Ecommerce is the fastest-growing segment in Canada’s digital economy. Retail ecommerce in Canada is expected to bring in over $117.06 billion in 2024, according to eMarketer. Canadian sellers who want to meet this demand with profitable products, must consider everything from the wholesale price to market saturation. A little inside knowledge can further ensure success in online retail.
Many an ecommerce empire has been built on a “buy low, sell high” strategy. In short, that means getting great wholesale prices on products and then charging enough to be profitable after expenses. In retail, margins are often so razor-thin that profitability can’t even be guaranteed. However, if you choose products that the target market is willing to pay enough for and the wholesale price + expenses allows for it, you’ll have a much better chance of being profitable.
Calculating Profitability
Retail profit margins can be low in certain categories, such as appliances or electronics. Smaller products, such as accessories and consumables, often have a larger profit margin. You must do these calculations to accurately predict the profitability of each product.
Factor shipping into your choice. If the item costs a lot to ship it will discourage online purchases or cut into your margins.
If you can find products with a fixed minimum price (usually referred to as “Minimum Advertised Price” or MAP), it will level a playing field in which Canadians often struggle to compete. You won’t have sellers severely undercutting you in Canada or internationally, because maintaining a price above the minimum is a requirement of the manufacturer. With price removed from the buying decision, you can step up your game to compete on other levels, such as customer service and premium content.
Market Analysis
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Once you’ve compiled a list of possible products, you’ll need to take your market research a step further with a detailed market analysis. This involves researching marketplaces and ecommerce websites to determine trends, supply and demand, market saturation, and competitive pricing. Check the prices in Canadian online stores, auctions, and marketplaces like Amazon.ca.
“The retail price sweet spot is between $15 and $200. Anything less than $15 and you might be struggling to make enough money,” say the experts at Salehoo. “Anything over $200 is harder to sell (buyers have to think more about expensive purchases).”
Top Categories for Small Businesses Selling Online
Following are some of the top product categories in North America, according to a recent report from Jungle Scout. You’ll find many niche reports on their website as well.
Home & Kitchen 32%
Beauty & Personal Care 23%
Toys & Games 20%
Clothing, Shoes & Jewelry 18%
Health, Household & Baby Care 17%
Sports & Outdoors 16%
Arts, Crafts & Sewing 15%
Books 15%
Kitchen & Dining 14%
Baby 14%
Electronics 14%
Tools & Home Improvement 13%
Pet Supplies 13%
Office Products 12%
Garden & Outdoor 12%
Grocery & Gourmet Food 10%
Appliances 8%
Cell Phone & Accessories 8%
Automotive Parts & Accessories 7%
Handmade 6%
Apps & Games 6%
Industrial & Scientific 5%
Computers 5%
Video Games 4%
Collectibles & Fine Art 4%
CDs & Vinyl 3%
Luggage & Travel Gear 3%
Musical Instruments 2%
Products with High Profit Margins
Salehoo has invaluable access to data that most of us could never hope to see. Luckily, they share this information freely with the wholesale dropshipping community they serve.
Salehoo considered several factors before arriving at their list of top-margin products:
- Potential Profit Margin calculated at 3x the wholesale price.
- Products with marketing restrictions were eliminated (such as alcohol).
- Competition level
- Products that grab attention within its target market.
We combined their recommendations with our knowledge of the online retail market in Canada. Following are the clear winners for online sellers and those who use drop-shipped order fulfillment.
Board Games
Average Margin: $20 – $60 USD
Board games were making a comeback before the pandemic, especially for small gatherings of close friends. The pandemic made them even more popular as family entertainment, and to gather friends in smaller, safer groups.
Board games are inexpensive at the wholesale level, yet sell at a great retail price. The cost of shipping is usually low and they don’t take up much space, as a rule. You can stock the latest games, focus on vintage or do both!
Toys
Average Margin: $10 – $30 USD
Toys often have good margins, but the competition can be tough. There are still under-represented niches to get in on, but I suggest thorough competitive intelligence and market research before you jump in.
TV Accessories
Average margin: $20 – $50 USD
Note that profit margins for all electronics and accessories can be higher for Canadian sales, due to their higher prices here than in the US.
Home entertainment has become increasingly important to everyone, from the single person to families. TV Tech is constantly improving, while the prices for larger sizes and ‘smart’ accessories are coming down.
Those big TV’s often have to fit into small places, for example, making functional wall mounts and stands especially important. Tight spaces can even be your niche! For instance, we recently required a corner mount to maximize space for a new 65″ Sony Bravia TV. Think outside of that TV box and give some thought to sound systems, gaming accessories, and other related products.
Both inventory for this category and shipping can be expensive, but if you’re dropshipping or using another hands-off fulfillment option, it shouldn’t be a big problem.
Shoes
Average Margin: $10 – $45 USD
If you’re into shoes, chances are you’re always seeking a new pair to add to your collection. We’ve had more success with adult shoes than those for kids, probably because most aren’t willing to pay as much for shoes when their child will grow out of them quickly. However, if you can keep the price low enough the incessant demand to shoe those growing feet could also be lucrative. Additionally, shoes are a popular category for recommerce (especially designer or collectible brands).
Shoes are a highly-competitive niche that we don’t recommend for the inexperienced, at least without taking it for a test run with drop shipping first. Keep your eyes open for trendy shoe accessories, hard-to-find sizes/fits, or even medical options to round out your stock.
Jewelry
Average Margin: $5 – $35 USD
Jewelry is one of the most profitable items to sell online. Not only does it offer decent profit margins, but it can also be less expensive to ship jewelry. That said, expensive items will need extra insurance and proof of delivery, which may increase the cost of shipping.
Consider high-end or trendy costume jewelry, unique designs, multi-purpose items such as healing stones, or even antiques.
Kids’ Formal Wear
Average Margin: $10 – $30 USD
There’s a gap in the market for kids who need formal wear, and any gap in the clothing niche is rare indeed. It may not happen often, but there are certain points in a child’s life that may require a suit, gown, or any number of accessories. Suits, gowns, shoes, ties, and matching bags or jewelry do well, but don’t go crazy with the selection until you know what your market needs most.
Halloween Costumes & Decorations
Average Margin: $10 – $45 USD
Halloween is a popular occasion in Canada, with Canadians spending more on costumes, décor and treats every year. For sellers, seasonal goods can be risky and if you keep inventory you may be stuck with stock for a year or more. Again, dropshipping or affiliate marketing eliminates that risk, while still allowing you to profit from the spooky holiday.
Outdoor Furniture & Accessories
Average Margin: $30 – $150 USD
Canadians don’t have a lot of time to spend outdoors, thanks to our long, brutal winters. That only makes us value it more! Elaborate outdoor entertainment spaces are becoming more common, especially outdoor kitchens.
This niche has its challenges, including shipping costs and seasonal demand. However, that keeps the competition level in check and the margins can make it worthwhile.
Pet Care Supplies
Average Margin: $5 – $50 USD
Pet adoption has exploded in recent years and people have been treating their pets more like children. That can add up to pawsome profits! The category has also become more competitive, but the niche possibilities are virtually endless. The natural niche has done very well for us over the past decade, and continues to grow.
Once you’ve mastered profitability at this level, you can move into high-end products that may be even more profitable (in spite of a lower profit percentage). It isn’t for the faint-hearted or inexperienced seller, however, so make sure you’re ready.
Are you selling products related to the above niches? Please share your experience or questions in the comments below or join us in the Online Business Canada Facebook group.
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Melody McKinnon is an internet entrepreneur with 25 years of experience in a wide range of online business models, backed by a formal business/marketing education and enhanced by training and mentorship. She has owned or managed both educational and ecommerce websites. Her book, 7 Recession Proof Online Businesses to Start From Home, is available from all major ebook retailers.
Melody has worked with many businesses in a multitude of capacities. She can often be found on CanadianDigitalMedia.com, CanadiansInternet.com, CanadianFamily.net, and AllNaturalPetCare.com, as well as other quality digital publications. Her content has earned reference links from highly-respected websites, magazines and university textbooks.
With all of the marketplace fees? What’s a margin? LOL
It’s important to focus on what people are buying online, not what you think is nice. Big ticket items seems to be the way to go these days but I do OK with a few other products too. New website this year might help because right now I sell on marketplaces.
It’s hard to hit that sweet spot between profit & market saturation though. It’s hard to compete in the toy category for instance even with a msrp. BUT when you DO hit it WATCH OUT! It’s a fun wave to ride while it lasts.