Entrepreneur Series w/ Wes O’Donnell: Find a Profitable Product Line

Entrepreneur Series w/ Wes O’Donnell: Find a Profitable Product Line

Entrepreneur Series w/ Wes O’Donnell: Find a Profitable Product Line


223A2817esquareWes O’Donnell is the Managing Editor of inmilitary.com/inmilitary and a successful “serial entrepreneur”.  He recently gave a TED talk on Data Visualization and is speaking at the US Air Force Academy about Leadership in February. Connect with him on LinkedIn!

“The best way to predict the future is to create it.”

– Peter Drucker


If you’ve missed any of Wes O’Donnell’s entrepreneur series, you can catch up with earlier articles here:  http://inmilitary.com/category/entrepreneurship/


Choosing which products to sell in your store is one of the most difficult decisions that you’ll make. You’re about to devote a lot of energy to building a website and marketing products; you want to make sure that they’re the right products. And while there is no “perfect product”, there are certainly very good products.

I once received some absolutely horrible advice regarding what products I should sell: “Follow your passion and sell your hobby! If you’re passionate about the products that you are selling then you will be more successful.” Just. Plain. Wrong… I don’t care how passionate you are about your 1984 line of Kenner Brand Star Wars Action Figures or your obsession with Japanese eating utensils; if you pick a niche that’s too small, you’re sabotaging the mission before it starts.

I’ve assembled some imperatives to help you in your decision making process and, with luck, make your brainstorming easier. That said, as with every rule in life, there are exceptions to the hobby rule. If your particular “passion” cross-pollinates with what I’ve listed below in Imperative #1, then you may have a viable product line.

Imperative #1  Find your target customers

You need to go deeper than just throwing some products on the internet for the general public and expecting a large return. You really need to get granular and identify who you’re selling to. These are some possible groups:

Hobbyists: The amount of money that some people are willing to spend regarding their hobby can be staggering. Hunters will easily drop thousands of dollars on equipment in just one year and amateur photographers will dish out a small fortune in lenses, software and lighting. This is a great strategy if you find a market with a passionate customer base. In addition, these groups often get together and talk about how awesome their hobby is. If you can infiltrate their group or online hangouts, it’s a wellspring of potential customers.

Government & Business Customers: Here’s an interesting proposition- Don’t sell anything to “consumers” or regular people. Before I started my first company, I read an article in Entrepreneur Magazine about a company called “Headsets.com”. This company was making millions of dollars a year from selling nothing but headsets to other companies. It was a revelation for me. It turns out that trying to constantly stay on top of what trends the general public is interested in at any given time was a miserable and time-consuming exercise. On the other hand, which products that companies (or the government) need to continue to function is very predictable. These two groups often order in much larger quantities then their consumer counterparts and if you’re adding value to your products, as you should be, they are likely to be repeat customers. This is called B2B (Business to Business) as opposed to B2C (Business to Consumer).

In addition, businesses and the government are usually very good about paying their bills on time and they aren’t as touchy about the price as consumers because they aren’t paying for your product out of their own pockets, meaning that you can charge a premium. This is the model that I setup starting out with medical carts and moving into videoconferencing furniture. At ModernWorkspace.net, I only recently started selling compact computer desks to “consumers” and have enjoyed great success with that, however my business and government customers are my bread and butter.  

Gender: According to Kristina Knight at Bizreport.com, women make the majority of transactions, but men are more comfortable making larger purchases, spending 32% more money per sale. Highly successful ecommerce entrepreneur Andrew Youderian from eCommercefuel has stated that products geared for a women’s niche are under-represented and could be a huge opportunity. If you do open a shop that caters to women, just remember that they are less likely to buy a “big-ticket item” than their male counterparts so choose your products accordingly.

Age: 29% of the 18-34 demographic have found product information through social networks. As if we didn’t already know how important social networks are in marketing, this simply reinforces that fact. If you’re ignoring Facebook and Twitter when advertising your products, then you are missing out on a large chunk of a demographic that values social recommendations and reviews in the purchase decision making process.

Also keep in mind that you don’t want to choose a niche whose customer base is senior or elderly if your store is primarily online. Even though today’s seniors are notably, in small steps at least, adopting current technology, this is still a generation that feels more comfortable placing an order over the phone instead of online. Phone orders are fine sometimes, however if your entire customer base is doing this, it’s going to be hard for a small organization.

Imperative #2  Choose a product that you can add value to

For any online merchant, Amazon and eBay are the primary competition. Why would a customer buy this product from you when they can find the same product on Amazon for an incredibly low price? There has to be a compelling reason that your customers should buy from you instead of them or you will lose most sales.

There are two time-tested solutions to this problem:

  1. Outstanding Web Content 
  2. Customer Service

Lots of companies use corporate jargon when talking about customer service; phrases like “long-term client relationships”, “customer-focused approach” and “exceed client expectations”. Et cetera… For you and your company, it has to be more than just jargon; you have to live it. A happy customer will evangelize their direct experience to others. In my experience, 10 evangelizing customers are better than 100 advertisements. In fact, I built this into the company culture of Modern Workspace. We believe, with 100% certainty, that “happy evangelizing customers based on positive direct experience” is the only sustainable source of long-term profits.

In addition, I believe that companies that use any form of coercion, trickery or misleading advice may indeed generate short-term profits, but such tactics will eventually destroy the firm.

It’s not about you, it’s about what problem you can solve for your customers. When your customers come to you, they need a problem solved; they don’t want to be handed more problems. Let me use an example from a recent interaction of a Modern Workspace employee at a popular large book retailer that she recently visited in person:

Ready to leave, she proceeded to the checkout line to pay for her book. The clerk asked if she would like a membership card that would only cost her $X amount but would save her X% on future purchases. After replying “no thank you”, the clerk then insisted “Are you sure? You will save XY% the next time you make a purchase and you would have saved $XYZ on today’s purchase.” Again, she replied “no thank you, I’m in a bit of a hurry.” In essence, she, like 99% of retail customers, just wanted to pay and leave.

Of course, if we dig deeper into this example, the clerk is not really at fault here. The clerk, in fact, had a problem of his own: his manager told him to push X amount of memberships over the course of his shift at the checkouts. Now the clerk is passing his problems onto his customers in an attempt to solve his own problem.

Every time you answer the phone and every time you send an email, customer problem solving should be running through your mind. Trust me on this. There are so many companies not doing this, that by going the extra mile to earn and keep your customer’s business, you will be light years ahead of the competition. I’m not saying that you should believe the old adage that “the customer is always right”, because that’s a false statement. But you should be going out of your way to figure out what the customer’s problem is and how you can solve it.

Consider this: Even today, after every single order that we receive at Modern Workspace, I send a personal email to the customer instead of the generic auto-responder email confirming their order. It goes something like “As the founder of Modern Workspace, I like to personally reach out to all of our new customers. So, on behalf of the team, thanks for your order!” And then, I give them my direct business line number (not the generic 800 number on the site) to call me directly if they have any issues. Word about your customer service will spread like fire and customer’s will seek you out. You can then partially justify having higher prices for your products over what can be found for the same item on Amazon. But this is only half of the solution. The other is: 

Outstanding Web Content. You must distinguish yourself from other online retailers selling the same things that you are, most importantly Amazon, otherwise, you will lose customers to someone that has a lower price. How do you do this? You have to add value to your product via your website that other retailers are not.

Let’s say that you are selling wall mounts for flat screen monitors and TVs. Of course, a customer can find a very similar wall mount on Amazon for, perhaps, $10-$20 cheaper. But on your online store, you have multiple beautiful high resolution photos of your mount, a highly detailed product description complete with clear specifications and you have a step by step how-to article for someone that wants to DIY mount it on their wall. Throw in free shipping and personalized “problem solving” customer service, and you have just won the sale over Amazon.

Creating guides and how-to articles related to your product line serves three very important functions: First, it establishes you (in your customer’s minds) as the expert or authority in your chosen field… in this case, wall mounts. Second, you’re solving a customer’s problem by providing them with information. Third, it’s very good for Search Engine Optimization. I have had many customers make purchases from me because they got to me through a Google search, not for my product, but through a “how do I do X” type of search. Google loves content heavy websites. If your online store is nothing but products and prices, your Google ranking will suffer, your sales will suffer and you’ll end up in the pile of failed ecommerce stores.

Just remember, if you’re going to charge more than your competitors and still make sales, then you have to offer something of value to the people that visit your web store.

“But Wes, why can’t I compete on price?”

Because low-margin sales will eat into your overhead and it’s impossible to grow your business in the low-margin world. Margin is the difference between what you paid for the product from a supplier and what you sold it for to a customer. So, the higher the margin the better.

So now that you know about adding value, how can you use this information when choosing a product line or niche? 

Complicated products are a great choice as it will give you the opportunity to inform your customers. Any opportunity you have to engage with a potential customer is an opportunity to convert them. Examples of a complicated niche include Audio Video equipment for the home or office, videoconferencing, or home security systems like biometric fingerprint deadbolt locks, et cetera. Also, the more complicated an installation is, like wiring a videoconferencing system, the more room you give yourself to create helpful content.

You might choose a niche that requires multiple interconnected products. Certain components only work with certain other types of components. This will give you a lot of room for a setup guide or some other informational how-to guide, like a compatibility list, to help your customers. We could return here to our wall mount example:  only certain wall mounts will fit certain TVs and some require special hardware to make fit and so on.

Imperative #3  Final Considerations Before You Choose

Price.  The average price for goods at ModernWorkspace.net is right around $2,500 per product and are what one would consider “big-ticket items”. I have some products that are almost $10,000 and some that are a few bucks. However, it’s important to note that I sell to other businesses, including the government and healthcare, and price isn’t normally a sensitive topic with my customers.

In his book “The 4-Hour Work Week” author Tim Ferriss claims that your ideal product price for selling to “consumers” should be between $100 and $200 and he gives some very compelling reasons why this is the sweet spot.

$100-$200 allows you to make a decent profit per sale. If you’re selling a bunch of underpriced products then your margin will also be low. It might seem like your racking in the sales but your revenue numbers at the end of the month won’t look so hot. In addition, you’ll do all of the work of processing orders and making sure products get shipped for very little monetary reward. Conversely, if your products are too expensive, you might have a big payday, but sales will be fewer, perhaps even as low as one per month until you really get established with Google rankings for keywords related to your product. This can be tough because in the beginning, getting sales is a huge motivator. When sales are so few and far between, it’s easy to get discouraged.

So, at least at first, it’s crucial that you keep your morale up. Let’s look at this example from Andrew Youderian’s eCommerceFuel.com for why it’s better to have a lower profit margin on a lot of items rather than a nice big margin on one item, (with all respect to Andrew, I’ve changed his generic “units” to Star Wars Action Figures for my example:

10 Lando Calrissian Action Figures at $32.00 margin = $320.00 profit

1 Bobba Fett Action Figure at $125.00 margin = $125.00 profit

Difference in profit: $195.00 in favor of Lando when clearly Boba Fett is more desirable. This example shows that a higher margin is not always a good thing. In this case, selling more products at a lower price resulted in much more money than selling one product at a high price.

Of course, in this example you make more money by selling more products at a lower profit margin but I should mention that you’re also doing 10 times the work processing the orders, so you should factor your time into any equation as overhead.

Accessories.  Another consideration is choosing products that require a lot of accessory items to function, or at the very least, get the most out of the main product. One industry that has exploited this is the video game industry. Imagine buying an Xbox One for $500; what’s another $20 for an HDMI cable and an extra $50 for a second controller? After all, you want to get the most out of your main purchase. When choosing what products to sell in your store, keep accessories fresh in your mind.

Perishables. I’m using the word incorrectly since it normally applies to foodstuffs, but hear me out… You might consider selling products that need to be replaced on a regular basis. Let me give you an example from ModernWorkspace.net: One of my best selling products is an anesthesia medical cart that costs $2000. These carts are extremely durable (made out of American steel) and will last for years, or if you’re a VA hospital, 50 years… Seriously, some of VA’s equipment is Korean War era. Some of my customers won’t return to me for years to come until they expand a wing of the hospital or need to replace an aging cart. Fortunately, I sell medical cart accessories that need to be replaced on a regular basis like plastic breakaway seals for these anesthesia carts or plastic divider trays that get worn out and need to be replaced. This allows me to keep customers returning after they have made that first big purchase.

Plastic Divider Trays and Plastic Breakaway Seals that keep customers coming back. Remember your disposables!
Plastic Divider Trays and Plastic Breakaway Seals that keep customers coming back. Remember your disposables!


“We’ve Got a Niche Down”

One last thing. It’s imperative that you “Niche down” or focus your product offerings. I know an online store owner that started selling smartphone and tablet protective cases. She had an amazing website, I mean really top notch; and she was a social networking guru. She was offering hundreds of cases for every type of mobile device that you can imagine but her sales were in a perpetual slump.

I advised her to focus her product niche down to just one device and remove all of the other products from her site.  In this instance she chose iPad cases. The results were no less than staggering: She was able to focus many more of her resources and began pushing products for just that device. In addition, because of her renewed focus, she became a product expert for all things iPad and her customers sought her out as the authority in her given niche. So what was the financial outcome?  A jump from five figures annually in sales to six figures annually.

This would be a good time to look at Headsets.com run by Founder and CEO Mike Faith. Mike is an advocate of the “ruthless focus” or “niche down” philosophy. Headsets.com sells headsets B2B to other businesses around the world and brings in exceptionally large profits. Started in 1997 by Faith with only a few thousand dollars, today Headsets.com generates over $30 million in sales annually with over 700,000 customers. The important thing to remember here is that Faith and company sell only one thing: Headsets. What set them apart early on from their competitors? Mike claims it was Product Expertise; they established themselves as the authority in the headsets niche. If a customer had a question about how a particular headset worked or what is compatible with what, Mike Faith was there with an answer. It’s important to note that Mike wasn’t some headset aficionado when he started, he could not have cared less about headsets in 1997. But he recognized that he needed an edge over the many headset competitors and becoming the expert in his niche was the answer.

When Melissa Campanelli, writer for Entrepreneur magazine, asked Mike Faith during an interview in 2009 what makes his ecommerce site so incredibly profitable, he responded:

“we simply remove all the barriers to buying our products.  I know that sounds trite, but it’s true.  We offer great prices, unbeatable guarantees, a solid reputation, free trial of all our products, all backed by smart, knowledgeable, professional reps offering the world’s best customer service.”




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