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|How do I compete with Amazon.com? Help!|
I run an ecommerce site that does about $60K a month in sales selling software. The site has been profitable and fairly steady for 2 years now.
My #1 competitor is Amazon.com. In the past I have always been at or slightly below their prices so there has not been a problem. Recently, however, their prices have been slashed so much I literally can't compete on price.
In attempt to stand out I offer a 30-Day Money back guarantee and ship everything 2-3 day Air. Amazon does not accept returns on software and ships via "Super Saver" which is double the shipping time. I belive I have done a good job of making our policies clear on my site.
What would you guys suggest I do to compete? Should I slash my prices yet again to an even smaller profit margin? I would then be closer to them in price but would not be able to match them. Should I put a comparision chart on my page? I heard this is not a good idea since you don't want to invite people to leave your site.
Any suggestions on how to compete with the "big boys" would be appreciated. These low margin sites with $5.00 above cost are killing me. Do I stand a chance?
|These low margin sites with $5.00 above cost are killing me. Do I stand a chance? |
Perhaps if you can't beat them you can join them. Can you become an affiliate for Amazon and also sell for them? Then at least you would make an affiliate commission for each sale and you would not have to put any effort into making and supporting the sale other than putting up the links.
I personally buy tons of stuff from Amazon in part because of the low prices, no sales tax and the super saver shipping. I also have an Amazon rebate card so I ended up gettting 3% more off their prices in the form of Amazon gift certificates.
Most of the shopping comparison site all list Amazon so for many reasons they are very hard to compete against for smaller volume competitors. They are like the Walmart of the Internet these days.
[edited by: Jane_Doe at 9:48 pm (utc) on July 3, 2007]
I wouldn't recommend becoming an affiliate--you lose all control over the process and give the keys to them. That is, unless you've tried everything else...
Unfortunately, because I don't know your business, I don't have a good answer. It's the reality of business. You were probably priced lower than other sites, so it's all fair.
Can you offer something they don't? Service contract? Additional complementary software?
Have you automated everything you can? Is there a way to cut costs? How about a downloadable version of the software?
You could offer a rebate to get the price lower. Most people won't bother filling out the forms, but you will have to deal with the hassles if they do.
I assume the software developer has no interest in stopping them? Some care enough about their product that they want it sold at a higher price.
You could try laying low for a while (how long has this been going on?), until they raise their prices.
In the end, however, it is hard to compete with a company that does not have to turn a profit on products they sell...
Try offering customer support with every purchase
|Any suggestions on how to compete with the "big boys" |
Play up on the personalized service and knowledge of the product. Face it, you order from Amazon or other such "stores" and you, as a buyer, are nothing more than a number, and forget getting help. This is still important to the consumer at large.
If there are any customers group that would be happy to buy from you if you'd offer something Amazon does not (regardless of price)?
Every big boy has a pool of unsatisfied customers, because big boy offers on too generic terms, that are Ok for the 80% of their customers, but the last 20% just buy because they do not know who can put them out of their current misery :-)
Like 30-days payment terms for some groups of customers? On-site support contracts (efficiently transforming you from retailer to consulting company) -- you already have a large pool of customers, and services might be much more profitable than retailing?
Try coming up with some kind of product that is unique to you (if you have just a few titles - maybe a howto ebook) that you can include with each order. Sell it separately for big money to give it perceived value. If customers then try to do a direct comparison, your price seems lower because they are getting the package.
The freebie doesn't need to be much of anything and can even have zero unit cost, but it throws off direct price comparison.
|Any suggestions on how to compete with the "big boys" would be appreciated. |
There are only 2 alternatives; fight or run! But hey, take care... If you fight too often, with every fight, the chances of being killed increase. If you run too often, you risk starving too often, and therefore with ever decreasing chances to win the next fight. This is a difficult choice, but that's what your brains are for.
If you decide to fight, find a niche on the basis of your unique advantages and... disadvantages!
That means whoever from the big guys wants to fight you in you niche, they should spend much more energy to kill you than the energy they'll get by eating you up! Try to increase this margin.
This not much, isn't it? But this is the only reasonable defense in Mother Nature. Oh... and make sure your niche doesn't look like too attractive.
You might want to consider selling on Amazon as a merchant.
Amazon will process the credit card information, but charge you a commission for each sale (which is higher than what you would consider paying an affiliate). If they're getting good rankings on search engines, as you may be, then you'll have two chances to make a sale and also make the consumers aware that you're out there on the web. And if you list your products along Amazon's product listings, if Amazon is out of stock, you'll be in the "buy box" or competing other sellers for the spot.
You can set shipping policies and display return policies as well.
Have you considered something like G's Products? Can't hurt!
Survive until the weakness(es) of the big box or "monoculture model" of doing business takes hold. Market diversity offers strengths that operational scale and supply chain efficiency alone don't offer.
Pending the marketplace working out the winning economic model do something bold.
1. Go directly to the manufacturer and argue for the merits of a diversified marketplace for their product. If they "go all in" with Amazon and effectively kill off their other distribution channels then will they be at the mercy of Amazon? I'm sure that's on their minds. What if Amazon gets the hiccups? What if Amazon cuts them off or decides to play favorites with a new entry into the software field?
2. Form a buying collective. Hunt down other distributors and suggest that they agree to pool their purchasing power.
3. Offer general software installation tech support at $65+/hour. Bundle 1 hour of installation support for the significantly discounted rate of $35/hour. Outsource your tech support.
4. Go the anti-buying collective route: Join forces and advise your manufacturer/vendor that you all will stop buying and reselling their software, and begin to promote a competitive or open source product, unless you are offered a competitive price. This fits the "What they hell, we might as well all go down in flames if we're not going to play nice" model.
5. Get your collective together and seek competitive bids from competing vendors/manufacturers for the same/similar product.
6. Sell 1/2 pre-product-purchase consultations for $25+. Run the software and be prepared to answer questions.
7. Sell knowledge and experience, not just the product and put a price on the sharing of knowledge.
8. Cross sell niche products that work with BrandX. Know your product and know what works well with it. Find out what freeware or open source products work well with it and bundle that. Have a demo of the associated and assorted "bundled freeware" running on your website. Make access to the demo a sign-up proposition ~ mailing list growing.
9. Tell the truth when selling. "We cannot compete with Amazon purely on price BUT Amazon cannot compete with us for the following reasons . . . " (You get what you pay for and don't get what you don't pay for.)
10. Openly declare war on Amazon. Rally the masses. It's about time. If the fight againt the Bigboxization of the economy cannot be fought online - where it ought to be a bit easier to gather the troups - then we are lost.
11. At the same time you openly declare war on Amazon declare war on Walmart.
Hunker down. Determine where your inefficiencies lie. Look for better pricing all across the board in the operation of your own enterprise.
I fear that "lower prices" are the real opiate of the masses.
Here's an idea: Show customers a photograph of the house you live in. Next to it show people a photograph of the house the CEO and other "C" level employees of Amazon live in. Then ask your customers what it is that they really want to support - what they want to vote, to create - with their dollars, pounds, yen, pesos, lira, francs, euros, . . .
Viva la revolucion or more opium for the masses? The final judgment is pending but humankind is sometimes slow on the uptake and easy to addict. Do what you can to save us . . okay? ;)
[edited by: Webwork at 1:47 pm (utc) on July 6, 2007]
you can increase your sales margin buy buying in larger quantities than you can normally sell through your own site.
Buy a quantity of products that is way over what you would normally be able to shift, but that gives you excellent bargaining power with the manufacturer / supplier.
Sell your normal number of products though your site at the normal price (but larger margin). Get rid of the rest at cost price through eBay.
You break even on half, and make more than normal on the rest.
Thank you, Webwork. Your post is an inspiration for me!
|11. At the same time you openly declare war on Amazon declare war on Walmart. |
Wow, those are some REALLY bad ideas. Don't think the "buy from me because I live in a hovel" is going to score points with software buyers.
TV commentator just noted HOW MUCH WEALTH people in the US have these days when 500,000 (700,000?) people line up to buy iPhones on the first day.
jsinger, in the context of the OP's proposition - "I'm going down because a monster is eating my sheep" - all I'm suggesting - as an alternative - is that one doesn't go down sheep-like.
The marketplace dialogue about big box retailing, with its "beneficial" scale and efficiency and lower prices, eviscerating small business communities across the world and broadly altering a way of life - where retail profits that once stayed in the community are now passed on via stock options and where the shopkeepers once lived in a house not that different from the one that the white collar folks lived in - the dialogue about this trend isn't over yet. Communities are starting to push back. Collective bargaining by labor may yet be reborn. The price of gas may make the short trip to the local merchant a bit more appealing. All things in their time.
Before any one business becomes the next, after the next and next and next business to succumb to this new economic reality, one should consider all approaches - including a call to action, to wake up the opiate induced "low cost is all that matters" masses - to wake up and face the reality.
Do I think it will work? No. Not until we reach a critical mass of what I do not know. I think we - humankind - are pretty slow on the uptake of larger scale issues. We tend to wait until we have a crisis on our hands or in our own backyards and see our own individual houses burning before we shift priorities and act. We are so darned busy and overworked and overwhelmed just by the business of maintaining the status quo that we keep waiting for someone else to fix things. We don't even write letters to our Congress or the local paper. Healthcare? Global warming? Social security and Medicare stability? Deficit spending? Like sheep to the slaughter we are, all the while anxiously hoping that everything will all turn out. "Someone will fix this because they have to." Meanwhile, the icecaps melt and deficits grow.
The sheep are anxiously waiting for a voice of reason, to give them a bit of direction. Perhaps to rally them. Michael Moore doesn't quite do it for me but his existence - he presence on the stage of the marketplace of economic ideas - somewhat of a distant scion of Ralph Nader - is to me sign that the masses are getting fed up and are beginning to see that their own economic interests are increasingly at risk. When folks are willing to pay to see what is largely a policy piece in their local theater that tells me folks are looking for a unifying voice, likely a consumer or "I am an economic unit voice.
So, who wants to step up next? One may go down in flames or, possibly, one may be the beneficiary of an advancing point of the next economic revolution . . of sorts. I'm not quite ready to give up on the little guy. I'm not giving the economic undercurrents a name quite yet but addiction to the "low price opiate of the masses" is one thing we will have to face - again. At some point the "benefits" of the economic efficiency of the marketplace will erode the social underpinnings that support the economic efficiency - or, perhaps better said "the wealth redistribution" efficiencies of the marketplace - and then things will get interesting.
What was it that finally brought down the monarchy in France?
Did the price of a loaf of bread play a role?
I say that if you have no real chance agains the economic moster of big box retail, compounded by the low price opiatization of the masses, the least one can do is to remind people that, in time, we always do it to ourselves when we fail to see the bigger picture.
So, show them the picture - the economic reality - of the latest round of improvements to the economy.
Like I said: I think there are only so many improvements this economic model can sustain. The there will be evolution.
Or . . . revo . . . no . . no . . that'll never happen, right?
Well, that was fun. Now, back to paying the bills and making a buck.
[edited by: Webwork at 3:07 pm (utc) on July 6, 2007]
This only works in some industries, but when it clicks its very powerful.
There is one place that Amazon could never compete with the smaller company: personality. Amazon has in a way become the Walmart of the internet (not in a political way, just in a bland, corporate sense).
Some sites win because of the personalities involved, people who are recognized within the target market. If you don't necessarily qualify, go find some personalities (big-shot or otherwise) to get on board. People go to Amazon for low prices, but just as big a motivator is our desire to buy from people we like and trust.
Depending on the market and the guru/celebrity/respected member you partner with, you could have to pony up quite a bit of bread. Maybe try a rev-share deal.
You may even try to incorporate some 2.0 responsibilities into the agreement. Nothing drums up a little consumer loyalty like interacting with famous people.
|Play up on the personalized service and knowledge of the product. Face it, you order from Amazon or other such "stores" and you, as a buyer, are nothing more than a number, and forget getting help. This is still important to the consumer at large. |
Is that really the case on the web? I take that view when I'm shopping at a store, but on the internet 99% of the time I already know what I want and I just want it at the lowest possible price.
If I want service, I go to the high street.
That might just be me, but...
|Did the price of a loaf of bread play a role? |
Too bad those French didn't have the delicious and cheap bread from the Sam's Club division of Wal-Mart. My wife brings home their wonderful rotisserie baked WHOLE chickens...already cooked for $5.99! 70 years ago, chicken was something the rich ate. (Herbert Hoover: "a chicken in every pot") I'm amazed at how cheap products are compared with decades ago.
My young son got his first parttime job last summer, at Wal-Mart. Was paid something like $9.30 an hour to start for a clean, safe and fairly easy job that he enjoyed.
Revol...? Not when half of America owns stock and unemployment is near zero.
Does the web need the 50,000th online software seller? Sometimes it's smarter to move on.
So, to put the economic "big speak" in practical "how to" terms I suggest the OP go viral . . if you are going to add into the mix the larger issues.
Say what you have to say on YouTube. Be frank. Challenge people to think and to confront what they are doing.
Create a website on the topic of how big box retailing is effecting not only your business but others. But, since it's your business, keep the focus there.
I'm not sure people are really ready to pay $3.00 or $10.00 "extra" dollars to vote for a larger value proposition but isn't it about time to accelerate our education and deepen our appreciation for what is unfolding and our role in it?
If you cannot compete purely based on final sale price you have to compete for the hearts and minds of the consumer on other grounds, for other reasons, based on other values.
My sneaking suspicion is that the downside of low cost retailing will be a very large externalization of other costs. Nothing escapes the economic system. Costs and benefits are simply shuffled around.
Sell something other than price and be better than anyone else at selling it. For heaven's sake you are posting at WebmasterWorld. Where better to work out how to get out your message, rally the troups and fashion your battle plan.
Rehab for low price addiction starts here.
|but on the internet 99% of the time I already know what I want and I just want it at the lowest possible price. |
This is the mindset on the net now and that is why pirated products are poping up all over the place.
Had a family member find an item way way below our price he bought it problem was it was a pirated product and these are pills so it was something that could be contaminated.
Why I know he called me up after he got the product and asked me about it. From what he said and the cost I suggested to him to called the manufacture and ask them...Pirated...
Bought from us after this and quit trying to find the "cheapest"
Best price is not always best. Some can come back to bite ya.
To help with the answer of competing with the big boys.
I have quit worring about them and focused on our customer care/service as this is were you will build a business. Been in a real real tough ecommerce for 4 years now I was once a price chaser and worried about this all the time.
You can control your overhead and expenses tighten up the belt keep the prices were you can make a living and forget about Amazon.
[edited by: bwnbwn at 3:47 pm (utc) on July 6, 2007]
|but on the internet 99% of the time I already know what I want and I just want it at the lowest possible price |
But is this the exception and not the rule? This has been said in numerous threads in one form or another - never assume about your visitors. Like sooooo many things, a seller has to "think outside the box" when it comes to promoting sales, or a product.
If you study every popular whatever, there is something unique that makes it stand out: myspace, iphone, google, etc. They all provide somthing the others don't. It's that "others don't" nitch you should be looking for.
>>Openly declare war on Amazon. Rally the masses.
Taking a David vs. Goliath approach has created considerable emotion for brands and companies. Firms that have successfully portrayed themselves as competing against the "big guy" but offering better products or service have carved out nice niches.
I just read a book about branding, and according to the author one of the key elements in building a near-religious brand identity is to have an "enemy". Not all successful brands have that characteristic, but many do: Mac vs. PC, Pepsi vs. Coke, etc.
Idea: put up a prominent list of bullet points of "Why we are better than Amazon". Get creative. :) These don't all have to be serious, like, "our prices are lower." (Particularly if they are not!) Something like, "We have two Labrador Retrievers in our office who like to chase the warehouse cat" or "We don't allow decaf coffee because we want our people charged up to take care of your order" might be just as effective. Portray your small size as an asset and show that you have real people, not recommendation algorithms.
|Does the web need the 50,000th online software seller? Sometimes it's smarter to move on. |
"Give up. You are doomed." eh?
"We are Borg."
Is the economic machine able to grind so finely that it is even capable of grinding up souls?
"It is useless to resist . . . . It is your destiny, Luke!"
Pack up and move on or go down swinging. There's nothing quite like clear cut choices.
There are reasons why the popular conscience responds to imagery of "the evil empire" or why phrases like "we are Borg" take hold. It is the struggle for individualization versus the forces of commoditization - cloning - of people. It's open source versus Microsoft. In some respects it is literally a battle for the soul - the individuality of self-expression versus the orange-shirted or blue-shirted masses of Home Depot and Sam's Club. "Yes, well, I'll be myself after work . . I've got bills to pay."
Somewhere in the morass I see the merging - Neo/Matrix style - of the socialist/communist/capitalist economic models, taking the best of each. Does low cost and efficiency drive out the individual or force the individual to conform - just so he or she can pay the bills this month? This is something to mingle with discussions of the latest travails of affiliate marketing, over drinks, at the next PubCon.
So . . What's it going to be . . "Luke"?
You cannot compete on price. "They" have the opium. The low cost opium. It is very appealing and addictive. We sometimes think of nothing else. So, what else ya got to offer me? Maybe a kick in the economic head might work? Clearly I'm a bit dense as I think there's a fight worth the effort in here somewhere, for some reason.
[edited by: Webwork at 4:18 pm (utc) on July 6, 2007]
* PBS has a show called CEO Exchange. They recently interviewed Brad Anderson, CEO of BestBuy. BestBuy has been successful with their GeekSquad service but admit its a still a jugging act to sell that service and products that are always falling in price. My point - just make sure you're not working harder for nothing.
Speaking of Amazon, we recently found out that one of our own distributors was selling direct to amazon which ticked me off to no end in the first place. But what really got me angry was that they were allowing Amazon to sell direct to the public at the same cost they were selling to us.
That being said I raised cane with the manufacturer of the products that were being low balled on Amazon and thus we are now able to purchase those products manufacturer direct and cut off the distributor.
I think that many retailers will begin going this route especially with manufacturers now willing to dropship (with a small fee) but the higher profit margins make up for that cost of the dropship fee.
We still dont sell at the cheap cost that Amazon does, but try getting customer support or technical help from Amazon on an item that they have no business selling.
Go back to the basics of eccomerce. And then look at the basics of your business. It looks like you are doing great but there is still room for improvement.
Does your website have all the basics? ph number? logo's ect.? I bet it does at your level. Does it have store appeal? Does your website speak that you specialize in software, your company is great at what it does? Do you make improvements and measure conversion?
And back to the basics of business:
Do you have different vendors for the same brands of software? Re-negotiating proce is a part of business.
I sell more products every year and each year there are price increases. I stomach the price increase but find better ways to buy.
Larger quantities, different vendors, etc.
When was the last time you renegotiated your credit card merchant account? After years of doing business with card service international someone else showed me I was getting gouged. I saved 1% or more and real banks gave me solid quotes, not fly by night guys.
I cut down spending in PPC where keywords weren't competing well and bumped up some bids where I was doing great.
|My point - just make sure you're not working harder for nothing |
70% of our online competitors would be better off shutting down and focusing on something else. They don't have a prayer. Many are brick/mortar retailers who bought into the myriad of net fictions.
OTOH, the Big Boys are especially quick to cut and run. Wal-Mart has sold off several huge overseas operations lately that were profitable, but not up to their goals.
|What would you guys suggest I do to compete? Should I slash my prices yet again to an even smaller profit margin? |
Consider some immediate cost cutting measures such as using Google checkout which has no fees until '08 and if you don't already ship via USPS (if in the US) they are usually cheaper than UPS or Fedex.
The support angle could be good with something like a huge online FAQ (how-to videos?) and even a forum that you could offer "FREE" to customers, with some teaser pages or snippets for non-customers, and possibly charge for access to other customers, such as those that bought from Amazon.
Consider possibly partnering up with someone else that provides tech support services as an affiliate, you could theoretically make more money giving the software away at cost as long as you get a good share of the labor contracts, including those that purchased from Amazon.
Try product dumping to raise the inventory cost of big players.
Also the Internet is full endless niche, you should focus on that.
|Try product dumping to raise the inventory cost of big players. |
what does that mean?
| This 33 message thread spans 2 pages: 33 (  2 ) > > |