It makes me nervous.

Wanna-be competitor dumping product

[HRoth]

I am known in my niche for having the knowledge to produce authentic widgets. I have lots of info on my site product pages about the things I make and others that I sell. I charge a good price for what I make, because for one thing the ingredients are not cheap, and for another, I consider that my time and knowledge are worth it. Most of my customers really like what I make and respect what I do and don't complain about the prices. No evil eye, in fact I cannot remember the last time I had a complaint about price or quality (except for a guy who bought a mandrake root and claimed it was evil, lol).

Now here comes this guy who has gone out of his way to imitate what I am doing. Other people have tried to imitate it (one guy simply took the names of a bunch of items I created but put different ingredients in them), but this guy is actually going in depth. He's made a study of what I am doing. I can tell. Thing is, he is charging prices that I know he cannot even be covering his expenses. For instance, a widget that I charge $25 for, and it costs me $11 to make, he is charging $10 for--and it's on Amazon, no less, so I know he is getting less than that. I don't believe he has found cheaper sources for raw ingredients than I have. I think he is dumping.

Are such people just clueless? Do they think they are going to build a customer base and then raise prices massively? Or is their goal just to attempt to discredit my pricing? IOW, are they not real competitors but simply would-be boat-sinkers? I don't know if I'm being paranoid or not.

What bothers me most is that like another couple of folks who started out buying from me and then went out of their way to undercut me on anything we mutually sold (one of the reasons why I determined to make more of my stuff), this guy started out buying ingredients from me. Should I quit selling these ingredients? They are generally uncommon things that folks can't get anywhere else and sell well for me. They fit well with the products I do make, which are unique.

No matter how much I tell myself not to worry about this guy, I feel threatened. Maybe because this is the best December I have ever had? It's not even over and already it is 40% more income than any previous December in 12 years. And I don't know why. Traffic is actually less.

[lucy24]

Is he a big guy or a little guy? If a big guy, is it the kind of widget that can be used as a loss leader? That's your Worst-Case Scenario.

Does it take special talent or expertise to make each individual widget? (I'm thinking musical instruments.) Or was the expertise only needed to figure out how to do it in the first place, after which you can get the same results simply by working very very carefully? (That is: outsourcing to somewhere that pays 11¢/hour. Or setting up a sweatshop if transport isn't practical.)

I don't think selling ingredients is a problem. Of course you're charging more for them than what you paid. But not too much more, or your competitor will go straight to the source and offer more than you do. Any chance that he got a one-time dump of raw materials and mistakenly thinks this is the ordinary price?

All this is assuming for the sake of discussion that Competitor hasn't simply figured out a way to achieve the same results with less work, leading to a lower price. It happens. No fun. If you're dealing with something like the industrial revolution in microcosm, then there aren't a whole lot of alternatives to early retirement. Ugh.

So if you want to make yourself miserable, the questions to ponder are:

Loss leader?
Outsourcing?
Sweatshop?

Or, if you prefer to maintain a spirit of Holiday Good Cheer:

My competitor is an idiot and I will politely refrain from comment when he fails :)

[Planet13]

There is that possibility that he is not very good at accounting and just doesn't realize that he is losing money.

[dpd1]

There's people that think, as long as stuff is going out the door, then that's a good thing. They're too dumb to realize they're not actually making money.

Sounds like you're doing well, so I wouldn't worry just yet. Plus, you're making money off him. If things get worse, then maybe cut him off I guess. Maybe wait and see if he burns out on his own. If he has to copy somebody else, that means he's not very bright. And if he's not bright about that, he's probably not bright in most other areas either.

I've worried about others. One guy blatantly copied me. Really ticked me off at first, because not only did he copy a product, he talked smack about mine... the very same thing he copied. Some people have no shame. I've talked to him and he's kind of a nut. I figured that would shine through eventually. He has sort of faded away since then. Most nuts have ADD. Another guy kept coming out with similar items to me, but dirt cheap.

I think people like this will come and go... You just have to expend energy being better than them. Which is hard to do if you expend energy being annoyed. If your niche is above just basic product reselling, I doubt this guy will kill your business.

[HRoth]

lucy24, that's a good point about loss leader. He is not doing that. As far as I can tell, he is sticking to items I make.

With the widgets I make, anyone can put ingredients together, and there are formulas out there, lousy ones, but formulas nevertheless. The real skill comes from creating one's own formulas based on experience and then blending ingredients so the result is pleasing. Hardly anyone in my niche knows how to do that. Most customers don't know enough about how such things are made to know from reading even a list of the ingredients whether the thing is going to be good or not. And there's a lot of sizzle involved in writing copy for these products because of it being online. We all know that sizzle can sell something that is poorly put together.

I have recently seen some people get good authentic reviews for products that I know for a fact are crap. I don't know if that's because there is so much junk out there that people just expect it or what. That does concern me. If people can't even tell the difference...

I will keep selling the ingredients for now. He might have gotten a cheap source, but usually the only cheaper source than the ones I have access to are the harvesters in Africa and India, which is pretty complicated for someone just entering ecommerce. I don't think he's doing that, but if he is, he's welcome to it. I tried that years ago and did not find it practical or fun to do.

I think, as Planet13 and dpd1 have mentioned, that this guy just does not realize he is not making any money. I think for people who like to make things and who want to have their own business, it is very difficult to be hard-headed about that end of things. I know it was for me. I went by the seat of my pants. If more was coming in than going out, I figured I was okay. I didn't want to learn how to determine exactly what was profitable and what wasn't. It seemed boring. I did okay anyhow because I was just lucky. After a while, though, I realized I was working working working, so I began looking at how I made money and raised my prices a great deal, which in turn allowed me to work a lot less and so spend more time being creative. I came to love my work.

The other thing is that I have seen people with no business sense at all open a shop in my niche because they want to create authority for themselves. Some do it deliberately as part of a plan to sell ebooks and eclasses based on their shop, which they run at a loss. But most are clearly losing money and do it as a hobby and for the respect. Customers in my niche automatically believe merchants are knowledgeable.:) So it could be that is what the real motivation is here.

I think dpd1 is right to recommend expending energy on being better than these copiers are. In the past couple of months, I have been creating a lot of new products and wonder if that is why I have had such an increase in sales. I have a lot more that are in the pipe. Because this isn't a holiday for me, last night I finished up four new ones, one of which has had five prototypes. They came out really well. It felt good.

I am glad I am not the only one who has copiers. Makes me feel less paranoid.

[g1smd]

If they're copying you, you're obviously doing something right!

[dpd1]

I also think there is something to be said for the 'higher prices are better' mentality. I definitely think there are people out there who shop that way. They are skeptical of people with prices that seem too good to be true, or considerably lower than previously established people. Sure, some people will take the bait and go for it. But if you make enough your way, who cares.

I raised all my prices this year. I was still plenty busy enough. I may have lost some people who never think anything is cheap enough, but oh well. They may be a minority, but I do believe there are shoppers with a conscience out there. I got an email from a guy in Scotland the other day, who was willing to pay $43 shipping for an $80 item, to send it to Scotland. He said he was happy to see something being made in the states for a change. We emailed back and forth a few times, and I answered all his questions... Let the other guys duke it out with their price wars on imported junk and bare minimum service.

I think it may be more difficult to establish a business as a quality organization in the beginning, and it may take longer... But once you do have the reputation, it's worth a lot. After that, it's just a matter of adding more things to sell. The hard part is already done. Whereas, the price war people will never be done.

[HRoth]

The kind of feedback you got from the Scottish guy is very rewarding.

That's a good point about the price war people never being done with the hard part. Price war stuff is too much like work, IMO. :)

I try to keep in mind the thing about copying being a sort of stamp of approval. Doesn't stop me from being nervous, though.

[votrechien]

He might have gotten a cheap source, but usually the only cheaper source than the ones I have access to are the harvesters in Africa and India, which is pretty complicated for someone just entering ecommerce.

However, he may be an experienced importer just entering ecommerce. There's two parts to every retail equation: getting the product and selling the product. He may be an expert in the former.

There is that possibility that he is not very good at accounting and just doesn't realize that he is losing money.

There's two possibilities I think. Either he is very small and has almost no overhead and almost no expectations for a huge return and is content making pennies on the dollar. Or they are fairly sizable and have either figured out a way to produce the product cheaper or are testing the waters at a price-losing point to see if there's a market available and then they will pursue either a less expensive sourcing method and/or a more expensive price.

It's the danger with a lot of products that become popular, they become a commodity.

[jecasc]

No matter how much I tell myself not to worry about this guy, I feel threatened. Maybe because this is the best December I have ever had? It's not even over and already it is 40% more income than any previous December in 12 years. And I don't know why. Traffic is actually less.

So you are not yet loosing sales to the new guy. Depending on the product the price is sometimes viewed as a quality indicator itself by customers and cheap prices scare customers away. This is especially the case with products that are not standardized and products that have an expiry date.

I know that this is the case in my particular niche. I have often talked to customers and some told me one of the reasons they buy from me is that my competitors sell too cheap and they worry that the products are either old, not genuine or due to expire.

[jwolthuis]

Are such people just clueless? Do they think they are going to build a customer base and then raise prices massively? Or is their goal just to attempt to discredit my pricing? IOW, are they not real competitors but simply would-be boat-sinkers? I don't know if I'm being paranoid or not.

Maybe they're just testing the waters. Or maybe they don't care about profit... a husband financing his wife's hobby. Or perhaps they found a cheaper supplier overseas.

In any case, why worry? There is *always* going to be someone with lower prices than you, trying the how-low-can-you-go game. When someone lacks expertise, volume discounts, and SERP rankings, that's about the only game left to play.

[dpd1]

Maybe they're just testing the waters. Or maybe they don't care about profit... a husband financing his wife's hobby.

I've wondered how often this is the case with businesses in general. I live in an area where there's a lot of house wives in high income families. There's a pretty high level shopping boulevard near me, and just the other day as I was driving down it... I started noticing just how many high priced clothing boutiques there are. Way more than any area needs, and most of them empty. I know the rental on those things has to be outrageous, and I wonder just how many of those are from the scenario you mention... basically operating at a loss until they get bored with it.

[HRoth]

Yes, in my niche it is not uncommon for people to run a small shop at a loss basically so they can seem expert to their friends. And so they can buy a lot of stuff. It could be this guy is doing that. After posting about this, another one came along doing the same thing, so I am not going to be able to worry about this anymore.:) Thanks, guys.

[dpd1]

Maybe put how long you've been in business on your site, if you haven't. That can be a positive thing.

[HRoth]

Yeah, I have it in my banner.

Looks like this guy is targeting b&m shops. I tried that years ago with some shops and didn't like it. Have you tried that, dpd1? I still regularly get requests from shops for wholesale of my products.

[dpd1]

The problem I have with wholesale, is that my stuff is performance based and technically challenging. The longer I live, the more I realize, most people are clueless with technical things in life. But I've learned to welcome that and actually depend on it. My web sales techniques are antiquated compared to most sites. But I realized, I actually don't WANT people to just be able to easily buy whatever they want without talking to me first, because my return rate would shoot through the roof. I can't remember how many times I've had multi item orders sent to me, and I got a little feeling that they weren't really understanding what they ordered. After asking... Sure enough, they weren't. This has saved me countless hours of effort, producing things that might have taken a year to sell individually, after they were returned. So if I sold those items to retailers? Forget it... They couldn't care less. They'll let somebody buy whatever they want, because they have nothing to lose. Then they return it, and I'm stuck with it... because 9 out of 10, they'll just make some bogus claim about performance issues.

So for primarily that reason, I have turned down wholesaling. Not to mention, I think the future will see more middle men cut out of the equation in sales. But of course it depends on your product. If I had a bunch of little low cost items that look pretty on a store shelf, I might feel differently.

I tend to view myself as a manufacturer, who just happens to allow people to buy stuff directly on the internet.

[HRoth]

Hmm. I've thought of wholesaling to b&m, but only with b&m specific products. Packaging would have to be more glitzy, I think. And that's a good point about explaining how to use something.