Last Updated on Mar 5, 2020 by James W
It isn’t enough to work hard at your day job; if you’re trying to save money or pay off debts, often you need to find a second source of income, usually from a job you can do at home. Many people decide to create that all-important second income stream by selling merchandise online. There are three types of merchandise that people sell online:
1.Handicrafts, including jewelry, clothing, furniture, and anything that might end up on Etsy
2.Entertainment/information products, including self-published books, ebooks, and albums
3.Resale merchandise, including antiques, used books, and used clothes
With the exception of ebooks and downloadable music albums, each of these products includes the overhead costs involved in purchasing the materials and shipping the product to the customer. With that in mind, it is important to make sure the cost of creating and shipping the product does not eat up all your profits.
Here are five ways to save on costs as you create and ship merch:
1. Buy in bulk
No matter what you are selling, try to buy in bulk. This includes both your product materials and your shipping materials; you need to have enough embroidery floss on hand to make your Guatemalan worry dolls, and you also need to have enough padded mailers in which to ship them.
Buying in bulk saves costs and prevents you from wasting time on last-minute supply runs. The only reason not to buy in bulk is if you do not think you can sell enough merch to use up all of your supplies.
2. Take preorders whenever possible
The answer to the question “will I sell enough merch to use up my supplies” is often solved by allowing people to preorder your merchandise before you create it. If you are creating a unique set of child’s furniture, or a series of hand-knitted sweaters, holding a preorder period helps you learn exactly how much demand there is for your product.
3. Streamline your shipping
Do not make a trip to the post office every time you need to mail a product. Instead, create your own post office at home by buying a postage scale and printing stamps online. Invest in heavy-duty corrugated packaging to ensure none of your products arrive damaged, and buy plenty of boxes and envelopes in advance to make sure you never run out.
4. Use your own online shopping cart
Sites like Etsy and Bandcamp help you promote your product, but they also take a percentage of your profits. Even PayPal takes a small cut from every transaction. If you want to save as much money as possible, you need to hand-code your own shopping cart and host it on your own website.
5. Make sure you include sales tax and plan for other taxes
If you are selling physical merchandise online, be prepared to pay sales tax to the government. This means that you need to make sure your customers are paying sales tax to you. There are two ways to do this. The first way is to charge sales tax at point of sale, but not every online shopping cart is set up to include sales tax in its calculations. The second way is to price your product in such a way that your net income includes the required sales tax, and then include text in your product description indicating that sales tax is included.
If you do not account for sales tax in advance — or for the other federal, state, and business taxes involved in selling merchandise online — you run the risk of losing a significant amount of profit come tax season. If you are selling an item for $9.99 and anticipating a $2.00 profit, expect to pay about half of that in taxes. This means that if you want a $2.00 profit on each item, you need to charge $11.99.
