Predict Your Market's Future

By Amy Kendall, Research Education Specialist

We live in a world of constant change. There are always new products coming out, and it seems that just when we get to point where everyone understands the new way things work, consumers are demanding the next big thing.

In the last article, we talked about how to grow your eBay business by either selling for more or selling more often. But in our world of constant change, how do you know when you can still trust a product to sell for more or sell more often, and when that product is about to be dropped for the next big thing?!

Once again market research is the answer. We can use HammerTap to not only discover the current market for a product, but we can also predict what’s going to happen.

Single Snapshots vs. Views Over Time

If you’re looking at a photograph of a ball in mid-air, can you tell whether it’s on its way up or on its way down?

Probably not.

A single frame in mid-motion will not tell you direction. But if you had another picture of the same scene, taken just a split second before or after, you could compare the two pictures. You would be able to see whether the ball was moving up or down.

The same principle applies with online sales, and we can compare the flight of a ball to the life cycle of your product. You need to look at demand for the product over time, and only then can we decide if product demand is rising or falling.

Every product has a life cycle that revolves around supply and demand.

In the beginning, demand rises because of a lack in supply. Or in other words, buyers are willing to pay more because there are fewer products to be had—like when the price of the Nintendo Wii video game console jumped so high on eBay because no one could find them in stores.

Then at some point, demand begins to level out and balance with supply—or buyers aren’t willing to pay as much because they can readily find the product and prices become more competitive.

And towards the end, demand falls and supply rises. This happens when buyers have moved on to the next cool thing but sellers are still stocking the item—this is about the point when you start seeing a product go on sale.

So the whole point is that before you invest in a product, you want to make sure that product is on its way up and not on the way out.

Going Up?

Just to make my point, I’m going to start this discussion with a little quiz.

Question: Using the information in the research results in Figure 1, below, can you tell whether demand for Baby Bjorn baby carriers is increasing or decreasing? How about supply?

Figure 1: Baby Bjorn Baby Carriers 30 day snapshot

Answer: I’m guessing you already know the answer. But, I’m simply trying to illustrate my point. You can’t tell whether it’s increasing or decreasing because you are looking at a “freeze frame” of the market. It’s going to take several snapshots to look at a product’s performance over time.

What to Watch Over Time

Determining whether a product is on its way up, steady, or on its way down is just about as simple as looking as several photos to decide the direction a ball is traveling. You do basically the same thing by taking snapshots of the product’s performance at different points in time and comparing them.

In this case, we’re gong to look at some snapshots, week-by-week, for a 30 day period. Below are four snapshots for each week in those 30 days. Pay close attention to the bolded numbers in the figures. They are:

  • The total number of listings (supply)
  • The LSR (or listing success rate; this is the sales rate, which is the demand in sales)
  • The ASP (or average sales price; this is the selling price)
  • The total sales in dollars (demand in dollars)

IMPORTANT: To get your research “snapshots,” you’ll just use HammerTap to run your research for one week periods, and then save your reports.

Week 1

Figure 1: Week 1 Snapshot for Baby Bjorn Baby Carriers

Week 2

Figure 2: Week 2 Snapshot for Baby Bjorn Baby Carriers

Week 3

Figure 3: Week 3 Snapshot for Baby Bjorn Baby Carriers

Week 4

Figure 4: Week 4 Snapshot for Baby Bjorn Baby Carriers

Remember, in the figures above, we’re looking for:

  • The total number of listings (supply)
  • The LSR (sales rate, which is the demand in sales)
  • The ASP (selling price)
  • The total sales in dollars (demand in dollars)

Comparing the Results

Comparing the results over time provides us with some subtle clues about how this product has performed over time, and the direction it’s going. Table 1, below, pulls it all together.

Table 1: Week-by-Week Supply and Demand Comparison

There’s a short and long explanation of how this product performed over time.

The short explanation is that it is fairly stable, despite the slight dip in overall dollars consumers are spending for this product in the market.

The long explanation is that this product has not remained static. The conversion rate (LSR) actually went up, and the variation in selling price (ASP) isn’t too drastic, although there’s a slight dip in the overall sales from Week 1 to Week 2. But this dip is correlated with a decrease in the number of listings.

Overall, the product has held steady. Considering the decreases in the number of listings and ASP in contrast to the rise in LSR and the slight upturn of overall sales the last few weeks, the product doesn’t appear to be on its way out. From this information you could predict that steady sales will continue.

Where is Your Product in Its Life Cycle?

Every product goes through a cycle that begins with a little interest, then attracts more buyers (demand) and not enough sellers (supply), and gradually ends up with too many sellers (supply) and not enough buyers (demand).

But how do you decide where a product is in its life cycle? Again, we turn to the data to find out and will look at how supply and demand change over time.

And that’s the perfect place to pause!

In our next article we’ll talk about each phase of the product life cycle in complete detail complete with some research examples, and show you how understanding a product’s life cycle can make you more money!

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