Long ago, in an internet day far far away, you could very easily sell a $30 or lower price point product online. These were the days when traffic was cheap and getting your site ranked in the search engine organic rankings were practically guaranteed.
Those days are over. The average cost per visitor through paid means (sponsored search and paid media) is nearing $2.00 a click (compared to $.50 per click in 2000). SEO is now much less predictable and often times takes much longer than it did in the past. It is certainly more difficult and not something you can build a business exclusively around anymore.
The biggest issue is that despite the increased cost in traffic, conversions haven’t really moved up at all. Unless you are a big brand, or you do a tremendous amount of off-line direct response advertising, the highest you are going to convert at is in the 2-4% range. Meaning, for every 100 visitors you pay for, at the very most, you are going to convert 4 of them into a buyer (the average is closer to 2% for a product under $50).
So if you do the math, the picture looks bleak:
1. Cost per visitor of $1.00 (Probably higher, but trying to no be so doom and gloom)
2. If you convert at 3%, it will take you $33 to create a purchase.
How on earth is a retailer to live off of a net-loss margin? There are a couple of options for you:
1.Continuity – have something that someone needs on an on-going basis. Figure out a way to bill monthly or quarterly.
2.Upsell into other peoples products – After someone checks out on your site, offer up a complimentary product from another company. You have seen this probably with magazines.
3.Sell in packages. If you can get away with it, force people to purchase 2 or 3 products.
4.Dangle Free Shipping – Find a price point that makes you profitable, and dangle a free shipping coupon if their order hits that number.