Where's the logic please....

[Davek0974]

Is it best to score a sale over making a reasonable profit?

We are seeing a lot of competition selling the same product as we do for slightly less money but with free post and packing.

Now, we know the product comes from the same supplier and we buy in pretty large volume so the cost prices are very likely similar. We do not know their overheads of course, could be a one-man-band maybe but doubtful.

Customers nearly always seek the lowest cost and press the buy button.

This therefore seems to give them the advantage but then means they are working far harder for less return - order quantity rather than order quality.

Say we sell 50 items and make £50 profit, they would have to sell maybe 100 items to reach the same goal but they have taken more customers from other sellers like us in doing so.

Is the quantity rather than quality model what is going on here? I can't see the point in killing ourselves just to scrape a few pence per order but if not then how can they offer free P&P????

Back in the day, everyone charged P&P and the competition was fairly level - P&P charges were fairly consistent and the battle was on product price which we could compete in nicely. Since the free P&P started, we have been getting crippled, our postage costs are around £20k per month.

 

[Twinkle Toes]

It's the old Tesco model of getting rid of the competition, profit (or lack off) doesn't come into it. Time to find another product, why sell what many others are selling anyway? That's the trouble with selling via the internet, it's all about price and competition, you may be able to sell to the whole word but your competing against the whole world as well.

 

[Tim Coulter]

Unfortunately, you're in a price war. As you've pointed out, nobody can win this war except the buyers and then probably only in the short term (until the weaker or less determined sellers fail or withdraw from this market).

However, perhaps there's a psychological factor that you might use to your advantage. There have been a number of studies (here's one example) that show that free shipping is a major motivator for buyers. Even if you simply add your shipping charges on to your prices and call it free shipping, the evidence suggest that you will win significantly more sales. Of course, this would mean that your headline prices will then be higher than those of your undercutting competitors, but maybe the negative effects of that move will be less significant than you imagine. I would at least test this.

 

[Davek0974]

Thanks.

finding a new product is not easy due to the market we're in being hobby/craft related, it's a battlefield these days.

That report was quite interesting, thanks.

We will keep up the fight.

 

[AllUpHere]

This topic has been discussed on this forum many times before. There are loads of reasons why your competitors may be able to sell at what seems to you as a loss. Unfortunately, it's not easy to find out exactly what their specific reasons are.

Obvious examples are selling non-prime lines at a loss to bolster turnover, a fire sale to get out of a hole, an attempt to increase market penetration through the sale of loss leaders, an attempt to build a highly relevant e-mail list, etc, etc.

 

[Davek0974]

This topic has been discussed on this forum many times before. There are loads of reasons why your competitors may be able to sell at what seems to you as a loss. Unfortunately, it's not easy to find out exactly what their specific reasons are.

Search didn't bring much up, it's bit vague to look for.

Obvious examples are selling non-prime lines at a loss to bolster turnover, a fire sale to get out of a hole, an attempt to increase market penetration through the sale of loss leaders, an attempt to build a highly relevant e-mail list, etc, etc.

I think those two are the relevant factors here, these are pretty new lines so fire sale and non-prime are probably not relevant.

 

[AllUpHere]

Search didn't bring much up, it's bit vague to look for.



I think those two are the relevant factors here, these are pretty new lines so fire sale and non-prime are probably not relevant.

There is one here. If you can't find any others let me know and I'll do some digging.

 

[UKSBD]

Thanks.

finding a new product is not easy due to the market we're in being hobby/craft related, it's a battlefield these days.

That report was quite interesting, thanks.

We will keep up the fight.

The Internet was great for small business owners who got in to it at the right time.
The exact opposite now, as so many others are doing similar.

The days of finding a niche product, entering the market, expanding and still staying in that market in a few years is getting harder and harder.

The in and outs are great for the consumer but the Internet is changing traditional business.

I made this blog post a few years ago - http://www.sim64.co.uk/uk/why-google-is-bad-for-business-expansion/

 

[Annoying Donkey]

Customers nearly always seek the lowest cost and press the buy button.

Wrong...!
People only seek out lower prices when there's no other criteria. Offer them added value that they want and price won't come into it.
Example: Salt at our local supermarket is 26p per pound, Aztec Sea Salt sells for $99 per pound plus shipping and handling...
Coffee (it that watery dishwash gunge could be called coffee) at Starbucks is 4-5 times what you can get it elsewhere. Even cheaper if you make it yourself...
How many times have you bought something from a convenience store, when 5 mins down the road is a supermarket with much cheaper prices.
People don't buy Mercedes or Aston Martins or Ferraris on price...
What do your customer's value? What can you add in as a bonus that has a very high perceived value, but little cost to you? Offer something along those lines and competition becomes irrelevant...

 

[Chris Ashdown]

Can you use each of your ebay sales to really push your own web site and easily cover the loss by selling other items without the silly ebay coasts, so you are using ebay to advertise your other site

 

[silvermusic]

Trying to get customers to your web site from eBay / Amazon purchases is like trying to push water up hill, a waste of time. Customer loyalty on eBay / Amazon doesn't really exist, price wins every time on identical commodity products. I certainly would not be trying to gain a market share of anything on eBay at the expense of my margins. Seen it happen time and time again on their with the race to the bottom until the next busy fool comes along. Sell stuff that others can not source, be a manufacturer because there's nothing left in reselling commodity products for the middle man, those golden days have come to an end, the only people making anything decent margin wise are the manufacturer at the top of the tree.

If product will sell on eBay or Amazon under it's own steam at a margin you're happy with fine, if not don't sell it on the platform, keep it for a platform, including your own site, where it will sell for the price you want.

 

[Andrew Beardlsey]

One possible route is to create your own product by using an existing prodcut and adding something to it to make it a little diferent.
Perhaps you add a manual or a booklet on uses of your product and promote it as a course
Or bulk package 2 related prducts that work together and sell them as 1 unit
The big challenge you have selling the same as everyone else is to do something that makes you stand out.

 

[zimone]

Exactly as the other posters have mentioned you are in a price war, a race to the bottom and you have to find another way to differentiate yourself from the competition. Adding value to the product you already sell is one great way of doing this.good luck

 

[swankypants69]

If I am looking for something specific on eBay, I will search, then rank lowest price first

Then I will look through the lowest priced listings in general, say lowest £50 through to £55

Then I will roughly compare quality of listing, postage offered, general feedback etc etc and judge who looks to be the best seller

So the cheapest doesn't always win. You only get what you pay for!

Anyone else do something similar?

 

[The Byre]

The logic is called Price Elasticity of Demand.

 

[laguna]

As other have said; your in a price war and you somehow need to differentiate yourself from the competition.
Added value, USP, make it or modify it to create a situation where you offer something your competitors cant. We are manufacturers and are in a saturated market too, we have to compete against bedroom warriors with zero overheads. We are not the cheapest but what we do sell is unique and exclusive and we have many repeat sales, our own problem is one of initially educating the customer.

 

[Davek0974]

All good stuff but we sell paper and card in the craft market, you can't add uniqueness or value to ten sheets of pink a4 card

Our main line is/was pre-cut card blanks but that died out some time back, we were the original and biggest UK blank card manufacturer for many years, then along came the Internet, followed by killers like Hobbycraft et al.

We are not worried about dominating ebay or Amazon, they are just further outlets that we must tap to keep in the running.

 

[MOIC]

Focus on your target market and consolidate that market, starting locally and spreading out.

The more your spread out, the more competition you will face.

Online selling is great as long as you are able to compete. But you must maintain a profit margin that allows you to make a profit.

Gaining market share by making sales without your required profit margin is a worthless exercise on platforms like ebay & Amazon.

Better to expand your product lines, where you can sell and maintain your required profit margin.

Businesses have to adapt to the increasing online competition, doing nothing will mean a reduction in your sales slowly but gradually.

There is always new innovation & new ranges in most product categories, make it your business to find out what they are and be first with it.

The alternative is to build your brand.

 

[silvermusic]

Putting two or more commodity products together in a pack is not a new product, it will take your competition 10 seconds to duplicate the offer. Pure resellers are going to really struggle more than ever before in the next few years to keep trying to stay ahead of new products on their competition, that's only weeks months if you're lucky, before everyone has it and starts the race to the bottom on price. The future in retail for those not wishing to be continuously chasing their tails, can only be for those who genuinely have something others don't have, that can only happen by designing making or having manufactured your own product.

There's already certain areas where it's impossible to enter the market and make any money unless you're operating on vast quantities with tiny margins, electronic accessories is one that comes to mind.

It's quite amazing how many areas of expansion are out there but so many so called retailers are blinkered to them, too much concentration on e-commerce. I grew up on face to face sales so it's second nature to me, but many have only ever sold online. It staggers me how many opportunities there are for sales in the real world and it's an area I'm expanding into more and more with my own products. I can honestly say it's something I enjoy doing, I'd forgotten just how much, but I guess it's not for everyone. I'm tempted to work towards selling more offline / directly and in bulk and only keep my own website as the only online source for my stuff and dropping eBay altogether. e-commerce has it's place, but there's a big wide world out there for the taking.

 

[Swisaw]

If your postage cost is £20k/month, you should consider to do your own delivery, which should be a lot cheaper. In addition to that offer deliverey service to other companies, which should enable you to recover the cost of the delivery service. In this way, you save your £20k/month postage cost and get a better copetitive psition.

 

[MOIC]

. . . . . .and the thread is called. Where's the logic please!

 

[Davek0974]

. . . . . .and the thread is called. Where's the logic please!

Lol!

There is no way we could deliver to the whole of the UK, Channel Islands and Europe for 20k a month it would need a fleet of vans or cars, staff, depots etc, er, pretty much like the royal mail I guess.

If it was 20k per month to local area the it would be better but no.

 

[Swisaw]

Let parcel force or others do Europe and Channel Islands. Deliver to uk by yourself. Do a 100 mile radius by yourself. Deliver to a depot of a major delviey company in each city and let this delivery company to do your delivery in each of cities at a sort of half usual price. This should reduce your cost to £10k, which is not bad.

 

[Davek0974]

but you could not run a fleet of cars big enough to target that area for that sort of money, the sums do not add up. You really cannot beat well established deliverers. 100 mile would mean we have to cover the whole of Kent, Norfolk, Suffolk, Essex, and way out west, just can't be done.

 

[MidlandFoodService]

Speak to the seller and see if you can do a bulk deal, they seem the greedy type so keep haggling until you are at cost or below and buy the lot. But only recommended if your in a position to sell large quantities.

 

[Davek0974]

It's an idea but it's not just one seller, there are many selling the same product for practically cost price with free post!

 

[MOIC]

Can you expand your product range and offer a branded service?

 

[Davek0974]

If anything we need to reduce our range,

We used to do branded products, that died out years ago. We used to supply the likes of Hobbycraft, then they took our range and had them made elsewhere, most likely for less, did not even give notice.

We just happen to be in a cut-throat market sector - hobbies and crafts, pennies count every time, loyalty is very low, average order value is low.

 

[MOIC]

Are you manufacturing in the UK?

 

[Davek0974]

Yes we are.

 

[MOIC]

Could importing make you more competitive as well as sourcing new products in your category?

I understand it's a change of direction, but that may be the "adaption" you need to consider.

It's just a thought.

 

[Davek0974]

I doubt it, it would also mean shedding a lot of staff in production, machinery etc, and then having too much spare room. I think it's too late for that, we are a manufacturing business and geared up for that.

 

[MOIC]

Yes, I agree it is not ideal, especially if it means shedding staff.

Could you not supplement your product lines with imports?

It's probably a case of keeping the existing manufacturing business going, all be it at a less capacity, due to decreased demand and supplementing the business profits with buying and selling finished products, as opposed to manufacturing only.

Could existing staff be trained to work in other positions if you diversified?

It's not an easy decision, especially when livelihoods are at stake, but ultimately your business seems to be at risk with decreasing sales and profits due to ebay and other online sellers.

It may be a case of adapting or slowly accepting that sales will dwindle year on year.

At some point, action must be taken.

I wish you good luck with your decisions.

 

[Chris Ashdown]

Could you sell on qvc or the other tv shops where they sell on and have the distribution problems

 

[Davek0974]

we tried that some years back, they have some very odd ideas as to what they will sell, who pays for it and what happens if it does not sell. Long story short, its not worth the hassle or risk.

If that is your only outlet and can focus on it then ok but it's not an outlet to be taken lightly.

 

[Root 66 Woodshop]

one thing I've found with some retail customers is that as soon as you mention a FREEBIE or a discount they're all over you like a rash... you're selling a product that has the ability of having 10% or 20% free i.e. 1 - 2 additional pieces of card for instance...

That should without doubt make your customers buy from you, whether there is postage or not... and with all due respect I have no idea what your mark up is, but pink card? surely your markup is enough to swallow larger/more orders because you're giving away and extra piece away...

 

[RakeMark]

I worked with a company that were in your situation regarding competitors selling for pennies of profit and everyone bought from the same supplier in that scenario as well. We all talked about price matching but after a discussion the boss said that its easy to be a busy fool, she wanted a better alternative.

They started manufacturing their own products under their own brand so that a direct comparison couldn't be made. The products required safety testing and CE marking so it added a barrier to entry.

I don't know anything about card manufacture, but could you branch out in some way? Could you look to invest in new machines that punched the card in a specific way or printed copyrighted designs or punched a copyrighted design?

My mum is always buying craft stuff, the latest fad, could you create a new fad in card? If you are manufacturing already you have an advantage over those that are purely buying from a wholesaler.

 

[Davek0974]

Yes, we have a workshop full of machinery for punching, cutting and folding paper and card, trouble is, most of our core lines are now produced by people at home on tabletop hand operated machines, these never existed until a few years back.

Paper and card is a pretty limiting topic at present, fads are going to be very rare now, even at it's hay-day there never were any fads really, just people making greetings cards at home to sell at markets, craft fairs or to give to family etc. These cards have been hit just as all other cards by email, text and probably facebook etc. so the market is very much reduced now, add to that sellers that flood the market at silly prices, sell out then move on after having destroyed that market.

Of course, if anyone has any bright ideas that are card related.....

And no, we can't compete in the world of commercial print, the trade of printing where you have a press in a small shop doing jobbing work (where I cut my teeth ) has also died and is pretty much stitched up by a few very large companies now, the likes of VistaPrint et al.

 

[Chris Ashdown]

Could you have a coupon code in your goods that allowed the purchaser to download a number ofdesigns or drawings from you own website for free, something like 250 clipart Images with seasonal content. There used to be a good number of very cheap drawing software packages for under a fiver in the cheap software places maybe work with them

 

[silvermusic]

Have you considered selling less of the smaller quantities at retail level and more in smaller bulk lots to wholesalers, crafting groups, etc.

Back end of November into December last year for me sales started to get into silly numbers with little profit on each, a quick calculation and I realised I was just about making minimum wage for myself on the time it took to make and package the low value orders. Which was annoying to put it mildly as there were a good number of larger orders too. I decided to immediately put up the price of the low value items by 30% and increase P&P prices so everything went first class. This was the exact opposite of what my competition were doing. However, although sales of low value items dropped by over a half, those I did sell made better margin, this left me time to concentrate on new higher price/profit lines and going after better sales outside the eBay world.

As my better half keeps telling me, there's only you and 24 hours in a day,use the time wisely because it's all too easy to become a busy fool..