When you think about what products you want to sell, you probably think that expensive products will make you money the fastest. But in reality, it’s the profit margin that matters, not the price you sell products for. For example, smartphone cases are more lucrative to sell than smartphones themselves.
No matter what you sell, the key to high profit margins is controlling costs while charging a premium price. Here’s how this strategy works.
What are high-margin products?
A high-margin product is one that makes a notable profit per unit sold. This means you spend less to source an item than your customers spend to purchase it. Imagine you sell custom printed t-shirts for $12, but your expenses on materials, raw materials, and labor are $11. This means you only make a net profit of $1 per shirt sold. However, russia email list if you keep the costs the same and increase the price to $20, your profit margin jumps to $9 per shirt. In other words, you’ve gone from a comparatively low profit margin to a high one.
How to Calculate Profit Margin
The profit margin is calculated using a simple formula:
Sales price – production costs = profit margin
The selling price is the amount customers pay you to buy an item. Production costs include raw materials, machinery, labor, and shipping costs. If you use accrual accounting, you could also include your marketing budget as part of production costs.
Why you should focus on high-margin products
High profit margins contribute to the growth of a business as they offer a high return on investment (ROI) . When online retailers offer high-margin products in their e-commerce stores, they earn comparatively high amounts per sale.
For example, consider an online store that sells two products: Product A and Product B. Both cost €100. However, two shifts: covid-19’s impact on infrastructure the company pays €88 to produce or purchase Product A and only €61 for Product B. This means that the net profit margin on Product A is €12 and on Product B is €39. Although customers pay the same amount for both items, the online store makes significantly more money from selling Product B thanks to the comparatively high net profit margin.
5 product types with high profit margins
If you’re looking for profitable, high-margin products for your e-commerce business, there are plenty of options. Some of these products have high selling prices, b2c phone list while others are relatively inexpensive for customers. All offer significant profit margins for online stores. Here are five product categories you can consider:
1. Niche products
This category includes cell phone accessories , kitchen gadgets, watches, and collectibles like trading cards. These niche products can often be produced comparatively inexpensively in large quantities and sold at a significant premium due to demand. Some specialty products, like cell phone accessories, enjoy broad market demand. Others, like specialized watches, have a narrower target audience. Timbuk2 , which makes specialty bags, and One Blade Shave , have built their Shopify online stores around such products.
2. Products for children
This category is aimed at parents shopping for their children. Sales for toys in Germany will rise to €5.5 billion in 2025. Many toys for children can be produced at low costs and sold at comparatively high prices. Companies built on Shopify, such as Babylist , have flourished in this high-demand market.
3. Candles
The turnover in the candle market in Germany is €0.43 billion. Profit margins in the candle market are possible due to a large network of foreign candle suppliers who can produce large orders at relatively low costs. You can even make high profit margins by making your own candles, as the raw materials are mostly inexpensive.
4. Private label products
Private labeling means that manufacturers create a customized product for retailers based on their specifications. E-commerce retailers can partner with manufacturers to create customized private label products to sell online. The private label category includes customized clothing, jewelry, fashion accessories, and health and wellness products. Companies like Victoria Beckham Beauty , Blume , and Frank Body have built successful e-commerce stores in this sector.
5. Drop shipping
Dropshipping is another high-margin option for a successful ecommerce store. In the dropshipping model , ecommerce merchants sell products that are manufactured, stored, and shipped by a third party. You can sell many products through dropshippers, including coffee , clothing , and phone cases . Dropshipping can offer good profit margins because you don’t have to rent retail or warehouse space or hire employees to physically manufacture your products.