How to tell if a product will be profitable before buying stock: a 6-question test

To find out if a product will be profitable before buying stock, answer six questions: Is there demand? What price does it sell for? How much is left at that price? How quickly does it sell? How much capital will it tie up? What’s the risk? The fourth question is the one most people skip. A product with a 25% margin that sells through its stock in 30 days earns more than twice as much in a year as one with a 35% margin that takes 120 days, with the same amount invested.

Buying stock is the most expensive decision a marketplace store makes, and it’s almost always based on the wrong question: "Does this product sell?" Selling is only the first of six questions.

#1. Is there demand?

Look for three signs, ideally together:

• Rankings and trends. The product appears among the category’s best sellers or in trending searches. Mercado Livre has a best-sellers page and a trends site; Shopee has the Sales Assistant. I explain where to research in best sellers on Mercado Livre and best sellers on Shopee.
• Recent reviews on top listings. A review only exists after a sale. Reviews from the past month show that the product is selling now.
• Multiple sellers making sales. Distributed demand leaves room for a new seller; demand concentrated with one seller may point to a strong brand or an old listing.

#2. What price does it sell for?

Write down the prices of the top five listings. That’s what buyers expect to pay, not what you’d like to charge. Also check whether top listings are just above a fee threshold (R$ 79 on Mercado Livre; R$ 80, R$ 100, and R$ 200 on Shopee). There may be room to come in lower and earn more.

#3. How much is left at that price?

Calculate the margin at the top sellers’ price:

Profit = price − commission − shipping or flat fee − tax − cost − packaging − listing

Use the actual acquisition cost (product, inbound shipping, damage allowance), the package’s actual weight, and the category commission. Use these benchmarks:

For a step-by-step guide to calculating this number, see how to price a product for resale.

#4. How quickly does it sell?

Margin tells you how much each sale earns. Turnover tells you how many times a year your inventory investment comes back. Together, they show how much your inventory earns.

Two products, both costing R$ 30:

Product B has a better margin but earns less than half as much. When capital is limited, turnover matters just as much as margin.

Estimate turnover based on top sellers’ sales (recent reviews can help), and buy enough for 30 to 60 days—not six months.

#5. How much capital does it tie up?

Add up the batch cost, inbound shipping, and the time until your money comes back: inventory sitting unsold, delivery, and the marketplace’s payout period. For the first batch of a new product, choose a quantity you could sell within 30 days in a pessimistic scenario. I explain working capital in online store cash flow.

#6. What are the risks?

• Returns: products with size, color, or compatibility options (clothing, shoes, parts) get returned more often.
• Seasonality: holiday products sell well, then demand can stop suddenly.
• Certification: products that require certification, such as an Inmetro seal or Anvisa registration, need documentation from the manufacturer or importer.
• Supplier: if your margin depends on a one-time deal, it disappears when you restock.
• Price competition: if a large seller is selling below your cost, they may be clearing inventory or getting a better deal than you.

In practice. A kitchenware seller had R$ 8 mil to invest and two options: a knife set with a 38% margin and slow sales, or airtight containers with a 22% margin and fast turnover. After working through the six questions, the containers sold through in about 25 days, while the knives took more than 90. He started with the containers, using half the money, then used the first month’s returns to test a small batch of knives. In three months, the money invested in containers had come back three times; the money invested in knives hadn’t come back once.

#The test in a table

#From forecast to results

A test is a forecast. The results show up in orders. For question 3, the Milewa calculator runs the numbers for Mercado Livre and Shopee using current fees in seconds. Once the product is added to your catalog, Milewa tracks the real margin on every sale, including the commission and shipping charged, the cost, and the tax. It shows whether the product is delivering what the calculation promised before you buy the second batch.