Sunday, October 26, 2014

The Never Ending Question

Mistakes are the proof that you are trying.

Once or twice a week in every Facebook group that I'm a member, I see the same, never ending question.

Why would a seller drop a price to rock bottom when the item has been selling like hot cakes at the higher price? Example: Item is ranked 2K, sells several times a day, is priced at $20, and another seller comes in and undercuts the price to $9. Why, oh, why, oh, why?

The Answer(s):

  • The seller is new and doesn't understand the fee structure or how to price an item, and believes that they must be the lowest price.
  • The seller bought the item for much cheaper than you bought the item (never question that because it's a complete waste of energy), and can make a healthy profit even with a lower price.
  • The item isn't moving at the current price, so the seller lowers the price trying to find the sweet spot.
  • The seller is willing to take a loss on a product in order to dump it.
  • The seller is a high volume, low margin, fast turner (it's their business model).
  • The seller's model is to always be the low price.
  • The seller is trying to get the competition to give it up, so that they can dominate the listing.
  • The seller doesn't understand the buy box.
  • The seller is only interested in getting it sold fast and making a quick dollar.
  • The seller is determined to dominate the buy box rather than share it.
  • The seller needs to liquidate fast in order to create cash flow.
  • The seller needs to move the item out in order to avoid long term storage fees.
  • The seller is from overseas, and the lower margin is still big dollars for living in their economy.
  • The seller made a pricing mistake.
  • The seller didn't set their repricer up correctly, and caused a race to the bottom.
  • Some sellers use black hat tactics to drive out the competition. They don't care what you think. It's all about the bottom line.
  • New sellers don't always do the math, or they don't understand the math. They end up with a low profit margin, or take a loss because they didn't do their due diligence prior to listing.
  • The seller with the lowest cost of goods wins. They can lower the price and still make a healthy margin. 
  • You may not agree with the mentality of other sellers, but in essence, there really isn't any thing you can do to change other people, so suck it up as part of doing business.
What can you do about it?
  • Wait for the low cost sellers to sell out and for the price to rise back up.
  • Lower your price just enough to share the buy box, but still make a healthy margin.
  • Lower your price to match, sell out, and move on to another product.
  • If the price drops significantly, then buy out the low priced seller, and send it back into FBA with your price (do NOT do this if you have a Prime account, or you will risk losing your Prime and seller account).
  • Find complimentary products and create a new bundle.
What you shouldn't do:
  • Moan, groan, and whine. It's a complete waste of energy.
  • Go so deep on a product that you would lose your shirt if the price bottomed out.
  • Depend on one product. Never. Ever. One product is NOT your bread and butter. It's great while it lasts, but don't ever count on a product to last forever.
  • Use black hat tactics to drive out your competition. Always rise above such and build an ethical business. In the end, you will be glad that you did.
  • Price below the low price and start a race to the bottom effectively killing all profit for all sellers. 

No comments:

Post a Comment

Hey there! I'd love to hear what you have to share about FBA, but please keep your spam out of it. Thanks for reading and commenting!