Profit margin calculation. More of an art than a science really. A delicate balance between making money and making sales.
Profit margin is the percentage of profit earned after you deduct your expenses from your revenue.
Like many things in life, there’s no right or wrong when it comes to calculating profit margins for your Shopify store and it’s this realm of grey area that makes even the most decisive of business owners stop and contemplate the daunting scope of possible profit scenarios.
Should you sell low-cost items at a high profit margin or high-value products with a small profit margin? Or best of all, mid-value products with a high profit margin? Sounds too good to be true but there is the possibility of sourcing mid-range products, priced at around $50, with room to add on a hefty profit margin.
While the margins could very well be high also for low-cost items, you’ll need to sell a whole lot of products before you can rake in the kind of profits you need to be successful.
When choosing products to sell online, profit margin may be the most important consideration, but it’s by no means the only one. You also need to take these other factors into account:
- Consumer demand – there’s no point selling a product if it’s not in high demand. But try to steer clear of trending products if you’re just starting out – it can be difficult to compete with the hordes of other sellers if you don’t already have an established online presence and reputation
- Seasonality of the product – it’s best to avoid seasonal products, such as Halloween costumes, for example. Even if it’s a product line with high margins, you’ll need to sell large quantities of product to offset the times when there’s low demand
- Competition in the niche – high competition means fewer sales for you so stick to product niches with less competition but enough demand to become profitable
- Potential for repeat customers – for example, through subscriptions, loyalty programs
No matter which products you decide to sell, you need to make sure you’re selling through the right platform. There are a number of top e-commerce platforms out there, each with its own pros and cons. Shopify is one of our favorite platforms, as it has something for everyone. You can start off with the basic account and scale up as your store and product selection grows.
It’s easy to add new products to your Shopify store, and when it comes to measuring the profitability on a per-product or overall basis, you can install a profit margin calculator Shopify app, such as BeProfit – Profit Tracker.
While the average profit margin for online retail is 45%, the exact margin varies from product niche to product niche. Without further ado (drumroll please), presenting…
The top 10 high profit margin products to sell in 2021
Men, women, young and old, you’ll never run out of people that want to buy jewelry, whether it’s as a gift or for personal use. In 2020 alone, over 29 million people bought jewelry online daily.
Although the competition is high, the profit margin potential is too so it’s worth giving this product niche a chance. According to PriceMole, the average jewelry markup is 100% depending on your supplier and target market, making it one of the most profitable products to sell online.
2. Beauty products
How would you like your piece of $25.73 billion? That’s the dollar value of online global beauty product sales in 2019 for US-based e-commerce sellers. But with a high profit potential comes high competition, unless you find a way to differentiate yourself like the Shopify seller Michibox that specializes in Korean beauty products.
3. Kids’ toys
Where there are children, there’s the timeless need for toys. From babies to kids to big boys that like to play with toys, you can sell anything from trending toys to board games to drones.
Keep in mind that there’s fierce competition out there but if you keep your quality standards high, your service outstanding and your product selection wide, you can attract a loyal customer base.
4. Women’s apparel
‘Shop til you drop’ has taken on a whole new meaning since the advent of online shopping. And with the ability to easily return items, the market size in the US alone has reached an incredible $28 billion. But since you’re competing against 24,523 other online apparel retailers big and small, it’s best to pick a niche where you can carve yourself a fair share of the profits, such as sports apparel or fashionable maternity clothes.
5. Pet supplies
Pets are part of the family with pet owners spending on everything from the basics like pet food to accessories like pet clothing, toys and grooming equipment. The average profit margin for pet supplies is 60% and demand is constant.
6. Phone accessories
With 3.8 billion global smartphone users predicted for 2021, you can just imagine the number of phone accessories that will be sold online. In fact, it’s expected that the smartphone accessory industry will reach $108 billion by 2022.
7. Bluetooth speakers
Bluetooth speakers come in all shapes and sizes, kids versions, adults versions, even waterproof ones for singing in the shower and are one of our top picks for high profit margin products to sell in 2021. This product niche is showing no sign of slowing down and it’s predicted that wireless speaker industry will reach $134.2 billion by 2025.
Stylish, and sometimes outlandish, socks may be a hot trend right now (yes, something we did recommend avoiding), but you don’t have to toe the line on this one, as this staple wardrobe accessory isn’t going anywhere, unless it’s on your feet of course.
9. At-home exercise equipment
Especially relevant and in-demand since staying at home has become the norm. Items such as resistance bands, yoga mats, pilates balls and the like could all be included in your repertoire of products and are popular high profit margin products.
10. Intangible products
According to Shopify, you can sell things other than physical products through their platform. Anything from experiences to digital products such as custom fonts or online course material can be sold through Shopify. Intangibles are one of the most profitable products to sell online as costs are typically low with no COGs, just your time and overheads.
Make 2021 your most profitable year yet
Now that you have some ideas for the most profitable products to sell online in 2021, you can set the ball rolling on adding these or others to your store, to maximize your profitability.
Are there any high profit margin products you love that we didn’t mention? Let us know!