How To Create A Successful E-Commerce Business With Alibaba.com
If I were to build another seven-figure e-commerce company using alibaba.com, this is exactly how I would do it.
In this post, I will walk you through how I find winning products via research, look at trends, find consumer demands, meet those demands, and source the entire operation using alibaba.com. I’ve been doing e-commerce for eleven years; I’m not a newbie! I’ve had ups and downs but ever since I learned how to leverage data, my sales have been on an upward trajectory. Once you figure out the right equations and which numbers to look for, e-commerce becomes pretty straightforward!
There are many ways to create an online business. E-commerce is one of my favorites because it has the upside of scaling to unimaginable numbers. If you're brand new to selling online or have never sourced a product, let’s take a step back. As with any business decision you make, you should analyze the pros and cons…
Selling on the internet used to be super hard. When I first launched my e-commerce clothing company about eleven years ago, I bought each and every custom branded hoodie, snapback, and t-shirt with money out of my own pocket. I didn't know about sourcing back then so I bought in bulk. Long story short, I didn't sell anything but a few sweatshirts to family and friends. Years later, I ended up dropping off my once prized possessions at Goodwill to never be seen again. Tragic, right?
Nowadays, technology and globalization allow people like you and me to source top-of-the-line products without burning holes in our pockets! With today’s advancements, you can start a data-driven business that will tell you right from the get-go whether or not it’s going to work out. The data will either say “yes, go for it” or “good idea, champ, but you need to move onto the next one”.
The (Realistic) Path to Get to The Dream Life
- Spend countless hours learning about how to create a website and brand
- Brainstorm and pick a niche
- Research using alibaba.com to find products to source for your brand
- Launch your store but your products don't sell right away
- Learn marketing, how to run ads, how to sell products, and how to create content
- Fail and repeat steps 1 through 6
The moral of the story is that starting an online business is not always easy. It’s frustrating! It’s not easy! However, every order that comes in tells you that the proof of concept is there. It has sparks!
7. You don't give up and keep at it until you find the formula to scale
Now that I’ve painted the picture of what it feels like to start from the bottom, let’s break it down by going through a step-by-step walk through of how it’s done.
As I said, alibaba.com is an amazing website. I’m going to start by searching organically to give you ideas of what they have to offer…
Starting on the first page, there is a reason why each of these products is the first thing you see when you open the site. This is because of data! You are seeing the top-selling items. One product, in particular, caught my eye…
This plant stand is super cool! It only costs $31.02 for a box that contains five units. This means the cost per unit is just around six bucks before shipping! Another great thing about this product is that you only have to buy two boxes to receive bulk pricing. Many think that sellers must buy thousands of units to buy this cheap, but with Alibaba, that’s not true! The lead time for this product is fifteen days. The shipping time is eighteen to twenty-three. This means that in thirty days or less, you can have this product ready to sell to your customers. Alibaba is great for sourcing quality items with low risk.
If I were to recommend a niche to look into, it would be the furniture/high-end decor sector. You can source it all on alibaba.com!
This super sleek and modern chair is a great example. Its bulk order price starts at $35.00 per unit. Obviously, sourcing larger products will cost more. That being said, larger products often yield larger profits!
Now that you have a few ideas for products, it’s time to bust out the data…
Winning Product Calculator
One of my most prized possessions is my Winning Product Calculator. By quickly plugging in a few numbers, the calculator will tell me if my idea has enough margin to build a business behind. You can make a copy of the Winning Product Calculator here.
Note: Only fill in the boxes that are gray. Do NOT type in the colored or white boxes! The red, green, and white boxes are programmed with a formula that does all the computing for you.
For this example, let’s go back to the plant stand. Again, since there are five units in the box, I will need to combine the price per box ($31.02) and the shipping cost ($56.43) and then divide that total by five. This comes out to $17.49 per unit.
Next, I need to figure out how much I can mark the product up. I do this by going to Google and searching what other comparable products on the market are selling for. I found a similar plant stand being sold for $65.00. This means I can mark up my product between three and four times. I used 3.9 times to get a listing price of $68.00.
Now it’s time to account for the costs of running ads. You can sell online organically but it will take longer to scale. To figure out which ads to run, I use the Keyword Planner tool in Google Ads. “Wooden Plant Stand” is searched on Google 18,100 times per month! The bid range is between $0.21 and $0.94. Since I know marketing, I am going to plan on paying the lower of the two. This makes my cost per click $0.21 and my cost per 100 clicks $21.00.
The conversion rate is the rate at which people who land on your page, store, or ad follow through by making a purchase. This number heavily depends on how good you are at marketing and driving the right traffic to your site. The average conversion rate on the internet is 2%. For the sake of being conservative, I’m going to set the conversion rate at just 1%.
All of the boxes below should now be either green or red. You can see your profit or loss if you were to sell just one unit, ten units, twenty-five units, and so on. Reading across, you will also see what your margins would be if each sale was 1.5 or 2 times the average order value. These projections will come with a strong up-sell, cross-sell, or down-sell. I always account for a 5% return rate because returns are inevitable no matter what you are selling.
At the bottom, there is a box titled Initial “Lost” Testing Budget. This is where you can keep track of how much you had to spend testing products (whether that be in physical items or ads) in order to get to this point. Once you type this number in, the boxes below will update and tell you how many sales you should expect your campaign to take on before you break even.
Here’s a breakdown of the basic numbers from this example…
Cost of Product & Shipping: $17.49
Mark Up Quantity: 3.5x
Listing Price: $68.00
Estimated CPC: $0.21
Cost Per 100 Clicks: $21.00
Conversion Rate: 1%
That’s it! Now it’s time to find a product to sell, make relationships with manufacturers, and launch your campaign! I hope you feel encouraged that e-commerce is something you can actually do. That being said, this calculator is a great way to test ideas without spending any money upfront. Give it a shot and try it out! I’d love to know what you think.
Check out the Alibaba homepage here!
Peace and God bless.
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