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What Are High Margin Products And How They Can Bring You Profits

One of the most crucial metrics for measuring profitability is profit margin. Although other factors, like customer acquisition costs, retention, and satisfaction, are all vital, many online sellers prioritize profit margin, as it reflects the company's current profitability.

In this guide, we'll learn how to identify a good profit margin for your business sustainability and get an overview of five examples of real high-margin products.

What is a Good Profit Margin?

“Margin” refers to the ratio of profit earned after deducting expenses and revenue. When we talk about profit margin, it is important to understand two additional definitions: “net profit” and “net profit margin”.

Net profit is the total amount of money a company earns after subtracting all expenses. Net profit margin is the net profit divided by total revenue, expressed as a percentage.

The net profit margin is usually considered to be good if it exceeds 5-20%, depending on the type of business. Accordingly, products whose sales lead to this type of profit margin are usually referred to as "high margin".

For example, if the selling price of a product is $100, and all of the costs associated with production, shipping, and selling the product is $70, then the potential net profit is $30. If the product is sold 1,000 times, the total revenue would be $100,000 and the net profit would be $30,000, whereas the net profit margin would be 30%.

A high margin can be attributed to several factors, such as superior product quality, premium pricing strategies, high product demand, lower manufacturing and distribution costs, the advantages of large-scale operations, and/or minimal competitive presence.

Although it can be difficult to judge at a glance whether a product has a good profit margin or not, there are a few ways to figure this out wisely.

How to Find High-Profit Margin Products to Sell

To find products with high margins, you need to review all of the costs associated with production and selling the product, and compare them to the prices that other sellers are currently charging customers for that item. However, this process can take some time if you do it manually. Also, when choosing products to sell, you need to consider not only margins, but several other additional factors as well.

In general, when searching for a product, it’s essential to follow these steps:

1. Collect potential product ideas.
2. Avoid low priced items, as they usually have low margins. Instead, focus on products in the price range of $30-100.
3. Explore the production price of each product. Choose items whose original cost does not exceed 30% of the price for which you can sell them.
4. Analyze product demand. See if the product has stable monthly sales: a good number is more than 100 sales/month. Also note whether the product is seasonal or not.
5. Check the competition. The more sellers there are selling a similar product, the less sales you will get. Plus, you'll need to spend more on advertising to outsell your competitors, and that will hurt your margins.
6. Estimate revenue. Multiply the number of products sold each month by their price.
7. Estimate additional costs for the product:
  • Calculate shipping and storage costs based on product size and weight.
  • Calculate the marketplace fees for selling and fulfilling the product orders.
  • Estimate any other costs. Depending on the type of business you have, you may incur additional costs on advertising, taxes, packaging, and other expenses.
8. Determine the net profit margin percentage for each product. Subtract all costs associated with the purchase, delivery and sale of goods from the monthly revenue, and divide by the revenue.

If the resulting value is greater than 20% and the product meets all other criteria, this could be a great option for your online business.

If you do not have enough time and expertise to research products this way, you can entrust this responsibility to skilled professionals. Once you’re ready to begin your eCommerce business and you need help selecting a product that meets your criteria, consider checking out Sellerhook.

With years of experience and excellent customer reviews, Sellerhhook experts have a proven track record for success. You can gain insight into the quality of their services by reading a variety of success stories and user feedback.
Here’s how you can order your own research reports from Sellerhook:

1. Decide how many products you want to be included in your research report.
2. Pay for your order.
3. Complete the survey. Here, you can choose a price range and check the box “High revenue” to narrow down the search.
4. Provide additional information. You can enter other specific criteria, such as setting a minimum net profit margin of 20%.
5. Get your results. In 10 days, you’ll receive your research report with all of the essential information you need about the product(s).

With Sellerhook, you'll get a comprehensive research report featuring a product that matches your criteria and boasts promising profitability potential.
See what your research report would look like.

Five Examples of Low-Cost, High-Margin Products

Let's examine a few examples of some high-margin niches. It is important to note that the following niches were analyzed on Amazon, but the sales and profitability data may be similar on other marketplaces.
Please note that the following information is provided for reference purposes only and does not constitute product recommendations.
The data, such as price range, sales volume, and FBA fees, is sourced from AMZScout PRO Extension and is accurate at the time of writing. However, it's important to acknowledge that these factors can change over time. Therefore, it is crucial to use up-to-date and current product data when making informed decisions about your product selection.

Women’s Workout Sets (2 pieces)

Based on profit data, this specific workout set is among the high profit margin products in this niche. With a product cost of $7.50, FBA fees of approximately $12, and a selling price of $37.99, and other additional expenses, you could potentially achieve a net profit margin of 27%.

The profitability of this product could be attributed to its low production cost. If you can obtain these sets from manufacturers at a low cost, you can offer competitive prices, making the sets more appealing to a consumer.
Car Seat Cover

Car seat covers have a high potential for reselling through both the wholesale or dropshipping models, with a considerable profit of $22.97/unit sold. Based on a purchase cost of $70 and a selling price of $119, including expenses like FBA fees and taxes, you can expect a product margin of nearly 20%. The profitability of car seat covers can be attributed to their high demand, particularly when listed on the first page of search results.
Bamboo Pillow

This item has the highest net margin among all Amazon products listed here (almost 43%). This product's success can be attributed to its low wholesale product price, moderate FBA fees, and many customers’ desires for eco-friendly products. When you purchase products in bulk at lower prices and retail them at higher rates, they can result in a substantial profit margin.
Oil Diffuser

Although the oil diffuser market may not be as profitable as the bamboo pillow market, this item has a good net margin of almost 22%. One reason for this high net margin is this product's small size and lightweight design, which make storage and shipping more cost-effective. However, it's worth noting that while the low cost of the product plays a significant role in the margin, various associated fees may impact your costs, potentially reducing the overall profit margin.
Lawn Water Slide

This lawn water slide boasts a net margin of nearly 22% every month. With a product cost of only $14, which is more than three times less than the selling price of $49.99, you can earn a profit of $10.76/unit sold, or $4,532/month. This product is primarily sold during seasonal peaks when there is significant demand. Another factor contributing to the high product margin is the low production cost and affordable shipping prices.
In order to get more precise profit figures, factoring in all required and extra expenses, we'll be utilizing a specialized Google Sheets calculator. In addition to average monthly sales, this spreadsheet also takes into account the number of products you purchase from the supplier. By using this information, it will provide you with data on that product's profitability.
As you can see, some products from the examples have margins that are comparable to the screenshots above, but slightly lower due to additional costs.

Conclusion

To sum up, profit margin is an essential measure of business profitability. In order to boost profit margins, it's important to identify high margin products. This can be achieved by analyzing factors such as quality, pricing, demand, manufacturing and distribution costs, and competition.

However, the process of identifying high profit margin products can be time-consuming and challenging due to obtaining accurate data on original expenses and prices. Instead, consider using services like Sellerhook that offer research reports that can help you find promising products with high margins quickly based on your criteria.

See what your research report would look like.
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