If you’re wondering how to sell a product online, you will soon see that the world is your marketplace. Online shopping is now the preferred way to go for many consumers. For instance, 67% of millennials and 56% of GenXers prefer online shopping to in-store shopping, and even a significant number of older individuals buy online.
Whether you want to combine online selling with a bricks-and-mortar operation or sell exclusively online, be sure you address all the important issues for success. The following is a checklist of the issues that will lead to profitability.
How to Sell a Product Online – 8 Steps You Need to Know
1. Get the Right Platform
There are a variety of ways to bring your goods to the online marketplace. A 2017 survey found that 34% of businesses in the U.S. sell through their own websites, while 40% sell through social media venues such as Facebook, 16% do it through Amazon, and 22% through other platforms (e.g., eBay, Etsy).
When searching for ways to sell a product online, you aren’t restricted to one choice; you can do multi-channel selling. This can include using one or more online platforms to complement a physical retail establishment. But whether you use your own website or an existing platform, you need to bring shopping cart technology to your customers. This enables them to browse your offering, make selections that are added to their shopping carts, and check out (complete the purchase and pay for it). There are numerous shopping cart options; the most popular include BigCommerce, Shopify, and Magento. You pay a monthly fee for using shopping cart technology (e.g., from $29 to $299/month for Shopify).
Be sure that you optimize your offering for mobile devices because an increasing number of consumers use their smartphones and tablets to buy online. Consumers are more likely to do business with a company that is mobile optimized. Mobile selling can be accomplished by optimizing the viewing of your website and/or through apps for selling. For example, you can effectively sell through Pinterest by pinning your items and tying this to Shopify (the consumer makes the selection through Pinterest and the sale is then processed through Shopify).
2. Properly Display Your Goods
Consumers won’t buy what they don’t see, keep that in mind when you’re researching how to sell a product online. You need pictures and descriptions of your items. The number and size of the pictures as well as the length of the description for each item can vary, depending on the platform you use.
- Pictures should allow the viewer to see all sides of an item if possible, but at least front and back. Enable viewers to enlarge or zoom in on your pictures if this is helpful to the nature of your item(s).
- Descriptions should be complete. Remember viewers aren’t seeing the item in person, so they need size, weight, and other key features of each item.
3. Set the Right Prices
Consumers who are price-conscious can easily comparison shop online. In setting your prices, they must be sufficient to make a profit, but can’t be out-of-line with your competitors. In general, pricing is a science and takes in to account many factors that should be considered when you’re trying to find out how to sell a product online. (Shopify offers various strategies for profitably pricing your items.)
Be sure to factor into your pricing:
- Discounts – An important way to convert online browsers into buyers is to offer discounts. These may be sales that you run, special rates for repeat customers, or loss-leaders used to attract customers to you. Be sure that the prices you set can tolerate the discounts you offer so you won’t lose money.
- Shipping – Are you offering free shipping and free returns? Who pays for shipping is an extremely important factor in consumers’ decision-making for online purchases. One survey found that 9 out of 10 consumers said free shipping was the most important incentive to shopping online. If you decide to offer free shipping and free returns, be sure that you factor this into your pricing.
- Cost of payment processing – Depending on the way in which you enable your customers to pay for the items they buy, you’ll pay fees that eat into the amount of the sales price you effectively can keep (see payment options below).
And recognize that pricing isn’t a one-shot exercise; from time to time you may need to raise or lower prices.
4. Create Solid Fulfillment Procedures
Once a customer buys your product online, you must get it to him/her. Are you going to pick the item from your shelves, wrap it, determine postage, and get it to the post office or other delivery service? Will you be the one to track your inventory and track your shipments?
Inventory management is a key part of selling any products so that you have sufficient items on hand to fulfill orders. But you also want to be sure that you don’t carry too much inventory, an action that incurs upfront costs to pay for and store items that may not be immediately sold.
You may want to handle fulfillment yourself to minimize costs. It’s advisable to work with your CPA or another financial expert to get a handle on inventory management.
Alternatively, you can work with a third party, such as a fulfillment company, to handle the process from receiving an order to shipping it to the customer (and dealing with returns). You merely deliver your goods to the fulfillment company and it handles the rest. But you pay for this service.
5. Arrange for Payment Options
Tell customers what they must pay for a purchase. If you use a shopping cart or an online platform such as eBay, this information is conveyed seamlessly to the customer. Otherwise, it’s up to you to send an invoice for the item so you can be paid.
Because you’re not face-to-face with your online customers, you can’t be paid in cash. As you research how to sell a product online, you’ll find that the more payment options you offer to customers, the better off you’ll be.
- Credit and debit cards – If you want to accept American Express, Discover, Mastercard, and Visa, you need to arrange this through your bank or third-party merchant account provider (e.g., Square, Payment Cloud) that will process payments. You are charged a percentage of each transaction as a processing fee. Depending on the venue you select, there may be additional setup and security deposit fees. Alternatively, you can arrange to accept credit and debit card payments through PayPal (below). Similarly, Shopify, a shopping cart provider, lets you accept credit cards without any third-party accounts.
- PayPal, Amazon Pay, and other e-payment options – You can accept payments through various e-payment options. For example, PayPal allows your customers to pay for purchases from you using their PayPal accounts or their credit or debit cards that you run through PayPal. While PayPal is easy to set up and use, don’t ignore the cost of PayPal fees.
Again, depending on what you’re selling, you may accept payment through check or money order. If you do and don’t already know the customer or otherwise verify the validity of the check, it’s a good idea to let the check clear before shipping the item to the customer just to be sure that there are sufficient funds in the account to cover the payment to you.
6. Decide on Your Return Policy
About one third (30%) of goods bought online are returned. There are a variety of reasons for this. The items may not be suitable (e.g., items of clothing don’t fit) or are just not wanted. But sellers may make mistakes that result in returns: shipping the wrong item or the item is damaged in shipping (due to poor packaging).
Be sure to make your return policy clear because this policy is very important to consumers (one survey found that 88% of consumers review an online seller’s return policy before making a purchase). Do you want to set time limits on returns? Will you give cash refunds or only credit? And where must returns be made? For example, if you have a retail store and sell online, be clear about whether online purchases can be returned to the store.
7. Understand Sales Tax Obligations
The subject of sales tax is confusing, especially for sellers who are just venturing into the online marketplace. There are sales taxes in every state except Alaska, Delaware, Montana, New Hampshire, and Oregon. And the rate of sales tax varies within states due to local taxes. In total, there are an estimated 10,000 in sales tax jurisdictions within the U.S.
As a general rule, you must collect sales tax from buyers who are in any state in which you have a presence (an office, a retail store, a warehouse, etc.). In technical terms, you must collect sales tax in any state with which you have a “nexus” (a connection) for a customer in that state. If you use a fulfillment company, you’re treated as having a nexus to the location of that company.
What are your sales tax obligations? You must:
- Register with the state(s) with which you have a nexus. You’ll be given a sales tax or resale number to use with respect to the other obligations that follow.
- Collect sales tax from applicable buyers. Some locations have simplified sales tax collection rules so you don’t need to know every rate within a state.
- Remit the collections to the state(s). There are deadlines for doing this.
- File sales tax returns with the state(s). There are also deadlines for doing this, and penalties if you’re late or don’t file the sales tax returns.
Keep abreast of sales tax changes that may impact you. Also, Congress is working on measures to simplify sales tax collections for online sellers or limit them to states where sellers have a physical presence, so watch for developments on this matter.
8. Make Marketing Work for You
Just because you offer goods for sale online is no guarantee that consumers will even consider them or will convert their browsing to a sale. When finding ways to sell a product online you need to attract consumers to your online venue. And you must assure them that you and your goods are for real.
Today, marketing is increasingly driven through social media. Consumers listen to others. They read reviews and ratings. They share experiences. Invite satisfied customers to leave good reviews and testimonials.
Be sure to capture customer information so you can proactively target sales to them. You can do this through shopping carts if you use them, or by collecting email and other vital data on customers through your website.
How to Sell a Product Online – Cover All the Bases
The opportunity to sell online is extensive, but it’s up to you to address all the issues that can make it work best.