I always liked the idea of fresh eggs every morning from my own hens.
When I was researching what chicken coop to buy, the restrictions that the council bylaw’s imposed, how much the grain costs etc, I found that very few chicken coop builders sold their chicken coops online. A few sold via TradeMe but, at the time, only one had their own website.
I saw an opportunity there, so I made deals with 8 suppliers through-out NZ.
I created a website that showcased their chicken coops with details and photos and an order form.
With almost zero competition, I dominated the search engine results in a short time. I got great website traffic, I got a high rate of conversions.
Every few months I called each supplier and asked them which of the enquiries/orders I had passed through from my website had converted to sales. And then I invoiced them for a 4% commission (that’s all they could afford).
After 18 months I had sold $25,000 worth of chicken coops.
Sounds pretty good, right?
But you are forgetting that my commission was only 4%, so I had made just $1000!
The project had been 100 hours of work so I was making $10 an hour!
I was disgusted and sold the website to one of my suppliers for a few hundred dollars.
Lesson #1: Don’t Work With Low Profit Margin Items
- The profit margins were so small that there was very little money to share with me for a commission
- Instead: Ensure there is a healthy profit margin in the items
Lesson #2: Don’t Sell (Or Resell) Physical Products
- The logistics of moving a physical product around make it so complicated
- Physical products are more susceptible to competition which decreases prices and reduces profit margin
- Instead: Consider digital products, subscriptions, advertising programs etc.
Lesson #3: Don’t Rely On Honesty Or Memory For Commissions
- My honesty system for collecting commissions was time consuming and open to dishonesty (or forgetfulness)
- Instead: If an automated system can’t be easily and cheaply created, forget about it
What a sad story! Reselling physical products can actually work though, I’ve done it and made huge profit margins.
A few years ago I was living in Auz and bought bulk loads of very low cost wholesale jewelry online (from Taiwan), and resold on ebay. For instance I would pay $1.60 for a necklace that I would sell on ebay for $9.99. There are lots of people doing this so there was a lot of competition, which in the end I couldn’t be bothered with. But on average I would make $50-$100 weekly, which was good for me at the time being a new stay at home mum.
There are lots of people who are actually successful with reselling products on ebay or trademe, or even their own websites. The difficulty is coming up with the great idea of what exactly is going to be a good product to resell. So it can be done this way (buying wholesale stock yourself), but yeah as you have said here, it’s never going to happen earning 4% commissions.
I do know of a really good example of what I’ve described here if you’re interested.. dredge.co.nz. They sell gold prospecting equipment and are the only suppliers of this type of equipment in the country. I know this as I’ve purchased some pricey equipment from them myself. After having researched the item I was after I found that my only other option to get it was to buy it from the US, and it would be about half the price of what I’d pay in NZ. But of course, then you have GST to worry about.. So I paid the $1200NZD for the highly coveted item I was after(gold cube), which goes out of stock as quickly as it get in. Point is, these guys are rolling it, and they had the same idea principal that you did with the chicken coops; Identify a gap in the market and capitalize on it.
ah, the classic story of “who gets rich on the goldfields? The guy selling the pick-axes” 🙂
Interesting. I appreciate the post. Very important lessons.