The Side Hustle 07: Most of Your Products Won't Work - And That's OK

Reading time 2 mins 30 seconds.

Welcome to edition 7 of The Side Hustle, your weekend ecommerce tip, tale or yarn.

A reminder that my new course, Ecommerce Start launches on September 1, and is currently 25% off for early enrolments.

I've abbreviated The Side Hustle cleverly to TSH so that my email subjects don't get truncated - let's see if my open rates increase. I'll report back.

Today I'm looking at product as a way of growing your business.

The sooner you come to grips with the fact that most of your product won't work, the sooner you'll start to accelerate your growth.

Here's the problem: 

Way too many business owners look at their products through rose-coloured glasses.

We're so good at back-patting, and pumping up each other's tyres and generally, well, drinking the product Kool-Aid. Business owners who also do their own buying, will often make assumptions that every product is going to be a winner, and when sales don't boom, they'll usually look at their marketing, and not reflect on their buying.

Wrong - it's almost never your marketing.

The Pareto Principle stipulates that 80% of consequences come from 20% of causes.

In this example, 80% of sales will often come from 20% of products. That means that 80% of your product 'won't work'. 

Put simply, if you release a range of 10 dresses, it's likely that 2 will sell well, and 8 will sell ok, average, or poorly. 

By the way, I'll preface this by saying, if you've invented or sourced a one product wonder, like the Theragun, then this doesn't apply to you. 

If you release 4 backpacks, it's quite possible that none of them will sell very well, and that's one reason why many start ups fail in ecommerce, launching with narrow product ranges.

If you release 10 backpacks, it's quite possible that 2 will sell well. If you sell 100 backpacks, it's quite possible that 20 will sell well.

You get the idea. The more mud you throw at the wall, the more that will stick. It's way too much pressure on a founder or buyer (or both) to think that of the 10 new products you're dropping, all 10 will be winners, so it's important to drop a decent chunk of new product fairly frequently if you're planning to grow beyond your normal trajectory. 

What I find, is that of the 20 products you drop this month, 4 will perform well, and slip into 'core', or 'Grade A' - in other words, they will be repeated, because they're part of the group of products generating 80% of your revenue (check Shopify's ABC Analysis to check your stores Grade A B and C Product).

The next month, the same thing happens, so you're building out your core products each month, and therefore growing your baseline as the months go by.

The obvious critique of this strategy is that you might think it takes a lot of capital - but it doesn't. When you order correctly, you should be able to drop new products every month, staying within your open to buy (buying budget), so you're not over spending. If you find that you can't afford to drop product every month at a decent scale, then you're probably over ordering - going too deep on your orders, and tying up your money in excess inventory.

So remember, only 20% of the product you produce is likely to be a winner - that should put things into perspective, and give you an idea of just how much product you might have to put out there, to hit that next major growth milestone.

So, go and throw some more mud at the wall, and remember to go for 'and' products, not 'or' products, in other words, try not to cannibalise your existing products by showing too many variations (or variants, like too many colours), that make people choose this product 'or' that product, but rather focus on natural product extensions - what would people buy next, or with, when they're buying your product - what occasion are they buying for, and what else does that occasion need? Your 'and' product.

Finally, focus on breadth over depth - the customer doesn't care how many of each unit you have in your warehouse, but they do care how many options are on your virtual shelves.

Until next week,

Paul

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