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Profit margins are very important. (11)

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Hey stm,

First of all this is my first thread. I know probably no one knows me on here but I have been in affiliate marketing for 6 years (although, the first time I verbally called myself an affiliate marketer was when I was 6 lol, i'm 18 now).

Okay now onto the topic... Profit margins. Not only profit margins, but also how much you pay for your customer to receive their product.

I have seen countless store-owners who are drop-shipping buy products for $1-15 and sell them at a 100% profit margin. Now don't get me wrong, 100% is a good markup as you're making in profit how much you paid for the product. (Example, $5 cost $10 sale price = $5 profit). But doesn't a 500% markup sound a lot better?

The flaw in buying a $15 product on AliExpress and selling it for $30 on your store is that the value of the product is really $15. Moreover, say you can convert at $30 but you're paying $15 for your product on AliExpress. Either you can't convert because your customer can see the true value or you're simply overpaying for the product.

Well here's my tip to you:
Contact the supplier directly and work out an order sheet, some even have Shopify API for dropshipping, and CUT THOSE COSTS DOWN!
Either you're raising your profit margins or with a cheaper cost you're lowering your price and increasing your conversion rate.

Personally, I focus on items that cost me .10 - .30 that I can sell for $10. Yes, that's up to 1000% markup and I LOVE IT. Obviously with the cheaper product I focus more on volume as well. But hey, it works for me as i've made ~$300k in one month with 1000% markup

Best,
Garrett

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1,000% ROI is awesome if that's net profit, but sounds like you're talking about item markup?

For an item that costs $0.1 - $0.3 and sells for $10 you'd still have to pay to acquire the customer and ship it right? What's the actual net profit & ROI after you add up all the expenses there?

Very curious to hear more.

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Well, I am talking 1000% mark-up if the item is .1 and i'm selling for $10... However, that would still leave the ROI at like 850-900%

I try to not pay more than .55 item + shipped to customer. So $9.45 profit, and then cost per purchase of .80 - 1.30 on scale. I typically wont scale a campaign if the cost per purchase is more than 1.5. After all expenses, I'm turning $1 into $8 - $9, so 800 - 900% ROI.

Best

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Interesting how do you manage to get the cost per acquisition so low? That's what intrigues me most.

This is all Facebook? Have you tried other sources?

Would love to try something similar for native

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Well, yes, profit margins are important. But so is total profit. And market value.

The richest man in the world runs a company called Amazon, whose profit margins are .... 3%

https://ycharts.com/companies/AMZN/profit_margin

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Exactly, it´s same as with ROI.
Always nice to see such high numbers there but in the end it all comes down to profit.

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Yes they are able to get away with it because they're a huge company and it works. However, I really hope you wouldn't settle for 3% on an eCommerce store.

Personally I separate ROAS as what I make before expenses and ROI and what I make after expenses. So when I talk about 800-900% ROI, it's all profit. Hope that's clear.

Getting cost per acquisition very low has to do with literally everything coming together. From the store, your angle, creative, audience, etc. and then FB Algo also works it's magic a bit.

I have used Snap Ads and the best I could do was 400% ROI however it was on huge scale.

Best

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Isn't that 10,000%?

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If you have an item that cost $.1 and you sell for $10, that is not 1,000% ... it is roughly 10,000% (or 9,990% to be exact)

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Too low ROI creates cashflow problem with media buying.

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Thx for the great tip. Profit margin is something I've been struggling with. I'm at break even point for some of my products, and i'm looking at ways to increase the AOV or decrease product cost.

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