This news came in today: https://ecommercenews.eu/25-european...s-based-china/
For those of you who don't know how Amazon works, they sell stuff themselves, but also allow others to sell on their site and charge commission for each sale (percentage of the value).
In addition to selling on their site, you can have Amazon handle the logistics and communication with the customers. This is calle fulfillment by Amazon, or FBA in short.
Great for businesses who want to benefit from Amazon's reach and logistics, as it allows a business to sell in Germany for example, without having to deal with issues like German customer service, setting up a warehouse or shipping abroad (and the logistic cost involved).
In addition to that, Amazon favours FBA offers to 3rd party shipments, so it's easier to get the buy box (this is the product that gets the default sale)
So all I need to do as a business is label my products, ship them to an Amazon warehouse and they'll sell an ship it for me. All I need to do is keep sending stuff as it gets sold.
Your arbritage opportunity disappearing
So if a Chinese manufacturer sells on Amazon with the FBA service (and 50% of them do), there's no difference between you and them if Amazon stocks the product.
If you rely on arbitrage (sell something of Aliexpress at a higher price), your opportunities are disappearing fast.
That's because the product you are offering, is increasingly just as likely to be found on Amazon. But delivered the next day. And for about the same price you are selling it (your mark up will likely be similar to amazon commission + FBA cost, yes this depends on product and margin ambitions, but you get the point)
And the thing is, Amazon is a likely place for people to start their product search (55% in the US according to research: https://www.recode.net/2016/9/27/130...-search-engine).
So while you are trying to get customers to your site, Amazon already gets these customers to their site regularly.
Plus they advertise a lot (remarkting / email) so they are good at getting the sale (as much as 35% of sales come form recommendations: http://rejoiner.com/resources/amazon...elling-online/)
A formidable opponent.
So what to do?
1. Start fishing upstream
You don't want to compete only when the customer know exactly which product he wants to buy. Because by the time he knows he wants the Iphone wathever, your competing mainly on price.
That, coupled with the fact your one of the options among trusted names, like Amazon or other household names, it's tough.
But you could have built trust already.
Because the customer journey starts with a lot of questions. In the case of phones, those could be how much memory you need these days. Or how often you need to recharge. Or how you get the best pictures.
At this point, providing the customer the right information gives you the opportunity to gain trust. And guide him to the products that meet his needs, but also yours.
What does that mean?
That given a lot of products that meet his needs, you offer the one with which you can compete (because you have stock and others don't, have a better margin, have an exclusive deal etc)
This is a process that works well and one I have used a lot for my business. Proven by feedback of customers saying they could have gotten the product at many other places, but wanted me to get the sale.
2. Niche out
Unless you have the resources (whether that be money, connections or something else), don't go for the big markets. Like the phones I mentioned.
Overall, those margins are slim, you're up against savvy competitors (that might not even be profitable) and it's just too much work.
You are much better building up domain expertise, trust and a steady stream of visitors through google as the place to be for X.\
Real life example - while massive companies are fighting to get their interactive whiteboard sold in to schools and companies (with low to non existent margins, if making money at all) - the company a good friend of mine works for, sells the electric, height adjustable trolley for these boards.
Very, very limited competition and a great sales volume (over 8 figures worth per year) at impressive margins.
It's not a company whose name you;d recognise, nor as big as the interactive whiteboard sellers. So less prestige, but oh so profitable.
I'll take that sort of business any day.
3. Don't rely on low price products
A one off sale and a low price product just give you too little margin.
First off, a low cost (to the consumer) gives you little profit to work with. And too much work. Just look at these numbers which all lead to a 1,000,000 turnover:
100,000 people buy a $10 product
10,000 people buy a $100 product
5,000 people buy a $200 product
2,000 people buy a $500 product
1,000 people buy a $1000 product
Just think of all the invoices you have to process, shipments you have to deal with, calls or mails you will receive when you do 100,000 orders in a year.
Even if only 1% asks a question, has a shipment that goes wrong etc, imagine the work involved.
With 1000 customers, that's a lot more manageable.
4. Don't rely on a one-off sale
The hard work is getting a customer. But once you have gained trust by doing your job (selling and fulfilling), it's a lot easier to get that second sale.
So get your e-mail sequences in place that follow purchase cycles (send them a message when it's normally the time to buy again. Especially when they then don't order)
As mentioned before, Amazon claims that accounts for 35% of sales.
And a lot of this can be automated, so it's almost set, forget, collect for some campaigns.
It's been a lot, so I'll leave it at this.
I am thinking about doing something more with regard to point 1 - fisihing upstream. Not sure what that will be a new post, course, coaching or something else.
It does warrant more than what I posted here, as it works so well and once implemented, pays off over and over again.
Anyway, hope you found it useful and let me know your thoughts.