Choosing the right product for your e-commerce brand is one of the most
important pieces of the puzzle.
But how can you tell that you have the right product?
Well, you can't really tell until you validate your idea.
And that's why one of your first steps should be making sure
that you've picked a winner.
Now, if you do skip this step, you run the risk of wasting your time
or even worse, you run the risk of sinking a bunch of money into products
that people aren't willing to buy.
So to avoid all of that, this video is going to teach you how to
properly validate your product idea.
These 16 questions will help you gauge whether your product is viable so that
you can enter the market competent.
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So without further ado, let's just hop right into it.
Here are 16 questions that you can be using as a framework.
So for this, I'm just going to be using a coconut hair mask as an example, but
you would just plug in your own product.
Okay, so our first few questions are going to look at the market as a whole.
Why is the potential market size or demand?
You're going to want to look into this before you invest a lot of
time, money or energy into an idea.
And this can be as simple as using a service like BuzzSumo.
So BuzzSumo will show you how many people are talking about your product
per day, but by far, the most popular tool is Google Keyword Planner tool.
It's a free tool which will help you determine how many people
are searching for specific words each month using Google.
And you're going to want to use this tool to search words that
are related to your product idea.
So we used Google Keyword Planner tool for our coconut oil hair
mask and it looks like there are over 73,000 searches per month.
And then using BuzzSumo, we were also able to determine that there
were about 150 tweets per day mentioning our main keywords.
Now this information doesn't give us a hundred percent certainty
that our product will have buyers, but it is a vote of confidence
that there's interest out there.
Next you're going to want to do some research on who your competitors are.
The more you understand about the competitive landscape beforehand,
the less surprises you'll face later.
So research your competition on Google, especially in the
countries that you plan to sell in.
Let's hop back into our example.
So we've done our research and from our analysis, we discovered that
there are three areas of competition, pure coconut oil, like the kind
that you would find in a grocery store, DIY recipes and commercial
products sold by large businesses.
For us, we didn't find any true market leaders for our hair product, but
instead we found a very fragmented market of manufacturers and retailers.
So we don't have the full picture yet, but this may indicate some opportunity for us.
Is it a trend, fad, flat or growing market?
Just as important as knowing your potential market size, it is also
important to understand which direction the market is going.
The last thing that you want is to realize that you've actually missed the boat and
the market is rapidly declining, right?
So for our product, we know from Google trends that the search interest has grown
significantly over the last several years.
But even though coconut oil is trending, as of right now, the beauty industry is
always going through marketing shifts that push new ingredients as breakthroughs.
So it's important to recognize that at some point in time, this
trend may die out and that will obviously cause a decrease in demand.
So if you're not sure whether a trend is going to continue upward or
die out, just do a bit of research and use tools like Trend Hunter.
Also a lot of entrepreneurs report on using just their gut instinct when
it comes to capitalizing on a trend.
So your intuition can be valuable as well.
Can your potential customers buy the product locally?
So if your product is readily available locally, that's just one less reason for
people to seek your product out online.
So let's go back to our example.
Coconut oil as a raw ingredient is pretty widely available online and
offline, but coconut oil based hair care products are definitely much more
scarce offline, and it would likely require a specific trip to find it.
So if you're also finding that your product is hard to find in stores,
then that's definitely a good sign.
Who are your target customers?
Before you fully decide on a product it's important to get a sense of
who your potential customers are.
You don't want to find out too late that your potential buyers are living somewhere
that you can't shift to, for example.
So if you're in a market that has major players, You could use channels
like Alexa to find out more what the demographics of your target market.
But in our case, it's definitely a little bit more difficult because there aren't
really any major competitors with websites that we can analyze and just spy on.
So if you're in the same situation, You can just get a feel by using social media.
So try Twitter, for example, you can check out tweets that, mention your
keywords and just take a closer look to see who exactly these people are.
We did an analysis of our keyword, coconut hair masks, and most of
these people tweeting were female.
Based on credible profile images.
We can also assume that the average age is between 18 and 35 and then
having used Google Trends we know that our target customers are
mainly in the U S and in Canada.
From this information, we know that we can really easily
reach our potential customers.
And then we also do a little bit of extra research that basically indicates
that our particular demographic is not shy about spending money online.
So that's definitely good news for us.
So now it's time to move on to our product based criteria.
These are gonna be the questions that will consider factors about the actual
product itself and they're going to help you get a better understanding
about what your product strengths are and what are some potential pitfalls.
What is your potential selling price?
The lower the price, the lower potential profit per unit.
It has been generally accepted by many top e-commerce entrepreneurs that
product sell between $50 to $150 hit a certain sweet spot where you can
make an acceptable amount per unit, but not too high that customers are
hesitant to purchase online or expect premium services like phone support.
For our hair mask,
we looked at about two dozen comparable products from different brands.
We determined that we would be able to charge around a $9
to $20 for 120 milliliters.
Now for us, this is a little bit of a low price point.
That means our margins are going to be small and it's going to make it difficult
when using paid advertising channels, especially when we're just starting out.
So, yikes.
That's a little bit of a red flag, but this is our first red
flag in our research so far.
And frankly that is okay, right?
Not every box is going to be checked when doing this exercise.
So let's just go ahead and take a look at the next questions.
If you're looking to get started building an online business, but maybe you're not
sure what to sell or you need help finding product, then make sure that you're
checking out our free 40 minute webinar.
It's going to teach you how to find winning product ideas, how to validate
those ideas and how to get started.
So just click the link in the description box below to get
started with your free training.
Now, what is your potential markup?
Markup is the excess amount after the cost of your product.
This amount will cover your expenses to run your business
and it's going to be your profit.
Now, remember when you're looking at your potential markup, you may
also want to consider how it's going to change as your business grows.
So for example, we're just starting out, right?
So we're going to be ordering small quantities.
But as we grow, we're going to start to get some bulk pricing and that's going
to mean our costs go down and there's going to be some more leftover money.
Like we just talked about, we know we can comfortably sell
anywhere between $9 and $20.
Now we did some research on our costs, including ingredients in
packaging, and it's going to cost us a$5.83 to produce a hundred units.
So if we were to sell our product for $9, which was at the lower end, our
markup would be a concern for sure.
But if we aim for the higher end, at $20, we can still
enjoy a pretty healthy market.
All right, next up, how many skews will you have to stock?
So skews referred to types or styles of products like sizes and colors.
And in general, more skews just mean more potential headaches.
So a lot of skews are going to increase your costs for inventory and storage,
and it's going to increase the chances that you might make a shipping mix up.
So finding a product that has only one skew is definitely a bonus.
In our case, our product choice is just going to begin with one skew.
Now there's also potential to create an entire line with this concept.
And that's great because that's going to open the door for
opportunities further down the line.
Question number nine, can you offer a subscription?
So subscription based models are definitely not necessary to build a
successful online business, but the ability to do so is definitely very
desirable and that's because subscriptions increase recurring revenue and it saves
you costs on acquiring new customers.
For a hair mask, there's a potential that this could fit into a subscription
based model because it is a consumable, but it's important to be realistic.
A customer is likely just going to go through a couple of these a year.
So our subscription plan would definitely have to reflect that need.
Question number 10, what is your products
size and weight?
The size and weight of your product can have a big impact on
your sales and your bottom line.
If your product is oversized or maybe it's super heavy, that's going to
result in expensive shipping costs.
And those costs can deter potential buyers and it can eat into your margins.
All right,
so let's take a look at how this would affect our product.
Most shipping companies would consider ours to be a small
package, both in weight and size.
So you can even do your own research as well.
Visit your carrier's website and put some rough numbers, and then you can get a feel
for how much things are going to cost you.
All right, question number 11.
How durable is your product?
A durable product is obviously ideal.
A high quality product is going to decrease returns and overall durability
is going to ensure that your product isn't damaged as it's being shipped.
So again, going back to our example of our hair masks, so maybe we would want
to use a plastic container because that's going to be cheaper and it's going to
be more reliable than shipping glass.
Well also heavily vet our ingredients to make sure that they're safe and
effective, which is going to ensure a high quality product in the end.
Now don't forget that when you're asking yourself this question, you're thinking
about all the different factors that make your product durable, whether that's
the packaging or the product itself.
Question number 12, will you face seasonality swings?
Seasonality refers to swings in purchasing behavior over the course of the year.
So for example, Christmas trees, of course, they're going to be extremely
seasonal, all of them being purchased in the month of November and December.
Seasonality swings are very important to keep in mind because of the effect that
they can have on your cashflow, as well as the overall viability of your business.
We used Google Trends to better understand if we would potentially
suffer from seasonality swings.
Now we can definitely see that there are some subtle spikes in the searches
in January, and we're just assuming that people are looking for a bit
of a rescue in the colder months.
But other than that, there doesn't appear to be too much seasonality that would
affect our product choice, but we'll definitely keep this data in mind for
when we market our products in the winter.
Question number 13, does your product serve a passion or does it solve a pain?
Products that solve a pain point or serve a passion just make
finding customers that much easier.
Now, products that are maybe just, you know, nice to have, might be a little
bit tougher now for us, it's definitely safe to say that our product choice can
solve a pain point for people that are suffering from dry or brittle hair.
And arguably it also serves a passion as well.
Since some people are invested in this hobby of keeping their hair
looking healthy and looking good.
All right, next question.
Is your product consumable or disposable?
A consumable or a disposable product is going to be good
from a business standpoint.
That's because it's going to provide you a better opportunity for repeat business.
As a hair care product our product choice is definitely going to fall
under the consumable category.
So other consumables might include food or cleaning products for example.
Question number 15.
Is your product perishable?
Choosing a perishable product is going to pose a risk for you, especially if you're
struggling to make sales, because that might mean that you could be throwing out
some of your inventory if it goes bad.
So this is definitely an important question that you want to ask
yourself before you stop up.
So going back to our case study, coconut oil has an approximate
shelf life of three years or longer.
This should give us more than enough time to figure out our marketing
plan and to sell our product.
Plus we'll also want to consider the time that it would take for our
customers to actually use the product up.
Question number 16.
Are there any restrictions or regulations for your product?
Restrictions and regulations are normal for many businesses,
however, it's definitely best to learn about this before you invest
time and money into your business.
So for us in our product, as far as we've been able to determine, there
aren't really that many regulations or restrictions that required, but if
you're getting into food cosmetics, or even baby toys, for example, you're
definitely going to want to make sure that you're doing your research first.
So after looking at our case study and taking into account the market
and the product itself, we feel strongly about our product idea
and the potential market for it.
So some highlights that have really been standing out to us to give us this
indication are the low cost to start the business, the strong search demand, the
trend trajectory and the keywords that we could potentially rank for in Google.
However, we do have a few concerns that prevent this from being a
complete slam dunk and some of those being the low product price
point and the competitive landscape.
A large part of the potential success for product is going to come from building
a beautiful brand around this product.
And then we're also going to want to make sure that the product
itself is more effective than just coconut oil on its own.
Once you have your product idea and you validated the potential market
for it you're going to be ready to start building your online store.
Shopify makes selling online really easy, really fast, and definitely scalable.
So you can get started with a free 14 day trial and you actually don't need
a credit card at all to get started.
And it's going to give you a full two weeks to build a beautiful
e-commerce store so that you can start selling right away.
I will leave a link for you guys in the description box to get
started with your free 14 day trial.
All right, so hopefully you found this example helpful, make sure that
you're asking yourself these questions
just to do the proper research before you just go ahead and jump right in.
And that way you're going to have a clear objective understanding
of whether your product idea is viable and if it is you're going to
enter the market more confidently.
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But other than that, I'm glad that you were able to join me in today's video.
My name is Michelle Bali and I will see you in the next one.
Bye.