Profit margins measure how much a company earns relative to its sales. A high profit margin product typically has a low cost but sells at a high price. To calculate profit margin, subtract the item’s cost from its retail price. The remaining amount is the profit margin. For example, a company with a 75% profit margin keeps 75 cents of every $1 in sales after covering production costs. An aim of 60% or more is considered a good profit margin.
What products have the highest profit margins? Laptop stands, kids’ drawing sets, and wireless tire inflators are examples of in-demand, high-profit items. Their functionality allows for competitive pricing and substantial profits. Even low-cost products like the Fitbit Versa Lite smartwatch command high margins due to mass appeal.
To find these profitable products, it’s important to consider both the profit percentage and sourcing costs. Selling many items does not guarantee profit if costs are greater than revenue. Potential products should be carefully vetted using these metrics before inclusion in your catalog. Leveraging sales data, consumer trends, and production costs can help identify promising high-margin items. Selling niche products with healthy profit buffers can capitalize on the growth of eCommerce.
Dietary supplements have become particularly profitable due to increased interest in healthy lifestyles. Additionally, in the restaurant industry, the contribution margin per menu item is a key indicator of profitability, often providing better insights than the overall food cost percentage.
Private labeling is a strategy where a retailer commissions a manufacturer to create a product based on their specifications. ECommerce merchants can use this approach to create custom-made products to sell online. This category spans custom clothing, jewelry, fashion accessories, and health and wellness products.
By understanding what constitutes a good profit margin and using the examples of high-margin products provided, businesses can better identify and select products that contribute significantly to their sustainability and success.