Forum Moderators: buckworks
As a startup, I'm mainly facing the issue of getting good discount from the supplier, profits being eaten up by postal companies (our air parcel prices seem to be slighly higher than the services enjoyed by our competitors in their country), and paypal (not enough turnover to enjoy additional discount).
I'm looking towards pricing for the international market, but it appears that we are not able to beat their prices at all. Unless I try for 5-10% profit margin.
The way I compare against my competitors is that I use the full price, which is the item price + S&H from their shipping location to U.S., compared against my item price + S&H from my shipping location to U.S. Some of my competitors are located in US itself which is able to give very low shipping prices based on UPS Ground, which makes our prices look really bad. (There's no way for me to offer a better price than them)
Related to shipping charges, I don't seem to be able to find the fuel surcharge for Hongkong Post and Japan Post on their website. Whereras I have about 25% fuel surcharge in my country.
Wondering if anyone could give any advice on this?
Appreciate that.
As a startup, you'll find that a low margin (and therefore low prices) will help get you going - but then raising your prices may be impossible later.
"Post Free" is common in your industry, at least to 'local' buyers, and you need to be able to match the successful players.
But you've chosen an industry dominated by huge multinationals who can undercut most rivals; it will not be easy.
The market sets the selling price, and as times are hard, people will increasingly shop around - the only variables you can control are your margins and your supplier; are you sure you've found the cheapest?
Let me state a major competitive disadvantage I am facing: High shipping (postage) cost in my country, with 25% fuel surcharge. Major competitors are located in HK and JAPAN, which has lower shipping charges. To U.S., for a 1.501 kg package, I'm about US$10 higher than them, and for shipment to U.K, I'm about US$5.5 higher. (BTW I'm comparing my corporate rate against their over the counter rate!)
I'm new to the business so I'm not sure if I have found the cheapest supplier. Currently working with ONE supplier. Also, I can't order in bulk, so mainly I'm getting just 1-3 per item from the supplier. Each item ranging from $20-$200.
I would really appreciate if you could suggest how to negotiate with the supplier? Should I tell them to give me more discount by ordering more from them at one go? This would give me higher inventory risk though. Or does it sound like I would have to come up with a different strategy like having really low margin , which I'm not even sure is sufficient to cover expenses.
Initially I thought that I could work with getting discount from supplier and shipping it overseas. But now, it looks like high shipping charges in my country and major competitors operating at just sufficient prices means that I would have to concentrate on my home country (which is a not a huge market btw) or getting products different from my competitors in HK/Japan (perhaps getting goods from the US).
Thanks.
To reach the US market, you say you are competing against Japan/HK dealers who save up $10.00; not to mention US dealers who will have lower postage costs, too. Established dealers will already have the scale discounts you are considering. I really can see no logic in launching where you know you cannot compete. Why would you?
And while I agree that you'll cut your costs by buying in bulk, you'd be unwise to do that before assessing the risk - even if that means selling for a few weeks at minimal margins.
I understand it's tough to be surving in such a competitive environment but I'm sure that it's not impossible.
But seriously due to this, I've to minimise, breakdown and understand all costs involved in every step of the process. I'll try to relook the plan and see how to work it out, and bring in some better margin items.
sun818: May I know if a 5% to 10% is really good for commodity market? I mean is it normal/ok to be looking at such a small margin?
I'm thinking like maybe for certain items, I really have to lower it to match the market prices. It sounds like you are working with less than 5%, yet it's workable. Yes, perhaps by lowering my prices, I could get sufficient scale to enjoy further discount from suppliers, paypal and shipping companies. That would be something I hope to achieve.
> It sounds like you are working with
> less than 5%, yet it's workable.
It is workable if you can sell in high-volume and have a very efficient order processing system in place. We can easily ship 100 orders (pick, pack, and ship) per day with just two people. It really depends on what your anticipated personal and business expenses will be.
