Q&A: Does it make sense to sell a cheap product?

This question comes up quite a lot, and the answer is…

Yes. Of course.*

As a general rule you can assume it makes sense to sell a cheap product, whenever you see someone selling it because… why else would they be selling it?

*There are weird fringe cases where a person might sell something at a loss, but Occam’s razor suggests that most people are selling things because it makes them money.  In business, it’s safe to say that profit is everything.

The question with Amazon is actually never about the price of a product, the real question of worthiness is about the profit. Selling a $100 item 20x a day seems great because that’s technically a $730,000 a year business.

However if that item costs them $94 after shipping, manufacturing, Amazon’s commission, sales tax, PPC advertising, etc, it’s really a $43.8k a year profit business.

Compare that to an item that you sell for $12 but actually only costs you $5.  At 20x a day that item actually generates more profit than the $100 item.

Beware the Add-On Badge

Items below a certain price (generally under $10.00) fall under the auspices of the “Add On Item” program.  Amazon won’t ship these items by themselves because the cost of shipping might eat into their profit margin.  Again, profit is everything.

This means that no one can really buy your product unless they purchase another product in the same order. This can greatly affect your sales, unless it’s the type of product that people frequently by multiples of, or with another item.

NOTE: I’ve heard a rumor that if you start your price at $9.99 and gradually lower it, you can bring the price lower and avoid add-on status, than you could if you were to just set it at a low price to begin with.

So, set your price to $9.99, then $9.79, then $9.59, etc, and inch your way to your lower price and see what happens.

Perk: Fewer Returns!

There’s an added upside to selling a cheap item.  Fewer returns.  If you buy something that costs $50 and it doesn’t work, you’ll likely return it.  $12? Meh.  You won’t even bother.

Now, we are of the opinion that you should never knowingly sell a mediocre product, but there are some wheels that will always be squeaky no matter how much grease they receive so it’s nice to cut back on the number of times you have to interact with them.

So, to recap. Check your costs, find your profit, make sure your price isn’t too low, and go for it.

Happy Selling!

Leave a Reply

Your email address will not be published. Required fields are marked *