E-Commerce Doctor Ebiz® Q&A

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Why the Fishing Lure Won't Reel in Much Online Profit

Dr. Ralph F. Wilson, Editor-in-Chief Web Marketing Today, Rocklin, CA
Jan 16, 2007, 20:29

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"I invented and patented a fishing lure (the "Bottom Banger") about five years ago. I have tried to sell it online, but every time I try I fail. I have a video showing the lure in action and I do sell them in the local bait shops for $1.99. Can you steer me in a direction that will make this take off?" -- Greg Amsler

Unfortunately, no. Here are the options I see:

1. Sell wholesale to local bait shops, but your market is limited.
2. Sell wholesale to major retailers. Since this is a new kind of lure without built-in demand, you'll probably have to use your video to hook large retailers, and they may have to use the video to sell them in the stores. Not a likely outlet.
3. Drop-ship for online sellers. A listing in the Drop Ship Source Directory will bring you a steady stream of online retailers who will buy from you at a 30% to 40% discount and let you ship it for them. But packing and shipping one or two at a time will kill you, since you have no margin with the $1.99 sales price.
4. Raise your price to two for $10 and sell with a convincing online video. "With the Bottom Banger I can sit next to someone using a normal lure and pull in seven Walleyes for every one they catch!" You'll probably convince some people to pay $10 -- and it'll probably be well worth the price for bragging rights! But even with a $10 price, you'll still be working dirt cheap. Here's why:

	Income	Direct Costs	Gross Profit
Sales Price	$10.00
Postage and Handling	$1.00
Discount rate to take credit cards (PayPal is 2.9%. Merchant credit card accounts range from 2.25% to 2.5%)		.32
Transaction fee, usually 20¢ to 30¢		.30
Cost of mailer (bubble mailer)		.25
Cost of goods		.25
Cost of postage (assuming you ship first class, under 1 oz.)		.63
Time to process each order -- 5 min. Assume you pay yourself (or spouse) $8/hour.		.66
Paid Search Advertising (assuming 10¢ per click and a 2% conversion rate)		5.00
Totals	Income $11.00	Direct Costs $7.41	Gross Profit $3.59

This hypothetical analysis assumes that an angler would pay $10 for a couple of Bottom Bangers. It doesn't cover web hosting, payment gateway, monthly merchant account costs, gas and time to the post office, etc. However, if you can get top rankings for "fishing lure" you can save some money on paid search fees. When I look on Wordtracker.com to assess the demand for "fishing lure" and related words, it's not strong. Enough to make some sales, perhaps, but not strong enough to get much volume.

I have a friend who purchased hundreds of old phonograph records for $1,000 and then sold them one at a time on eBay. Yes, he had some demand, but with an average order size of $5 - $7, the eBay fees, plus processing and shipping time ate up any earnings. Very labor-intensive for little profit. The advantage of selling softgoods (e-books, downloadable software, entertainment, etc.) is that you have no shipping time or costs to cover, allowing you to keep your price lower.

To make money selling tangible goods online, aim for an order size of at least $20 -- hopefully substantially more. It costs as much time to process a $5 order as it does a $50 order, but with a $50 order at least you have some profit to cover your time and advertising costs and still get ahead.