Some people think that working with a real Wholesale Supplier
means that they will magically be able to sell products for less
than anybody else on the planet, for ever and ever. They'll be
the only one who ever gets such good prices, and they'll earn
millions because no competition can touch them. They're retire
happily in a couple of months, and buy a big house in Beverly
Hills, complete with a butler, a private chef, and a little satin
doggie bed in every room for the casual use of the family Basset
Hound, Duke.
Then they find that they may actually have to compete with
companies who have more buying power and get better price breaks,
and suddenly the honeymoon is over. They run around screaming
that the supplier is not a real Wholesale Supplier, and is
cheating them. The sky is falling, and it's time to get Duke to
the storm cellar because all their dreams are being blown away by
bad, BAD people who claimed to be Wholesale Supplier, and really
are NOT!
The truth is that they've simply been confronted with a perfectly
normal aspect of retail sales that they had not anticipated, and
need to be educated about.
Even when using genuine Wholesale Supplier, you're going to find
some stores selling products at a "retail" price that is lower
than your Suppliers' "wholesale" price. There are VERY good
reasons why you'll see this happen, and it's extremely important
to understand why it happens and what to do about it in order to
sell successfully on the Internet or anywhere else.
As I said, it happens for a variety of reasons; the most common
of which is that the retailer with the "lower than wholesale"
price is a large retail operation that bought THOUSANDS of the
product at a dirt-cheap quantity price break, and also qualified
for huge manufacturer's wholesaler rebates. You can't compete
against that with a home business; no one can.
The term "wholesale" is relative, no matter who your distributor
is or how you find them. What you're getting as a small business
is a Wholesale Supplier's genuine "first level" wholesale price.
For example, one factory-direct Wholesale Supplier we work with
has an initial wholesale price for 1 to 36 dart boards. Then the
second price level is reached, and there's a lower price for 36
to 72 boards, for example, then a lower price for the next higher
quantity level, etc. When dealing with single item orders in your
home business, you are obviously going to be getting the "first
level" wholesale price.
Again, wholesale is a relative term. Yes, genuine Wholesale
Supplier DO sell at significant discounts below Manufacturer's
Suggested Retail Price. However, you have to watch what you sell.
Electronics, for example, are a very tough market, because
EVERYBODY is trying to sell electronics on the 'Net right now.
All these people are so busy trying to undercut each other that
they have driven the "market price" of these items down so low as
to make it very difficult to make a profit, even at wholesale.
For example, if the Manufacturer's Suggested Retail Price (MSRP)
for a VCR is $149, and it is available at "wholesale" for $69.00,
that's a 54% discount off MSRP. That's a pretty good profit,
right? However, with everybody getting roughly the same price
break, there are a lot of people out there who are ruining the
market for everyone else by selling that product for, say, $79,
thinking they will undercut everyone else and make money by
selling volume. Pretty soon, everyone else sees this, and tries
the same thing. Eventually, the Internet "market price" for this
VCR BECOMES $79, and everyone is flooding the market with it at
that price. That's only a 13% percent profit margin, and that
product is no longer worth the effort for anybody.
So, even though the product IS available initially at a great
wholesale price, its market value is ruined by those who
(wrongly) assume that the only way to sell is to have the
absolute lowest price anywhere.
Sales is much more of an art than that. If selling something were
simply a matter of the absolute lowest prices, Wal-Mart would be
the only store on the face of the Earth.
Without going into too much detail, sales is a mixture of
choosing the right product, or combination of products, for your
web site. It's presenting a clean, attractive, focused site. It's
giving the customer some little value-added bonus at your site.
It's providing the absolute best customer service that you can.
All these things help a customer to trust you, and when they
trust you they are willing to spend a little more to buy from
you.
One of our retail sites is www.ElectronicDartShop.com. We sell
Arachnid Electronic Dart Boards there. We sell ONLY those
products on that site; just 14 of them. Our site is clean and
attractive. We have a page listing all the rules for all the dart
games that can be played on those boards. We pay very careful
attention to customer service. And guess what? We are NOT the
lowest priced store for those dart boards, by any means. Yet we
are one of the highest-volume Internet dealers of the products
around, according to the factory. Why? Our customers trust us,
and are willing to pay a little more because they feel they will
get more value from us than they will from some guy who just
throws up a cheap-looking site full of all kinds of unrelated
products and only pays attention to price-cutting.
In fact, a few days ago, I went online and bought a couple of
SmartMedia memory cards for my digital camera. I could have
gotten them for a very cheap price that I found on the 'Net, but
I chose to pay $5 more each for them because the cut-rate site
looked cheesy, and I was not sure I could trust them. I was more
than happy to pay the extra ten bucks total when I found the same
products at a higher priced site. The site was well-built, easy
to navigate, and went out of it's way to explain it's customer
service policies to me. I'd rather spend an extra ten bucks and
be confident that the cards would show up at my door than lose
thirty bucks plus shipping to a site I didn't feel I could trust.
As a small business owner, you should remember to choose
comparison areas very carefully. Too many people simply go to the
big search engines and look for the absolute lowest price on
earth, and then give up on selling that item if they can't beat
it. That's the wrong approach, as I've mentioned above. You need
to be comparing prices against sites that will be seen in the
same places that your site will be seen, and even if your prices
are higher, you can bring in sales by building a clean, focused
site. Alternatively, you can simply sell the models that others
are NOT selling. After you begin to earn some profit, you can
then start to buy and stock the better sellers in quantity,
lowering your price, if you really want to.
Even then, you're going to run into stores that stock a lot of
merchandise, and are getting price breaks on greater quantities.
This allows them to sell at a lower price.
Go around them. Sell models that they don't, from the same brand
names. You don't have to purposely go head-to-head with the big
superstores. They don't carry every product ever made on earth.
Sell something in the same general brand and product lines that
they DON'T have the shelf space for!
Besides the reasons mentioned above, there are also too many
people who buy entire pallet loads of last year's closeouts,
liquidations, and refurbished goods, and claim that they are NEW.
They get that junk at "rock bottom" prices, and of course, sell
them dirt-cheap, fooling the customer (and other Internet
retailers) into thinking that they have the corner on the best
wholesale prices around, when they DON'T.
The important thing is to work effectively within the framework
of available products and prices, and work around those who have
millions of dollars available to stock inventory. That's what
THEY did in order to EARN those millions in the first place. You
can do it too. I know it's frustrating to be just starting out,
and thinking that you can't succeed because of competition from
large stores. That's just not true. We're succeeding at it, and
so are thousands of others. You just have to be willing to be
flexible, and to make serious decisions for the good of your
business. You may have to give up selling certain products that
you personally like, in order to make money on other products
whether you like them or not. You're in business to make money,
not to satisfy your personal taste.
One thing I tell people all the time is that it's very important
to "jump through the hoops" and form a LEGAL business. It's the
right thing to do, and it's the ONLY way to work with GENUINE
wholesale suppliers.
However, anyone in business will tell you that the hoops never
end; not for home businesses, and not for big businesses either.
Even the big guys spend much of their time "hoop-jumping" in
order to be successful.
Imagine how the purchasing agents at CompUSA feel when they spend
a million dollars on 19" monitors so they can sell them for $329,
and a week later, they find that Best Buy spent three million
buying up the same monitor at a better price break, and is now
advertising them for $298. Suddenly CompUSA can't compete.
Should they throw a tantrum, and berate the Wholesale Supplier
for simply performing the normal function of a Wholesale
Supplier?
Of course not. They can simply stop advertising that monitor by
itself, and bundle it with an entire computer system that has
it's own serious price breaks, and move the monitors that way.
Adapt and improvise.
There are no magic bullets, even though there are plenty of
people who will tell you that there ARE. Don't believe them! When
you're in business you will always have to compete. It's all part
of sales, on the Internet or anywhere else.
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