How to evaluate if an activity is likely to produce a positive ROI?

Question

I am trying to establish if it would be worth my while to sell a product in a particular online marketplace but am unsure how to evaluate if it would be financially worth my while.

The marketplace in question allows me to know basic kinds of sales data for any given item in the marketplace such as:

• When was the item first offered for sale?
• What is the total number of sales for this item?
• What is the price of this item?
• Who is the seller of this item?
• What kind of item is this?

The marketplace also allows me some other high level information such as:

• What is the total number of items for sale on the website?
• How many user accounts are there on the website?
• What are the most popular items for sale on the website?

I would love to know if this information is enough to help me make an educated decision as to if it would make economic sense in order to produce an item to sell in this marketplace and if so how would I go about figuring that out?

Answer 1

Look into what similar/same products this platform and similar platforms are selling for compared to your pricing.

Ask yourself the following:

• How does their pricing compare to yours? If you are equal to or above their pricing- too risky. If you are below their sales prices, compare their online shelf life to estimate your projected holding period and carry cost between your purchase and sale time?

• Do the other sellers have strong reviews (credibility)? Are you starting out without any reviews, or are you an existing seller with reviews?

• What are your profit margins? If your costs go up 10-20% does will the demand allow for an increase your sales price?

Finally, run a 3-5 year cash flow plan to estimate your total sales, costs, and profits. Compare your projections(profits) with the amount of time you anticipate it will take you on a daily, weekly, monthly, annually.

Remember, selling online has its challenges, don't underestimate the amount of time it will take out of your day.

There's this story about a paintball gun dealer who bought their products from China and sold them out of their store, plus online through a major online selling platform. Their online sales grew so large their online platform (partner) went direct to the manufacture in China and made a deal cutting out the reseller, selling it cheaper than the paintball company could. They became a victim of their own success.

Anyway, good luck! :)