What Online Store Model is Right for You? Pt 1: Create Your Own Products

When it comes to launching you new online store, coming up with an idea for a product is amongst the first but most important steps towards building a profitable online business.

You’ll need to decide the best online business to start and how you’re going to get your hands on the products you intend to sell. There are a variety of options with regards to getting the products you’ll be selling, each with its own set of pros and cons. Should you make the product yourself? Should you have a manufacturer make it for you? Or should you buy wholesale or even dropship products?

The basic means of acquiring products to sell include the following:

• Making or Manufacturing
• Wholesaling
• Dropshipping

Before you get your feet wet in the world of e-commerce, it’s important to understand each of these means of obtaining products before you make your decision. Depending on the niche or product, one of these methods might be better than the other.

In this first of a three-post series, we’ll take a look at the concept of creating your own product – whether you make it yourself or have it manufactured.

If you’re an avid hobbyist, creating a product with your own two hands is probably the avenue you’ll be most likely to take for your online biz.

Whether you fancy creating organic body products, crocheting handmade scarves and hats or enjoy creating jewelry, making the products yourself gives you total control over the quality and look of your product.

This option is perfect for people who love the do-it-yourself approach and enjoy the creative process. In fact, they’d do it anyway, even if they didn’t decide to turn it into a potentially profitable business. This approach is great for those who are creative and have unique ideas that may be marketable, are able to physically produce the items themselves and have the resources available to do so.

Advantages of the Do-it-Yourself Approach

The benefits of creating your product yourself are pretty obvious.

Low Start-Up Costs. The start-up costs are as low as can be when you make the product yourself, since you don’t have to commit to a large bulk order upfront like you would if you were wholesaling. This gives you the freedom to enjoy low production costs which typically make up the majority of startup costs.

Control Over Quality. Since you alone are in charge of both the creation and business aspect of your online shop, you have full control over the quality of your products, which gives you the confidence to know for certain that each and every item you sell and ship out is living up to your – and your customers’ – expectations.

Control Over Brand and Price. You’re the boss. You make the product, which means you control the price point at which you sell it. Not only that, but having such control over the product’s quality and design allows you the freedom to create any brand you like without being faced with constraints.

Creative Freedom. If at any point throughout the life of your business you decide to change the look, feel, quality and features of your product, you have the freedom to do so whenever you want. You can literally make these changes immediately without having to answer to anyone or throw your product manufacturer for a loop.

Limitations of the Do-it-Yourself Approach

Of course, much like any other approach, this method of production comes with its own set of limitations and costs.

Time Consuming. Even though you’re making the product yourself (which might initially seem to be the best way to keep overheads low), you still have to factor in the time it takes for you to create each product. If the products you’re making are complex and take a ton of time, this could cause a significant dip in your profits. Your time is worth something, isn’t it? You just have to determine how much and make sure every minute you spend creating your own products is worth it. Time is money!

Limitation on Product Selection. If you’ve already got a product in mind that you’re sure you can make by hand, that’s great. But there are a host of other products that can’t be homemade, which is an important consideration. Your product choice will be subject to your skills and getting your hands on the raw materials needed to create the end result.

Scalability. You’ll likely find it relatively manageable to make all the products yourself when you’re just starting out and your customer base is small. But what happens when your business really starts to take off? With increasing demands for orders coming in at all hours of the day, how will you keep up with the required volume?

You don’t necessarily have to make the product with your own bare hands in order to call it your own. For those who aren’t particularly savvy in this area, or have a product idea that is impossible to create without the use of specialized tools or equipment, having the product manufactured is a viable choice. The product is still unique and it’s still yours. But you have some outside help to create it, which means you can develop the product in larger quantities to meet growing demand.

Manufacturing is available domestically and internationally. As a rule of thumb, having an overseas manufacturer from places like Taiwan, China, or India will come with a lower price tag compared to domestic manufacturers. If you decide to work with an overseas manufacturer, you’ll probably wind up at some point on Alibaba, which is one of the biggest marketplaces on the net that connects Asian manufacturers with American consumers.

This option is best when you are fairly certain that your product idea will sell successfully. After all, when you go down the manufacturing route, you’ll be dealing with a large inventory, so you need to be confident of demand. Manufacturing comes with a much greater financial investment as compared to the create-it-yourself approach.

Advantages of the Manufacturing Approach

There are a few benefits to this approach:

Cheaper Unit Prices. You can really maximize your margins when you have your products manufactured, as this method usually comes with the cheapest price per unit.

Control Over Quality. Much like making the product yourself, you still have a great deal of control over the quality of each product on the assembly line.

Control Over Price and Brand. This is your own product, so you have the freedom to charge the price you feel is fair while still being profitable. In addition, having your product manufactured gives you the flexibility and power to build your brand the way you see fit.

Limitations of the Manufacturing Approach

Of course, manufacturing does bring a few downsides, too:

Minimum Orders. Probably the biggest drawback of the manufacturing route is the typically large quantities that need to be ordered before the manufacturer will agree to producing the product. There’s a minimum order quantity that needs to be met, which translates into a huge chunk of your startup capital. You could easily rack up a bill in the thousands of dollars.

Long Wait Time to Get Your Products. Manufacturing can take a long time to prototype, sample, refine, and finally produce your product. This can delay the time it takes for your online business to get up and running. If you decide to use an overseas manufacturer, these wait times can be even longer considering the challenges associated with distance, as well as cultural and linguistic differences that can hinder effective communication.

Potential for Fraud. If you use an overseas manufacturer, there is always the potential for getting scammed, which will have your online business screeching to a halt before it even gets started.

Creating or manufacturing your own product definitely comes with its set of advantages, especially if you’re the creative, do-it-yourself type. It is a great option if you don’t have the funds necessary to invest in large startup costs, and would prefer to slowly build your business. However, there are other means of going about acquiring your product, which we’ll discuss in the next post in this series.

Do you think creating a product yourself will give you the ability to make your online business boom? I’d love to hear your thoughts!

Image source: shuttermonkey

About

Tom Ewer

Tom Ewer is the founder of Beginner Blogging, a site that offers free in-depth tutorials for beginner bloggers.