Profit Margins

Sell successfully online

Sell successfully online

Sam from Hong Kong has asked me about my last post.  He wonders if I ever deviate from my rule that I want to make 200% profit from goods I sell on eBay and Amazon.

He thinks that I am looking for too much profit and that if I bought with a lower profit margin in mind I would sell more and so make a greater overall profit.

I do deviate from the 200% profit rule if I know that the goods will sell easily and quickly.  I have to take a lower profit on my main ebay line as it is price sensitive.  Others are selling the same line of goods as me and I beat them on price and my feedback alone.  So my margins are lower but the stock turn around is quicker.

Assume that a widget costs you £100 and that you stand to make £5 gross profit but it takes a year to sell.  If you had that money in a bank you could have made £5 in interest and it would have been safe, no risk of losing the money (assuming that our governments continue to underwrite the banks).  In this case why bother risking the money in stock that you may not sell?  You would be better advised to leave the money in the bank (remember, you need to deduct all shipping and fees from the gross profit).  If your gross profit was £200 for stock that costs you £100 then, obviously, buy the stock and try to sell it.

However, if you can buy 20 widgets at £5 each selling them all for a net profit of £3 each in a week and keep buying new ones to sell every week then a lower profit margin makes sense.  That is about turnover and I will talk about that in a later post.

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