FAT SEXY said:
I'm talking about as a low level, one man operation using a 3rd party site like eBay.
When you make a sale: The online marketplace gets their cut.. then there is shipping costs. After those slices are taken, you will still have to report earnings to the IRS for their pound of flesh.
The cherry on top is that the customer is always right and you will have to factor in a percentage on return costs from dishonest or regretful customers.
I'm not considering creating an online business, just more or less thinking out loud on the subject.
Outside of finding some perfect product with considerable margin, I could imagine 90% of low scale online stores on eBay/Amazon etc etc just aren't worth the hassle.
I lent some money to a friend as an initial working capital injection selling something out of his garage on the internet. He did well enough to pay me back with a decent amount of interest and make a decent side income on top of that within 6 months. Won't say what it is (no… it is nothing close to illegal and sort of a funny niche he grabbed) because he is still benefiting from the market gap and he's been at it for about 8 years now. It's highly commoditized and no customization to what he sells… just an odd gap in the market for something highly specific particularly in more rural communities and no great convenient answers for it out there.
He explored expanding into drop shipping and decided that was too much work and not worth it because it would disrupt his really efficient mini warehouse garage setup. He's experimented with other products and all of them weren't really worth it (even stuff really close to what he does now that you'd think would be easy add ons for more income) for the same reason so your assertion is probably right.
At any given time, he's out about 20k for inventory, another few in equipment and supplies and spends about 20 hours a month on it. His market size is incredibly steady, he spends no money on marketing, and most of his customers spend $100-$150 at his store every 6 months or so and there is a seasonal element to his inventory.
Interesting thing is you haven't even mentioned what I think has to be the biggest drag on potential returns for a business like this: dead stock. The niche he's got he's never once discounted to move inventory and doesn't have to really. He rigorously tracks inventory at a bit of a gnats ass level and that dictates what he offers. Anything that sets for more than a year, he just keeps in his store until it sells out then never puts it in stock again.
