She decides it will be a good investment and chooses to invest in the new product.
The image above clearly shows what Carry’s journey could look like with the new product. Carry could upload all her information and compare different products, margins, and critical information to make the best decisions.
Profit Frog is a flexible software platform that allows you to customize your unique needs for the company.
Have you tested Profit Frog out? See if your products are making the cut!
Product Profitability FAQ
Here are some common questions we get about how to use software to find out if you have a profitable product. If you have further questions, don’t hesitate to reach out.
What is a profitable product?
A product is profitable when the revenue it generates exceeds the costs associated with producing and selling the product. To determine whether a product is profitable, businesses must carefully track their income and expenses.
If the product is not generating enough revenue to cover these costs, it is not profitable. In some cases, businesses may decide to continue selling a product at a loss in order to gain market share or meet other objectives.
However, this is not sustainable in the long term, and businesses must eventually make a profit on their products in order to stay in business.
For this reason, profitability is an essential factor to consider when making decisions about product development and marketing strategy.
What product is the most profitable?
There’s no easy answer when it comes to what product is the most profitable.
It depends on a number of factors, from the cost of production to the demand for the product.
The most important factor is undoubtedly the demand for the product. A product that is in high demand will always be more profitable than one that is not.
Other factors to consider include the cost of production and the availability of substitutes. When all of these factors are taken into account, it is clear that there is no easy answer to this question.
The most profitable product is the one that can command the highest price while still attracting buyers.
How do you determine a profitable product?
There are a few different ways to determine whether or not a product is profitable.
Use Profit Frog to Determine Profitability
The easiest is just to use Profit Frog: plug in your numbers into an intuitive, guided process, and our budgeting and forecasting software will tell you your product’s profitability. It will also allow you to model different scenarios by adjusting variables so you can see how profitability changes.
Examine Your Product’s Price Point
If your product is too expensive, it might not be able to sell well enough to generate a profit. Compare it to competitor products to get a sense of whether it is priced correctly.
Scrutinize Production Costs
Another way to determine profitability is to look at the product’s production costs. If the product costs too much to manufacture, it might not be able to sell for a high enough price to cover those costs and generate a profit.
Again, Profit Frog can help you quickly determine your product’s profitability by plugging in production costs and other variables.
Research Product Demand
Finally, you can also look at the potential demand for the product. If there isn’t enough demand for the product, it might not sell well enough to generate a profit.
Ultimately, profitability is about finding the right balance between price, cost, and demand.
What sells for the most profit?
If you’re looking to make the most profit possible from your online store or other business, you need to be selling high margin products. These are products that have a high price point potential while still being in high demand and high quality.
Keep a close eye on which of these high-margin products are trending so you can identify the ones that have the perfect combination of all three factors.
By selling these products, you’ll be able to maximize your profits and ensure that your business is successful.