When Selling Online, Make Decisions Based on Data, Not Your Emotions
It's important to keep your emotions in check when making big decisions for your ecommerce store.
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I'm sure you've heard the saying, or maybe even used the line, "it's not you, it's me." Well, when it comes to ecommerce, that saying goes from being a lame excuse for a breakup to a likely truth as to why your store is not seeing success. As an ecommerce store owner, your emotions and self-awareness come into play regularly during the daily grind of operating your business. Your ability to control your emotions during critical decision-making moments could mean the difference between successful sales or a failed store; it's just that simple.
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As the founder of the eCom Hacks Academy, an online ecommerce education platform, and owner of the second-fastest growing Shopify store of 2017 only behind Kylie Jenner, I've seen that one of the most significant barriers to success in ecommerce is emotion playing a negative role during three important scenarios as a store owner, which I will outline below.
When deciding what products to sell
I firmly believe that people should sell products that they would buy for themselves. However, it's important to be realistic about profit margins on the products you're selling. You might want to sell high-end clothing, but if after advertising and cost of goods you'll only end up with a minimal profit, it's probably not the right choice to invest your time and money into, unless you're projecting to move thousands of units, which is rare as a beginner.
So, what should you sell? If you're utilizing a drop shipping model, there are countless products available through AliExpress, but they're not all going to meet desirable profit margins, which I classify as at least a 25 percent profit after the cost of goods and ad spend is factored in.
Instead of going with your gut feelings or "emotion" on what you think will sell, you must follow the data. We implement proprietary software to help autonomously curate products that have a substantial likelihood of being successful based on specific parameters. For those doing this manually in a drop shipping model, or really for any type of ecommerce, selecting product comes down to social proof and a combination of projected and past trends.
For social proof, specifically for drop shippers, you're looking for products that have tens of thousands of likes and recent comments that are flowing at a steady rate on Facebook. Typically, products like this are simple yet interesting, easy to understand in under 60 seconds and have a uniqueness about them that makes potential buyers feel that they can't get this product in stores.
When I mention this, I typically get questions about competition. Let me say this -- there are over 2.23 billion active daily users on Facebook. Even if a product is getting a lot of buzz on Facebook and other social platforms, there's still room for others to jump in on the action and turn a reasonable profit. A good example is a mini projector product I sold in my online store -- it had thousands of likes, comments and shares on Facebook, so I decided to give it a go. The product sold well for me, and profit margins hovered around 40 percent!
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With trends, you have to be able to look into the future, but remember that history repeats itself. Just a few days ago I was talking with my students about what they should be selling. We were experimenting with a software tool called Market Intelligence by Viral Launch to identify what sold well last year on Amazon during this time, as well as year-over-year for the upcoming months.
The software provides revenue that product is generating, in addition to a product discovery module that allows you to search for products by monthly revenue and sales periods on Amazon. This is very helpful for specific products you could sell yourself, or it can be used as an indicator for the types of products that will be selling during whatever period you choose to examine.
Overall, as a general rule of thumb, avoid products with low margins and or no social proof as a drop shipping beginner. Starting an ecommerce store will be exciting at first, but when the honeymoon phase wears off, you'll want to make sure that you're making enough profit to support yourself with products that will sell. Again, don't trust your gut over concrete data -- there's too much information out there for guesswork!
(Additionally, Shopify has a great ebook on selecting products to sell.)
When your digital ads are just ramping up
So, you've created a Facebook ad for your product. Like many, I'm sure you're checking it constantly, anxiously waiting for metrics to come back that you can analyze. Unfortunately, many ecommerce store owners start to panic if they aren't seeing sales in the early days and the ad continues to spend. If the ad is still in the active learning phase, it's most likely not ready for you to pass judgment and deem it successful or not.
Facebook's algorithm needs to see conversions coming through your pixel to be able to improve the individuals it serves your ad to. When you launch a campaign, or a new ad set within a campaign, your ad set(s) will go into what's called the active learning phase. This means that Facebook is looking for a certain number of conversions (ranges between 25-50 at a minimum) throughout that learning phase to collect enough data to create stability within your audience. During this time, which is typically one or two days depending on the ad spend, tampering with an ad set could be detrimental to building out a sustainable, scalable audience.
There are several different metrics we can use to determine whether we should continue to ride out an audience through the learning phase, or cut our losses and move on to testing other audiences or products, which I outline below.
- Click Through Rate (CTR): If your CTR is under 1 percent after you have sufficient data, it's not running efficiently and you should shut it down. On the contrary, if the CTR is over 2 percent, that's very good and you should consider increasing the daily ad spend to maximize profit.
- Cost Per Action (CPA): Your target CPA should be less than your target profit margin. A good target margin is, again, about 25 percent. Which means that after your product is sold, your ad spend plus your cost of goods for the product should equal, at most, 75 percent of the product selling price.
- Cost Per Click (CPC): Your CPC rate should be under $1. If it's going over after sufficient data has run through your pixel, you should shut the ad down.
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When the going gets tough
Failed products and ads can be demoralizing, but even I have a graveyard of products that never sold for me. It's easy to get discouraged, but the reality is that to find winning products you need to test different variables, which takes time and probably won't be right at first. From experience, I can say that for the gadgets and lifestyle products I sell, roughly one out of every 10 products will be a winner.
I classify a winning product as one that is bringing in a profit with good margins (about 25 percent as I mentioned earlier). If you keep your nose to the grind and don't accept failure if your first few ad sets don't work, ultimately finding what does, you'll be able to win more.
If you are starting your ecommerce store with a smaller bankroll, you may not be able to test 10 products at once, so it's important to be patient and realize that every failure is most likely bringing you one step closer to success. Overall, you have to be as logical as you can when it comes to selling product online. With ecommerce, the numbers don't lie, and patience and persistence always win in the end.
As a final thought, the best way to better yourself and control your emotions is by investing in learning opportunities, either paid or free, that help you hone your skills and learn new ways to have success. Read articles and books on the topic, listen to podcasts and always be looking to better your mindset and ecommerce abilities!