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Understanding Product Life Cycles:

How to Always Pick the Right Products

FEATURED COMMENTARY

By Chris Malta
Home EBiz Product Sourcing Expert

When you sell online, you might be tempted to think that, once you’ve found a product and a supplier, the only thing left to do is sell. But without ongoing market research and product sourcing, you’ll soon see your profits begin to decline. No matter how in-demand a product may be, it still has a limited life span. What sells at a premium today, you may not be able to give away tomorrow. That’s why you need to constantly keep an eye on where your products are in their life cycles – so you know when you need to begin phasing out old products and phasing in new ones.

Monitor Product Performance
In the early phase of a product’s life cycle, demand is high, supply is low, and prices are at a premium. You’ll find it difficult to get in at this phase; the competition phase is where most online sellers make their money. Competition hits and supply surges; demand stays the same. Prices start to lower a bit, but conversion remains pretty steady. Towards the end of this phase, demand begins to wane, and a product moves into the decline stage.

Demand can drop off for many reasons. A product may go out of style or out of season; or competition may flood the market, driving prices so low that you can’t compete and make a profit. When you see a product is moving into the decline stage, you know it’s time to wrap it up and start offering something else.

Follow the Signs
Updating your product selection always begins with market research. Jen Cano, co-author of eBay Performance! Selling Success with Market Research and Product Sourcing, advises, “Research allows you to source the products your customers want, when they want them. There’s two parts to understanding what items you should be sourcing – demand and direction.”

• Demand: To determine a product’s demand, you need to look at the number of users searching for that product, the number of times it sells in a given time period, and the average selling price it brings. Different research resources like Hammertap, KeywordDiscovery, Google’s Keyword Tool, or eBay’s Pulse and Marketplace Research can help you pinpoint the numbers you’re after, and interpret what they mean to you as a seller.

• Direction: Establishing the direction in which a product’s demand is headed enables you to identify where it is in its life cycle. You don’t want to be sourcing inventory on its way out, so you need to observe your products over time. For instance, a product’s total numbers over a thirty day period won’t demonstrate if its demand is growing or declining. But studying that same thirty days as four separate periods, of approximately a week each, will reveal the direction in which those numbers are moving.

At any given time, you may be selling multiple products in different stages of their life cycles. Explains Cano, “Finding new products to sell – and consequently, finding new product sources – is an unending process. You never stop picking up and dropping off items, doing research, assessing new products and suppliers – that’s how your business is going to succeed in a changing marketplace.”