The Growth Continues! Why Our Online Store Profits Are Up 37% Year Over Year

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My wife just closed the books on our mid year numbers(January – June) for 2011 and profits are up in the double digits again. I say this every year but my wife and I are constantly amazed by how our little business continues to grow and expand.

Seriously folks, there’s nothing particularly exciting about our online store on the surface. We sell hankies and table linens primarily to the wedding and event planning industry.

Nothing big! Our niche is very small but it happens to be a part of a very large and lucrative market that is insensitive to price.

Part of the reason why my wife and I are always surprised with our numbers is because these yearly increases are compounded annually.

If we have a great year like last year where we grew 44%, then it’s that much harder the following year to show similar growth.

At the end of every year, I always say to my wife, “Hope you enjoyed the ride because I think we’re probably going to plateau next year”, but it never happens. In any case, here are some numbers to highlight the year.

The Numbers

  • Year over year revenue grew 32%
  • Year over year profit grew 37%
  • Similar to last year, we had 4 consecutive months with higher revenues than last year’s highest month.
  • Our margins grew 2%
  • Website traffic increased by about 15%
  • Our overall conversion rate went up by 24.6%

The Challenges We’ve Been Facing This Year

Last year, my wife and I didn’t get a chance to improve our business that much because our son was just born and we had to adjust to taking care of 2 young kids along with the business.

This year, our little one is much older and much easier to take care of so we’ve been able to focus more time on increasing revenue. I’ll talk about some of the strategies we employed in just a minute.

But I just wanted to take a moment to say that inflation is on its way big time to the United States. Now you might be thinking…Duh!

Inflation is already here but I don’t think it’s completely hit us on the head just yet. All of our vendors in China have been raising prices like crazy. In addition, shipping has gotten more expensive as well.

Given that many products in the US are manufactured in China and other parts of Asia, I wouldn’t be surprised if prices increase significantly on most products next year.

My wife and I have been debating whether to increase prices on both our products and shipping but have decided to hold things relatively flat for now which has caused a slight hit to our bottom line.

So in order to maintain the growth of our business, we’ve employed a few strategies this year which I’ll describe below.

We Boosted Our SEO

This year was the first year that I’ve been determined to drastically improve our organic search rankings and the results speak for themselves.

We are now the #1 search result for 6 of our main keyword terms. We are in the top 3 for at least 7 other keyword phrases and we have 5 others in the top 5.

While none of these keyword terms yield a particularly large amount of search traffic on their own, they are extremely targeted keywords and our conversion rates are ridiculous for these terms.

For example, the conversion rate for a few of these keywords is upwards of 15-18% which is unheard of. This just goes to demonstrate the power of small niche markets.

You can still make a decent amount of money if you can dominate a relatively small niche even if the traffic numbers aren’t that high.

The increase in targeted search traffic helped us offset the rising product costs and labor costs in our industry. In addition, some of the keywords that we ranked for led to increased conversions for our highest margin products.

We Became The Dominant Player In Our Niche

The other goal that my wife and I wanted to attain this year was to completely dominate our niche. Today, we are the largest supplier of wedding handkerchiefs on the Internet.

As far as I know, no one carries the same variety that we do. This past year, we increased the number of products that we offered by over 30%.

Since we carry everything in stock and do our own embroidery in house, we can offer extremely fast turnaround times on everything we sell.

Fast turnaround times are very attractive to our customers because most brides wait until the last minute to buy their wedding favors.

We can offer very predictable shipping and order fulfillment times and guarantee delivery in many cases. Therefore, it’s worth it to a customer to buy from us because they know they will get their goods on time.

I strongly believe that our conversion rates have improved because of this fact.

We Sold More Of Our Higher Margin Goods

Besides focusing our SEO efforts on more profitable items, we also started framing the prices of our bestselling products to push our higher margin goods.

Framing is when you sandwich the main product you want to sell between two other products that are both priced above and below this item.

The tendency of most shoppers is to buy a product that is priced somewhere in the middle. For example, they won’t buy the cheapest item because they don’t want to be considered cheap. And they won’t buy the most expensive item because it costs too much.

So by sandwiching your bestselling and highest margin items between two other products that are priced above and below, you can raise prices and not have a negative effect on sales.

For example if I offer one hankie at 5 dollars and another similar one at 7 dollars, the customer will most likely buy the cheaper one. But if I sell a hankie at 5 dollars, another at 10 dollars and another at 20 dollars, the 10 dollar hankie instantly becomes more attractive.

Believe me, these psychological mind games actually work. Our overall margins increased the first half of the year despite increased product costs because we were able to sell more of our higher margin goods without overtly raising prices across the board.

Other Highlights

The other good thing that happened to us the first part of the year was that we were featured in Martha Stewart Weddings magazine!

Not only that, but being featured in the magazine directly led to our hankies being used in a very high profile celebrity wedding. I don’t have permission yet to disclose who just yet but I’ll let you know when I do.

In any case, if you still have any doubts about the money making potential of niche markets, our store is the perfect example of how you can sell a very narrow range of products and still be successful. Here’s to another great year!

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16 thoughts on “The Growth Continues! Why Our Online Store Profits Are Up 37% Year Over Year”

  1. Hey Steve,

    I’ve never been here before but today is the first time coming here to your blog and I must say that the story of your success is very inspiring. Learning lots of things as read your posts :)

    1. @Angelica
      Thanks for stopping by and I hope you’ll be back!

  2. Kim says:

    Congratulations Steve!! I love learning from you in the full course and from following the blog. I hope to even half of your success one day! I couldn’t have a better teacher.

    Wonderful news!

    1. Hey Kim
      It’s great to have you in the class. Love your enthusiasm and the energy you bring!

  3. Steve, my business partners and I read your blog like hungry wolves. We started our first store together 37 days ago, in part from your inspiring example. There is so much to do and traffic feels so sluggish and difficult to attract that first month. I have used some of your SEO examples from your articles, and we had our first 100 visitor day yesterday! While exciting, its not that super targeting niche traffic from Google like you draw, I realize that takes time, patience and focused effort. Your message of being patient comes though loud and clear in your writing.

    I wanted to say thanks for being such an inspiration and sharing so freely. The four of us read the 4 Hour Work Week and wanted to build a muse so we can travel the world together. Our company president is pregnant with her 4th child, so our baby sling store will soon have another happy customer. We can all relate to how busy your lives must be with your children. Isn’t it great to be able to build something that has value as a family asset? One day your kid will run your store while you are on the beach.

    Thank for all you do Steve, continued success!

    Dave B. Ledoux
    http://cheekybabyslings.ca

    1. @David
      Thank you so much for the kind words. 100 visitors a day is a great start! I’m sure your SEO efforts will pay off several months down the line. While I would love for our kids to help run the store, somehow I don’t think they’ll want to do that when they grow up:) We’ve been laying the ground work for outsourcing the whole operation while at the beach. I’ll keep you posted on our progress.

  4. Great to see the profits and successful business. I am opening an e-commerce store front in about 9 months and I am using your guides as I prepare for the launch. Thanks for sharing the information.

    1. @Financial Success
      Keep me posted on your progress and let me know your URL once you launch!

  5. Great to hear how well things are going. I stumbled upon your site a few months back and have been reading bits and pieces here and there. My wife and I will be having our second child in about 4 months so your story hits close to home. I’ve also been studying up on various types of passive income, I was encouraging my wife to look at setting up an amazon affiliate site. Glad we didn’t go that route. Anyhow, thanks for the updates and content. Looking to follow this path before long.

    Thanks,
    -Orion

    1. @Orion
      I think 2 kids is the way to go. These days, both of them are playing together quite nicely…with the occasional wrestling match:) Good thing you didn’t invest in the amazon affiliate site. You know how I feel about affiliate marketing vs opening your own business. Good luck and let me know if you ever have any questions

  6. Steve,

    Thanks for sharing and congratulations on your successes for the first half.

    I manage an online store for a company I work for and we’re up over 50% in gross revenue from 1st half 2010 after increasing sales 200% in 2010! We also increased our margins as well.

    I started an online store last year and have become more effective at realizing how important profitability is and managing all your costs and keeping track of everything and return on investments. But, my main challenge is doing good accounting. We are using Magento Commerce which we spend more on Web Hosting as you know, but we love the flexibility and endless number of options available for customizing the site.

    Is there any good tools you use to export your order information and bring it right into quickbooks? Or even better an API that can synch completed orders automatically every night in a batch or something like that?

    Just searching through your site and reading accounting articles now but didn’t see anything about batch synching completed orders with our accounting software automatically.

    Highest Regards,
    James

    1. Hey James,
      The numbers for your online store are incredible! Sounds like your company is kicking major butt. Good to know that you’ve started your own store as well. Magento is actually one of the shopping carts I highly recommend in my mini course though their future might be a little more uncertain now that they’ve gotten acquired from Ebay. Send your URL, I’d love to take a look!

      As for tools involving the export of information, I’ve written my own scripts that format all of the data such that it can be easily be imported into excel by my wife. Magento has several quickbooks plugins does it not? Unfortunately, we don’t use quickbooks at the moment because my wife is an excel expert and is managing our finances like how she did at her last company. Syncing completed orders can essentially be done at the touch of a button once all of the required formats are decided upon and put into place.

  7. Wow that is a great accomplishment buddy. You sure inspired a lot of readers with your story. Keep it up!

  8. Glad to hear you’re doing so well. The framing part was great- I need to incorporate that into some of my sites.

  9. We have experienced exactly the same thing with our stores. The part about framing was great and we’ve been indirectly doing this without knowing it. Now I know why a certain model sells so much more units!

  10. matt says:

    this is excellent nich ecommerce is the way to go!!! i know a woman who sells a niche wedding product and her biz turns over $700k!!! niche product to a big market=win!!!! and the best thing is your too small for amazon!!!

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