Written by DaveH
TKA Contributing Author

Why E-commerce?

Indeed. Why go through the trouble of putting up actual products on your site, with all the headaches involved? Isn’t it easier to just do AdSense or affiliate products?

Yep. It sure is. But have you ever done anything that took significant effort and then reaped the rewards later? Then you know that easier is not always better.

Let’s take a look at the difficulties of e-commerce compared to other monetization methods:

• You are responsible for making the sale – no sending your visitor off site to an AdSense advertiser or affiliate site.
• You have to collect the money from your customer
• You have to ship the product and handle returns
• You have to set up your website to do all this – shopping cart, “thank you for your order” emails, and more
• You have to find product sources and negotiate with suppliers

Wow, that’s a lot. Let’s take these one at a time and see how they actually play out in the real world:

• You are responsible for making the sale – no sending your visitor off site to an AdSense advertiser or affiliate site.

True enough. But you are compensated. There is a big difference between a $1.37 AdSense click and a $50 profit on a single item. Would the advertisers be putting up those ads if they weren’t making money? Of course not. They have no problem selling product, but they want to pay you for your visitors. This is because…

You have already done the hard part: You have a site up, it pulls traffic, and there is enough trust there that the visitor is a least comfortable clicking a link on the site.

After all that prep work, do you want to step over dollars to grab some change off the sidewalk? Remember that it is not just about the single click…

One thing that’s often overlooked in these debates is a concept that every e-commerce site owner has drilled into their head: lifetime customer value.

Ideally the first order, the first click, or the first interaction with your visitors is just the beginning. I have customers that buy from me over and over again. I know their names and why they buy. Some of them spend thousands of dollars per year on my sites.

This is why advertisers (including myself) are happy to pay you for those clicks. Visitors are WORTH MORE to websites that are selling products, because the revenue per page view is so much higher.

So why would I send my visitors somewhere else?

• You have to collect the money from your customer

Not that big a deal. A PayPal account only takes a few minutes to set up, and you can use it to collect payments via PayPal and all the major credit cards. There are multiple Wordpress widgets (some of them free) that will let you put a “Buy Now” button on your blog with just a few minutes work.

If you don’t like PayPal, there’s Google Checkout and multiple hosted cart services that are a snap to integrate. If you can put up a post, you can set up an e-commerce website.

• You have to ship the product and handle returns

You’ll be surprised how little this bothers you. It’s not hard to do, and after all, you only do it in return for money. ☺ I’m okay with extra work because the customer’s cash is already in my PayPal account. I’ll let you in on a couple of secrets:

1. It’s not that hard to begin with.

Setting up an account at USPS.com is a snap, they send you free boxes (!) and your mailman is happy to take your shipments. Using UPS or FedEx is not much harder, and they give better service to boot. If you can wrap a present for Mom, you have all the skills you need to ship product to customers. If you never send presents to Mom, shame on you.

Shipping supplies are easy to order from catalogs that specialize in them. These suppliers will have them at your door, usually in a day. You can send your product out like a pro – from your customers’ standpoint it is no different than a getting a shipment from Amazon.com.

2. Most of the time, you can get someone else to do it.

I only ship 10-20% of what I sell, depending on time of year. The rest of the time I never see the product, and I don’t want or need to. Most manufacturers and large distributors are used to working with small vendors, and will not be surprised that you want them to dropship.

Returns are easy too. Regardless of what shipping service you use, it’s a snap to send the customer a return sticker electronically, or to schedule a pickup at their location to get the product back. I do fewer than a dozen returns per year myself, because I sell the customer properly up front, and they get exactly what they expect to get.

• You have to set up your website to do all this – shopping cart, “thank you for your order” emails, and more

Actually you don’t. We already covered how easy it is to get a shopping cart onto your site. PayPal and other payment processors will send out the order acknowledgement emails, and your shipper will send out the shipping info. The most we ever do in my company is to forward an email from the dropshipper to the customer. And that can be automated as well.

If you are using a turnkey store system, this is all built in.

• You have to find product sources and negotiate with them

True enough. But like anything else there is a best way to do this, and it’s not that difficult. If you have been going through the Keyword Academy core lessons in order, you already know how to do keyword research. Finding a good product/supplier is much the same.

Instead of using the Google Keyword Tool, you’ll be using the keywords you got from the tool to search the internet. I actually find this to be the fun part of setting up a site. There’s nothing like identifying a really neat item and finding out that you can get it for half of list price!

I have to add something personal here, because I hear it so much:

• It’s easy for you, this is what you do for a living

True, but I didn’t always. I had to start somewhere. It’s no different than anything else: the more you do it, the easier it gets. And you will actually have a much easier road to travel than I did. The tools available for e-commerce back in the late ‘90s were crude, to put it mildly.

Finally, remember: the core of e-commerce is what you are already learning here at the Academy – setting up a quality site, and pulling in targeted traffic.

Okay, so much for handling the negatives. Now I want to tell you why you should be looking into e-commerce, whether you are just starting out, or you already have a stable of websites earning for you.

Advantages of E-commerce Websites

If you are starting out, building an e-commerce site will give you experience in every facet of online business:

Site design
Promotion
SEO
Finding products and suppliers
Negotiating deals and contracts
Buying advertising (if you want to)
Collecting payments
Customer service

You’ll be learning in the safest way possible. E-commerce sites are by their very nature legitimate websites, with a real reason for existing. No one will mistake your site for a “spam” site.

If you are already making some money online, you can diversify in two ways:
1. You can set up a new site, and try your hand at pure e-commerce
2. You can add e-commerce to an existing site

In the first instance, you’ll have a chance to explore and learn about areas of online business that you never will deal with just running an AdSense site. You already know how to rank sites. Maybe you’ll find that a new e-commerce site in a niche where you already rank an AdSense site actually makes more money than your advertising site.

In fact, I want to encourage you to do this – why not? You already know the market – now go after the products!

Second, you can add a shopping cart to an existing site to see how well your niche’s traffic responds to direct sales. You may be surprised at how much money you’re leaving on the table by just running ads. And now your site is a little more legitimate. You have some real, relevant content and something more to put on your home page than ads.

It’s All About the Content

An e-commerce site will generate more content than you might imagine. You have multiple sources of free content, and the opportunity to quickly become a subject matter expert in your niche – which will enable you to generate even more content.

Let’s say you are selling table saws. Ok, let’s hop on over to the manufacturer’s website. Here’s what you might be able to gather up immediately:

Product descriptions
Owner’s manuals
Warranties
Assembly instructions
Accessories
Other products that can be bundled with it (coffee maker + coffee filters)
Any product recall information
Complete info on versions: sizes, colors, voltages, etc.
Detailed specifications: weight, measurements, is it UL or CA approved
Reviews and testimonials
Any awards, citations, or other notable accomplishments that relate to the product / manufacturer.
Images – take them all. It is always easier to get forgiveness than it is to ask permission.

All the above can be re-written and re-purposed for your own website. The Owner’s Manual alone is normally good for a dozen or so articles. Now as you go through all of this information and re-write it for your website, what do you think will happen to your level of knowledge about your product?

Here’s an example of a website where nearly all the content is taken from the owner’s manual. Please note that this is not a “real” website, but one I put together to demonstrate some e-commerce and marketing principles.

By the time you are done, you could have 20-40 pages of unique content for your site (depending on the product, of course). And you may well be the most knowledgeable seller of that product.

This is just the beginning. Products are a gold mine for people who want to build authoritative websites. In addition to the above, you can get more information elsewhere:

• Competitor’s website – how do their products compare?
• Amazon reviews, and shopping site reviews
• Forums and blogs in your product’s marketplace
• Magazines and books that feature your product, as well as their websites: For example, if I was selling table saw accessories, I might visit familyhandyman.com to get article ideas.

Remember, we’re still just talking about one product. Maybe you can’t do all the above for every saw on your site, but you can do it for saws, jigs, routers, tool belts and so on.

Now stop and consider for a moment a web site with six categories, each containing a dozen products. Here’s your simple e-commerce site at launch:

Home
About Us
Contact Us
Shipping & Returns
Privacy
Category 1
Category 2
Category 3
Category 4
Category 5
Category 6
72 product pages

You already have an 83 page website, and you haven’t even started on your supporting documentation, reviews, manuals and all the other content you can generate.

You can launch with basic product information, and just keep adding to it as your site ages. More research, more content, more targeted traffic, all leading to more sales over time.

Each time you add content that speaks to a specific product or category, you link back to it. This generates even more traffic to your product pages, and more sales.

An added bonus is that you don’t have to sit and think up article ideas – they are there for the taking, and all you have to do is re-write and re-purpose existing material.

Our 72 product site could easily have 300 pages of content in just a few weeks of writing. As you continue to learn about your product and your market, you would add articles like the following:

Table saw safety tips
10 things to look for in a new table saw
7 table saw accessories you can’t do without
Turn your garage into a furniture making dynamo with these easy to make jigs
Table saws – the ultimate crime deterrent ☺

And of course, there will always be new product developments, ways to use them and so one. Products are an endless stream of content, so long as you are willing to do a little work to get it.

Pictures & Video
If your product needs to be assembled, you have a golden opportunity. You can use the line drawings in the manual (properly optimized with alt tags, a new file name, and a good description). But if your product is available locally, go down to Sears or wherever and have a store clerk put the thing together. Take your camera and record it or take photos. Just don’t show his face. When you get back to the house put up assembly instructions a thousand times better than the manufacturer has.

And speaking of pictures now is a good time to speak of pictures. Before you go to the store toss a small tape measure into your purse or pocket. Why not show your customers how long the power cord is or how far it is from the bottom of the lamp shade to the tabletop?

Exactly how does the filter slide into that thing? Be sure to get pictures of parts that latch or fasten together, or have grooves or some other alignment feature.

Take individual pictures of everything that comes in the box if you can. At least arrange everything together in front of the box. I love it when I go to a site and it says:
What’s in the box?

And then it lists everything. That’s great – a picture is better.

You can also do some comparison photos. If it’s possible, get photos of competing brands or different models next to your product. You may want to include your tape measure, or something else to provide scale so your visitors can gauge relative size.

What you need will depend on the product, but hopefully I’m ringing some bells here.

Once you have done even half of this, you’ll understand how inadequate your manufacturer’s pics usually are. Normally all you get is a “hero shot” of the item on a white background, from the front. No problem with that, except that it wastes a chance to do what pictures do best: provide information.

Remember that giving as much real, practical information on your site as you can is how you avoid interacting with your customers except in the best possible way – by selling them something.

Finally, if it is at all possible, get a person (especially a female) into your product photo. Next time you go into your bank, look at the posters on the wall: Smiling ladies everywhere. Everybody likes to look at attractive women, even other women. This works, especially for consumer products.

Show Your Product Being Used
If you can, show your widget in operation. Have pictures (video is even better) of the thing working, being assembled, being cleaned, whatever you can think of. If you can, get a woman into the picture. You don’t need a model – you need someone that looks like your customer, if you can figure that out. If you are selling to moms, get a mom type.

For typical consumer items, you don’t need awesome production values. Just do the best you can. You’ll get better with practice. The most important thing is to create the content and get it online where it can be found by the search engines and your customer.

The exception: If you are selling anything to guys, put a pretty girl in there if you can. Guys are easy marks for a pretty face. (Sorry guys, it’s true) This is why you see smiling ladies everywhere in advertisements.

The Kings of Product Content

No one does it better than the Snell brothers at Gun Dog Supply

Take a look at that review – accurate, original and knowledgeable product information. And the site – it’s ugly! So ugly that it makes a fortune. Anyone planning to sell product online should spend some time on this site, just clicking around. Notice the interlinking strategy, and the unbelievable depth of information.

Can you rank an e-commerce site with product info alone?

See GunDogSupply.com above.

Of course you can. I do it all the time. Not all e-commerce platforms have a blogging capability. But they all have a place for product information. If all you do is collect every bit of product info you can find, rewrite it, and post it on your site, you’ll have more and better content than almost all of your competition.

Remember, if you only work moderately hard you’ll be outworking 90% of your competitors. Most people are astoundingly lazy.

Product Criteria

Don’t Sell Junk!
You want the product to be high value. It’s difficult to make money selling product if your gross margin is less than $25, including the money that you spend on shipping. Normally this means that you want your product price to be somewhere between $50 and $1000 for consumer items.

Profit per item is not the only reason to sell more expensive products:

You don’t really want customers who are looking to buy cheap products. You don’t want customers that are looking for the lowest price on a particular product either. People that are looking to squeeze every last penny out of their dollar are typically more difficult to please in other ways as well. People who are willing to pay a fair price for a premium product are likely to be more affluent and easier to deal with.

Competition is Good!

The next thing to do is to make sure that you have competition. If you don’t have any competition at all for this product, chances are there’s not much demand for it either.

Is it Easy to Ship?

I like picnic tables. But I don’t want to sell them. They’re big and heavy. Heavy means expensive to ship, and big is even worse. Shipping companies will charge you “oversize” rates for large items that can eat up all of your profit.

Finding your products

You can hunt down your products in a number of ways, but I like to start with Amazon. If nothing else you get a feel for what is popular, and who the major players are in your niche.

Amazon.com
Researching product on Amazon is pretty easy, thanks to their great design. Hopefully you have something in mind and at least some familiarity with the product type or market. You’ll start with the Amazon Directory page.

Pretty cool. Just a huge list of categories. Let’s say you want to sell treadmills. Work your way through like this: Exercise & Fitness/Treadmills to get here:

As you can see, we’ll start by sorting on “Customer Review.” There is no point even looking at junk that doesn’t get good reviews. Inferior product will create so much customer support work that it doesn’t matter how great your margin is – you’ll still end up losing. And who wants to be the guy who sells cheap junk?

Make a note of the sellers and manufacturers here for highly rated products with a lot of reviews.

Take any product related keyword phrases, model numbers and brand names. Search for them on Google.

Take a look at the results. Even if there is no legitimate e-commerce site there, someone will be selling something. Start your investigation with them. Follow the product back to its roots, so far as you can. I sometimes order the product just to get the packaging and paperwork, and trace that back to the manufacturer or a major distributor.

Once you find the product source, go through their site from end to end. Read all of their content, download any reports or product literature they give you, look at their ads. Search on their model numbers and product names to get a feel for the product’s marketplace.

Now do the same for their competition – they may be your next target product anyway. Once you feel that you have a firm grasp of their products strengths and weaknesses, and you can discuss it intelligently, pick up the phone. You can use email, but your kill rate will be higher over the phone.

Get Your Site Ready

Before you make contact, make sure you have something to show them. If your site is running AdSense, take it off for the time being. Make sure it looks professional and the design is clean and easy to navigate.

Make the Call

When you call the company, be straightforward and tell them exactly what you want. You want to be a distributor of the XYZ table saw. They may only work through larger distributors and refer you to one of these. That’s fine. It’s always best to be as close to the factory in the distribution chain as you can, but that is not always possible.

Keep working at it, checking with different companies until you find one that will work with you. If you can’t, just set the product up as an affiliate item and move on to the next one. There is nothing wrong with having a site that has both products for sale and affiliate items.

About Suppliers

The terms distributor, dropshipper, sub-distributor and re-seller are pretty much interchangeable. Here’s why:

Normally, I buy from a factory and sell to an end user. That makes me a distributor, and the factory, a supplier.

Sometimes I get an order from someone who is going to sell what they get from me to someone else. Now, they are a sub-distributor / re-seller and I am the distributor. I even get orders from people that think I am the factory and they are the distributor. If you buy a machine from me and have it sent to your mom as a gift, I am a dropshipper.

There are companies that do nothing but buy for their clients. I recently was part of a deal where the chain ran from the factory to Tyson’s Food. It looked like this:

Factory (I don’t even know who they are) > Importer > distributor> ME> buying organization> Tyson’s Food.

So I was a sub-sub-distributor selling to a re-seller?

The point is not to get caught up in semantics. What you want is something you can sell with enough profit that you can make a profit that justifies your effort.

Dropshipper vs Agent
The Dropshipper is the company that actually ships your product. What most people think of when they hear the word dropshipper is actually a Dropshipping Agent like DOBA.

Why would you ever want to use an agent instead of going straight to the dropshipper?
• You may not be able to find the actual companies that dropship for your chosen product.
• Agents have huge databases of products – you may discover some things that you have previously not considered for your site, and that will help not only to expand your product line, but provide even more relevant content.
• Your agent will track your orders and earnings for you.
• They will give you a uniform invoice, tracking info, etc. from thousands of different suppliers and one place to organize all your work.
• You can get a single report that lists all of your dropship products and sales.
• Some Agents can “push” products to eBay, Facebook stores and other
e-commerce solutions.
• Agents often offer discounted rates for other services, like payment processing.

If you start working with an agent, it is worth your while to spend some time going through their service / website from one end to the other. Make sure you can live with the drop ship fees involved and the monthly charge for access to their products

Pricing

There are two ways to price product:

Cost-plus pricing is where you total up all of your associated costs for your product, and then add on the minimum amount of profit that you can live with. This gives you your price floor.

Value pricing is where you shoot for the maximum price you think the market will bear, given how much demand there is for the product and what the competition is doing.

You should use both. First, figure out what your price floor is. To do this you’ll have to calculate your true COGS (Cost of Goods Sold) including both fixed and variable costs.

Fixed costs:
• Widget from ABC export: 75.00
• Shipping materials: 1.50
• Labor to process order, package and ship: 9 minutes @ 27.50 / hour

Variable costs:
• Shipping: 5.61 to 11.87 depending on destination (I just pick a rate midway between my greatest and least shipping cost)
• Ads / marketing – let’s say this month it was 4.50

Just a note about the marketing cost. If you are doing your own SEO and marketing, track your time and assign a fair value to it. If you value your time at zero, you’re playing pretend, and your price numbers will be too low. Plug in at least what someone else would have to pay you to do this work. Then divide it by number of sales or sales dollars to get your figure.

If you haven’t sold this product yet, estimate as best you can. You can always adjust your numbers later.

So our COGS for this product is 97.98

I wouldn’t sell this item for less than 124.99, and I would try to get 150.00 for it. I usually won’t sell something unless after doing the calculations above I can clear 25.00.

The above doesn’t mean that these should be your numbers or your criteria. Especially when you’re starting out, you may want to sell anything and everything you can. This will generate both some cash flow and content for your web site. It will also give you some valuable experience.

Don’t use your competition as a pricing guideline either, except in the beginning. You will want to do some research on what your item goes for on other sites. And at first, you may want to position yourself in accordance with their prices. I try to stay at the top end of a product’s price range.

But once you start getting orders, try to increase your price. You may be surprised at how high you can go without losing sales. I sell one of my most popular items at twice what it goes for on eBay and Amazon.

I believe that part of the reason this works is that I have positioned myself as an expert on that product. Once you hit the site, you can find pretty much everything you could ever want to know about it right there. Why go anywhere else?

Free Shipping

Give your customers free ground shipping.
Give your customers free ground shipping.
Give your customers free ground shipping.
Give your customers free ground shipping.

There, that should be enough. If you are selling consumer items and it’s not picnic tables or Sherman tanks, offer free shipping. I have found that most of the time, I can jack up the price a little to cover it.

People hate hidden or unexpected charges. People like it when you give them a simple, all inclusive price. Offer free shipping and watch your conversion rate go up.

Customers

Your best customer is one who just puts their credit card into the cart, and then keeps doing it. Those people do exist, but from time to time you will have to provide customer support. Things break. People type the wrong numbers into forms, and transpose letters.

You also have to consider lifetime customer value. Is there a chance for multiple orders? Is your product mix such that you may be able to sell your cheese straightener customer a potato bender? If this is the case, you have to consider establishing an ongoing relationship with your customers via a newsletter, or other means.

Your goal is to minimize one particular kind of contact with your customers. This is contact that results from poor design or insufficient information on your website. When this is happening, you’ll know it, because their communications take these forms:

1. They want to buy but need some more information to do so.
2. They did buy, but they are confused about their billing, or shipping info.

Try to take care of these issues with your website ahead of time. You could do a lot worse than copying the GunDogSupply.com format shown above.

Those of you that are selling or planning to sell consumer items will be pleasantly surprised at how automated and hands off the process can be.

Customer Service

Entire books have been written about customer service, and I could probably write one myself. In the end, though, it all boils down to just a few concepts:

1. Don’t lie. Ever. If you can’t get their product, or the warranty is less than satisfactory, or you just forgot about their order, don’t lie.
2. When you’re wrong, apologize immediately and sincerely, and fix things as quickly as you can.
3. When they make a mistake – inform them immediately. “Your credit card didn’t go through” is a lot easier to say the same day than it is three days later, when they call to get the tracking number. Sit on it and it becomes your mistake.
4. Customers don’t like surprises. Make sure they have all the info they need to make an informed decision. If there is something that you think might decrease your chances of getting the order, put it out there anyway. “This item takes two weeks to ship.” Fine – let them know up front.

Competition

I love my competitors. Seriously. Just look at all the neat stuff they do for me:

• They post free product info on items I sell, and on related or competing items as well.
• They tell me (in a general way) what I might be able to sell an item for.
• They lead me back to the manufacturers for those items.
• If I can establish a relationship with them, I can use them as a supplier – and I can sell to them as well.
• They give me industry/ market related info on their blogs and websites.

Get to know your competitors if you can. At the very least, go through their websites with a fine toothed comb. Be especially careful to read any product reviews or comparisons they are doing.

I love it when I see someone doing a comparison of his widget vs. my widget. It tells me what he thinks the weaknesses in my product offering are, and what he thinks his strengths are.

Then I can go back to my site and answer all of his points in advance. I’m not above ordering his widget to see what kind of in-box marketing he is doing, and whether he is doing any follow-up.

Finally, I can put my own comparison up. Documented, with photos explaining exactly why I rock and he doesn’t.

Day to Day Operations

Your workday as an e-commerce site owner will be a little different from one as the owner of a bunch of websites with AdSense or affiliate links on them. Here’s what the daily task list looks like for a typical e-commerce business (mine):

Those Daily Admin tasks take me or Chris about an hour, tops. Then there are phone messages to respond to, and emails. Normally, by about 11am everything is done, and I work on my other businesses, while Chris (my office manager) answers emails and phone calls.

Remember there are only three kinds of work in this world:
1. Changing the position of physical objects with relation to each other and the surface of the Earth.
2. Manipulating information.
3. Telling other people to do one of the above.

As a website owner, you’re going to spend almost all of your time on #2. It really doesn’t matter whether you are selling product or selling as space.

Successfully running an e-commerce business is really pretty simple. It’s all about establishing relationships with suppliers and customers, and keeping the product flowing.

Underlying that is the basis for all internet business: the trading of content for traffic.

Is E-commerce for You?

If you genuinely like people, and enjoy helping others – this is where you want to be. If your idea of an internet business is to be alone in an office typing away all day and night – maybe not.

Either way, I have something to show you that I think you’ll find interesting. We all know that getting targeted traffic is the most difficult part of this entire game, right?

That’s one site. The graph shows only the sales that came through the shopping cart. Total sales on that site: $69,862.94 in the last three months.

E-commerce is the fastest way to push some real numbers through your company. Experienced marketers may want to ponder the $ per page view here. That’s not a lot of traffic. It is a lot of money.

I’m not going to tell you that selling product is the only way to make money online – there are too many people crushing it without doing e-commerce for me to claim that.

But I do believe that the combination of easy to produce relevant content, completely non-spammy websites and real customers that you can engage and get repeat orders from make it one of the most profitable methods.

If you have questions, you can PM me in the forums. I usually check in several times per day to see what’s up. I’ll be glad to help you out any way I can.

DaveH is a small business owner who has been selling goods on the web since 1996. He joined The Keyword Academy when it first opened in spring 2009 and is a valued forum contributor on e-commerce and best business practices.

If you’d like to learn more about e-commerce, visit Dave at Grabapple.com for more information and free tips on running a business and increasing your productivity. Dave’s e-book, The Grabapple Guide to E-Commerce, is a 219-page guide that fleshes out the content of this lesson and tells you everything you need to know about monetizing your site by selling product. See this forum discussion for more information on the book.

(Editor’s Note: TKA Contributing Authors are exempt from our “no self-promotion” policy.)