For the May 2021 LaunchBoom mailbag, we’ll answer questions about successful eCommerce margins, the best way to approach product development, strategies for low average order value items, and the best time to start talking with our team. If you want to submit a question for our mailbag, join the Crowdfunded Community!
Question 1
Generally speaking, what kind of margins do successful eCommerce players have?
Your margin and success of your margin is directly tied to the strategy of how you model or finance your business. When you consider what a successful margin looks like for you, make sure you think about what you’ll be paying yourself, what your ad rates are, what partners you’ll have to pay for services… Your margin isn’t just the difference between your product’s sale price and your manufacturing cost.
Generally speaking, a margin of around 60% is comfortable. You can be incredibly successful with lower margins, of course, but your strategy will be different if you find yourself in that range. (For instance, your acquisition rates have to be as low as possible if your margins aren’t as high.)
Question 2
Is it better to research the right pricing for a product, then figure out how to manufacture it cheaply enough to have a decent margin, or is it better to build a good product and then find customers for it? Should I identify a good cost first or a good product first?
Think of it this way: address a need first! As long as your product is addressing a need well, you can work from that starting point. The market for affordable items is different from the market for premium items, and a high price point won’t automatically turn people away.
The crowdfunding demographic tends to be a little more well-off than the general consumer public. That makes crowdfunding a place that’s more like a premium market than, say, a big box store. That means that a higher price point will fit right in as long as your product is attractive to potential backers!
Bottom line: if you’re creating an incredible product that fills a need somewhere in the market, then the price point is less relevant than you’d think. Focus on your product and let the rest develop from there. You can read more about what makes a good crowdfunding product here!
Question 3
What are some strategies for success with low average order value (AOV) products?
Generally speaking, low AOV products are replenishable, so you could consider selling multi-packs of your product to raise your AOV. You could also think of it less in terms of individual order value and more in terms of the customer’s lifetime value (LTV). If the AOV is low but your customers return to repurchase multiple times a year, then the AOV might not matter as much.
One thing to keep in mind is that your cost to acquire leads have to be low if your AOV is low. You may have to think of different ways to get the word out about your product. Think organic search, influencer marketing, or social media outreach–things that you’re not paying for.
Question 4
When is it a good time to start a conversation with ScaleBoom to plan the move to eCommerce?
As with so many things… it depends! Every company is unique and will have different needs. That said, there are a few things to consider.
First, do you have inventory? If you don’t, are you within two weeks of having inventory on hand? We’ve tested extensively and found that if you’re more than two weeks away from having inventory on hand, it’s not worth putting the time and money into launching a new website and advertising. Conversion rates drop very dramatically if you’re more than two weeks out from being able to ship. That said, it does take some time for our team to formulate a strategy for your business and build the website and assets needed to be ready to launch. Talk to us when you have an idea of when you’ll have inventory on hand so we can plot out a path to your website launch.
Second, are you launching a website around one product, or are you looking to launch a site for an entire brand that already has multiple items to sell? While our team can generally handle a new website for a single product (or a small number of products) within 30-45 days, sites with more products will naturally take longer to develop.
That said, we’re happy to talk with you about your plans for eCommerce! Apply to work with us today so we can determine where in the process you are and work out a good timeline for your company.
