Products have life cycles. Yes, they live, breathe and sometimes they die, so it’s vital that you, as an online seller, are able to continually spot trends.
No matter what niche you sell within, this is the key to knowing what consumers will be purchasing in three, six or 12 months’ time. Trends actually give you sneaky peek into the minds of the consumer because now more than ever before, it’s lifestyle and social trends that drive people to purchase things. Obvious really isn’t it!
But when you sell products online, it’s all very easy to get super comfortable and complacent and start thinking that once you’ve secured a product and a supplier that’s all you need to do apart from sell your product.
In a way, this is correct, but without keeping your eye on the ball, making time for ongoing research, marketing and further product sourcing you could reach a point where your ‘comfortable’ product is no longer profitable. And what will you do then?
However amazing your product is, it will still have a limited life span.
By being aware of your product life cycle, you’ll know when to start phasing in new products to replace those that are waning.
So, what exactly is the life cycle of a product and how do you know whereabouts in this cycle your product actually is?
There are three main phases. Phase one is the early phase, or launch of a product, which usually sees high demand and premium prices but a limited supply. This is the phase where the real money is made.
Then phase two is when the competition starts coming from other sellers and the supply of the product is not quite so limited anymore. Demand stays the same but as there is more choice, prices drop a little. The product is usually still in high demand during this phase.
Finally, in phase three, demand starts to drop off. This could be for any variety of reasons. The product may go out of fashion, out of season or there may just be too much competition plain and simple. This is when sales start to decline and you must be ready to move on to your next product!
So, this is why it’s vital to monitor the performance of your product. This way you can have a continual chain of up and coming products waiting in the wings ready to go.
I’ve said it before and I’ll say it again! Research is key. Getting this part of the sourcing process right allows you to source the products your customers want and exactly when they want them. But to do this effectively you need to look at two things. Demand and direction (D&D).
Demand and Direction: The D&D method
Demand can be determined by the number of searches for a product, sales in a specific time period and also its price. To find this data you should use research resources such as Terapeak.
Then you need to consider direction. Where is the product you’re researching in its life cycle? To determine this, you should observe a product over time. Be careful though, because whilst 30 days of figures can look very impressive, those are just ‘sales’.
Instead of looking at a straight 30 days, break the 30 days into four separate weeks (with a little left over) and this will give you a much more accurate picture.
You’ll be able to see whether numbers are growing week on week or declining. For example, the first 7 days may show 30 sales, the next 7 days may show 40 sales and the third and fourth lots of 7 days, 50 and 60 in which case it’s quite clear that demand is high, the product is growing, therefore it’s near the beginning of its cycle.
But, if those figures were reversed and the fourth week had the lowest sales you’ll know from the data that this shows a decline and you should move on!
You will need to bear in mind some other factors when using the D&D method such as seasonal slumps, generally poor trading periods, news influences, world events and other factors that may be responsible for an increase or decline in sales – it’s not a fool-proof method, however it does give you some pretty decent and accurate data to work with when choosing a product.
You are likely to be selling multiple products in different stages of their life cycles at any given time and finding new products and their sources is a process that never ends.
For your business to be successful it’s important that you keep on top of trends. Trade shows, industry websites and magazines are just a few suggestions where you can gain a huge insight into your niche and it’s up and coming trends and products.
Don’t neglect your market research and assess products and suppliers constantly so that you are in tune with the life cycles of your products.