You start selling products on Amazon and grossing fifty thousand per month in sales. You are absolutely killing it until one day, two of your competitors mysteriously show up and hi-jack your Amazon listings.
You did all the hard work in creating the listings, sell the products, generate reviews, and then they just swoop in and steal it all from you. All they had to do is copy your ASIN number using a software such as Easy Data Feed and map those ASINS to their own products before submitting them over to Amazon. As a result they will link their products with their cheaper prices to the listing you’ve created that already have reviews.
Even worse, is when the manufacturer makes a deal with Amazon and sends the product directly to them, so Amazon can do the fulfillment, and next thing you know your product is being sold by Amazon at your cost with free 2nd day shipping.
Actually there is even a worse scenario, you started your business less than two years ago, and after doing everything you possibly can with marketing, social media, email marketing, pay per click, etc. You are not making sales, and you start to realize that your industry has been commoditized, and the only way to succeed is to focus on volume of sales and not profit margins.
Wait a second… there is one more scenario that is worse than all the above. You took this test and realized the fact that your target market is a bunch of price sensitive Amazon loving hagglers that spend one month doing price research, and then they still try to nickel and dime you to get their $25 product.
Run, Run, and Run while you have the chance. Unfortunately for one of my clients, it is not an easy decision. He has a brick and mortar store and his use to the healthy 30% - 50% profit margins. His taking a stand that it is not all about the price; it is about your brand and your customer service.
He has a valid point, and maybe he can even make it work. But he has two problems,
The odds are not in his favor because his market is unhealthy as it has been commoditized. There are people making millions in sales without knowing a thing about branding or customer service, and the only reason that is happening because of what they are selling.
If the customer does not have money and you don’t have a strong unique value proposition then no matter what you do with your brand, your sales will suffer. You only have a chance to make this work if you truly know what you are doing, and can genuinely identify what makes your value proposition better than your competitors to make it in an unhealthy market.
We were able to pull this off with Shopping Cart Elite even though our industry is commoditized with hundreds of Shopping Carts, our value proposition is that we can automate everything in your business in 30 days or less. In addition, we are able to solve most technology challenges because Shopping Cart Elite is truly the most sophisticated Shopping Cart in the world.
Other companies pull it off differently; Coca Cola spends hundreds of millions on advertising. Their secret is they have so much High Fructose Corn Syrup (50 tablespoons of sugar per can) in their drink that they literally get you addicted to it. They know that once they acquire a customer, they will make money on you on a recurring basis.
Amazon does the same thing, they can sell almost at cost, but they know that the lifetime of your business will translate into a lot of revenue.
All of these companies use a metric that is equivalent to lifetime value of the customer and not a profit margin on one sale.
HOW DO YOU KNOW FOR SURE THAT YOU ARE IN A CRAPHOLE
If this test shows you are 50% or less success rate, Amazon Prime is selling your product, you have done absolutely everything you can on the product sales copy, and you are still not converting your real high engagement traffic that you actually pay for (ex: Google Shopping Traffic) then you are in a craphole.
You have three options at this point:
2) SWITCH TO VOLUME BUSINESS MODEL
3) SWITCH TO WHITE LABEL BUSINESS MODEL
You’ve probably seen some businesses for sale on Flippa that have been declining. They may seem like legitimate deals, but they are probably in a situation where they are executing the exit option.
You should consider selling your business because there is a ton of people that would buy a struggling business with hopes of reviving it.
OUR EXIT STORY
Let me tell you a personal story about our previous company that was in the aftermarket RESTYLING auto parts industry for cars. Restyling including body parts such as Body Kits, Fenders, M3 Mirrors and Exhaust tips, etc. The reason I mention restyling and cars because that particular segment got hit the hardest in 2006.
Here is what was going on (And still is). China offers Chinese manufacturers 13% - 17% rebate for exporting goods overseas. So what the Chinese manufacturers started doing was open up warehouses in US and ship directly to their own warehouses.
Let’s say a Fender costs $5 to manufacture, what the Chinese manufacturers would do is send the fender to himself and declare it as $150 each. He would go ahead and pay the taxes when it arrived in the US, which is a few hundred dollars. In return, China would pay the manufacturer 13% of the declared value or $20 for that same fender that actually cost $5.
So the Chinese manufacturers were able to ship garbage into US, bring it into a warehouse and even after paying for Shipping and taxes, the landing cost would be $0. In fact, they made money for sending garbage into US.
Then these factories started recruiting their comrades to open more warehouses to store all of this garbage. After all how can you beat “FREE” product.
What these people did not understand is the basics of Supply and Demand. As more and more of the same product entered the market, the less of demand there would be for it. This started in 2003, and by 2006, these distributors started to go bankrupt because they couldn’t throw away 20,000 SQ FT of garbage for free, and you still need to pay rent, employees, etc.
It was bad enough they were selling products at no charge, and trying to make a buck on shipping. But, once they went bankrupt, and the liquidators came in they were literally handing out the products to avoid the disposable cost.
When we realized what was happening, we immediately diverted our focus on brand name products, which were heavily commoditized due to Amazon, eBay and others. We did not want to get into the volume business model, so we exited the industry.
The point of the story is you don’t know what is going on in the background with Amazon or your suppliers. They all need to survive, and they will all back door you the first chance they get if things are not going well for them. If you have a gut feeling that your industry is doomed, then it is time to rethink your strategy.
You need to decide to get in bed with them by finding a creative way to work together, or get out.
VOLUME BUSINESS MODEL
It might not make sense for you to sell something at a 5% profit margin. However, if you do the math it might actually make sense. For example, there is a seller on eBay that I know of that sells wheels at 5% profit margin after all the fees. He sells three million dollars per month on eBay making 150,000 net profits.
The idea has to be tested because it is all about numbers and economics. How much can you sell, what is the acquisition cost, and what is the overhead (returns, employees, etc.). I wrote an excellent article on how Wayfair did it with drop shipping, and if you have the cash flow then it may work.
If you do not have the cash flow to fund this type of operation, and there is no way for you to get a NET account from your supplier or borrow a loan, then this will not work.
In addition, you have to be an expert in building operational systems. Before you go into the volume business model, try to make it work in theory first.
I also highly recommend that you take my eBay course which covers how to steal competitor’s sales data to predict what will sell.
WHITE LABEL BUSINESS MODEL
Honestly this is my favorite business model because it has the most profit margins per sale. There are four types of white label business models
1) White Label Drop Ship – You would take a product that has no brand, slap your brand on it and have it drop shipped to the customer.
2) White Label Manufacturer – You would look up where your competitor, distributor or manufacturer sources their products from overseas and you would go to that manufacturer direct. Ask them to give you the same product with your brand on it. Then you would sell both your brand and the competing brand on your website.
3) Switch and Bait – If you do #1 or #2, you would then focus all of your attention to win your brand over your competitor brand. If you think that’s shady, than you should not be surprised that all the fortune 500 retailers are doing it. You can sell your own house brand and even openly say that this is exact the same manufacturer that makes it.
If your customers are already price sensitive amazon loving hagglers than they will love you and your new brand, along with your cheaper prices.
I always tell people don’t judge a product by its cover. Just look behind on the nutritional chart, most of the house brand products have exactly the same ingredients as the brand names. You got to be a complete J-A#$ to think that they are different products. Go to the store and look at the toothpaste, they all contain the same level of poisoning fluoride, the only difference is they use some poisoning food coloring to make it look pretty.
4) Affiliate Reseller – Get in bed with Amazon. Sell products for the same price as Amazon sells. Then use your Credit Card to order the product from Amazon and have it drop shipped directly. By using your Amazon affiliate link, you will get six to eight percent commission for the referred sale, as well as three percent kick back from the credit card. If you can automate the ordering process with a piece of software such as Easy Data Feed, then the cost of doing business this way will be minimal, and you are making your 10%.
Inside Shopping Cart Elite you go view the performance reports, and start with the most viewed products. Divert traffic from these products to your white label products using promotional banners. You will see your sales sky rocket overnight. Here is a screen shot of what the report looks like.
If you want to get more ideas on the white label business model, it is covered in this course here.
As you can see we know eCommerce very well, we are EXPERTS IN ECOMMERCE because we literally experienced it all over the last decade.
Shopping Cart Elite can help you grow your business. We will use our knowledge, software and marketing systems to solve any of your challenges and make sure you out grow your competitors.
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