Let’s talk today about whether or not you’re selling a commodity in your e-commerce business. Are you selling products that everybody else is selling?
There’s a thousand other sellers all selling the exact same product and the only thing left to you to do is to compete on price. That’s what most people do, they go out and they try to sell the same things, and that’s actually what most retail stores are. When you look at like big-box retail like Best Buy’s and you know or Macy’s and stores like that Target that’s what they do. Walmart all they do is compete on price. There is no value in the product itself and you will buy it from whoever has the lowest price. There’s no real brand loyalty in that regard to those products.
Because those products you are retailing are other people’s brands, the problem with that is, if I want to go buy a Sony camcorder where am I going to go? Why would I go to a little niche retailer when there’s all these big-box guys who are getting the volume discounts? They’re gonna let me to buy it for five dollars cheaper than you could sell it for. So there’s a thousands of other people selling the exact same product, that’s never a good way to be competitive.
Number one, you should never sell everything everybody else is. Now there’s a lot of successful businesses that are built on selling other people’s products. You know buying wholesale, selling retail –that’s the traditional retail model, right? People do very well at that, but your margins are gonna suck.
If you want to build a business where you actually control margins and have a good cushioning profit margin, you’re gonna have to sell your own products, and that means building your own brand and selling your own either private label products or OEM manufactured products or whatever. You can’t rely on just selling other people’s products.
Now if you’re just starting out, and you haven’t got going yet, well then hey go back to the drawing board and find a product you can launch on your own. That’s your own product and go with that. Your margins will be significantly better. On the commoditized side, margins are… It’s a race to the bottom with the pricing of the margin so you’re gonna wind up with lower prices, less margins and less profit overall. With the private label side or the OEM side where you’re selling products in your own brand, you can engineer that profit margin to make sure it’s healthy for you all the way through and nobody else is going to be selling the same product that you’re selling. Because it’s your brand, they may sell the similar product, but nobody’s selling your brand of that product.
The other reason you want to do this is, you differentiate yourself in the marketplace. If you are just another Tom Dick and Harry selling the same old thing, why would they want to come to you? But if you are a niche specific retailer, selling a very specific focused range of products, you’re better off.
There also is this indicator… I’m already selling a lot of products, I already have a business telling you: it’s great for you to tell me to go create my own products and start over, but I’m not gonna stop selling what I’m selling (and I don’t want you to). If you already are selling retail products and you’re selling other people’s brands on your store and things like that, that’s fine… what I encourage you to do though, is try to come out with your own product line as well, that you can sell on the store.
One, those products will have higher profit margins and you start pushing people into those when they come to buy your products and you can also leverage the third-party credibility of those existing brands that you’re selling. So if you sell electronics and there’s all these big-name brands in your store, and then you create your own brand of either electronics (or electronic accessories) then you put it under whatever brand name you create. That’s your house brand, and then you market it and put it in the store next to all these other big brands. It gets to leverage some of that credibility from the other brands.
So it’s a great way to do that. Now you’re also mixing higher profit margin products with the lower profit margin products that you’re getting from the other companies you’re buying from. So it’s a good way to mix the two together and start building up your own product line of products that have higher margins that you can continue to sell and then you just try to bundle them together with other products.
Then in your store, and your emails, and your marketing you start pushing your products a little bit more heavily than you push the other products, and over time not only will you start selling more of your products, but your profit margins will increase and you can probably start weaning yourself off of selling other people’s commoditized products that the only way you can compete is on price. That’s never the way to win in the e-commerce space. You don’t ever want to just compete on price and not have that be the only angle or approach you have to competition.
Alright, so with that guys, think about it and I’ll catch you later you.