No matter what you sell online - books, bicycles, or backpacks - if your price is lower than your competitors, sales will skyrocket! Surprisingly, some merchants actually hesitate to take the simple steps necessary to do this because they'd have to give up some short-term profits for long-term growth. Regardless of your philosophy, this post - which has nothing to do with repricing - will show you how to consistently beat your competitors, and end up driving your sales volume through the roof. In fact, one of our clients used our strategy and their sales doubled in less than 4 months! Keep reading to discover how you can do the same for your e-commerce business.
The Secret to Beating Your Competitors
With few exceptions, selling online is a volume game. Volume is typically driven by the combined forces of product popularity, price, availability, and supply. Assuming you have access to popular products and are already driving some volume through your sales channels, here is the most important concept to understand about volume - it increases negotiating power.
When you price aggressively and experience success with a product line, you strengthen your negotiating position with your suppliers. When you get better pricing from suppliers, leverage that into your marketplace pricing. You gain a competitive advantage and further increase your sales volume.
One of our clients recently implemented this strategy. He renegotiated with his supplier, lowered his cost basis by several points, and leveraged the discount into his marketplace pricing. The result - his sales volume doubled in less than 4 months! Let's talk about the practical steps you can take today to increase your sales as well.
How to Negotiate a Lower Price With Your Suppliers
Let's say your sales are $50k a month and your cost of goods is $30k. When you look at this from your supplier's sales rep's perspective - a $30k a month account is a dependable source of steady income! Now imagine that account making you this proposition:
"If you give me another 4-5% off for 90 days, I have a system in place that will allow me to immediately see if I can increase sales by passing the savings along to my customers, and as a result, increase my purchases from you. If my sales don't dramatically increase within 90 days, we can just go back to my old pricing."
If you're that sales rep, you're probably not going to say no. In fact, you're going to do everything in your power to accommodate them and increase the size of the account.
If you use this approach to get better pricing and then pass along all of the savings to your customers, your sales should increase - perhaps even double like our client's did! From the supplier's sales rep's perspective, they now have a $60k account with a business that's proven it can grow with better product pricing. Wait a month or two and then give your sales rep another call, and ask for another deal. You've established credibility and they'll be thinking about their own commission checks - so they'll bend over backwards to get you the best pricing. Do this every time you experience a significant increase in sales. Remember - volume gives you leverage.
If Your Supplier Says They Can't Go Any Lower
When you reach a point where you sales rep insists you already have the best pricing available, suggest they can do better as your volume of purchase lets them buy at a lower rate. The logic here is that, while they don't make a pile of money from you, they'll make more money on their other customers because your volume purchasing drives their own costs down.
Etail Solutions is a premier provider of integrated sales, fulfillment, and supply chain automation solutions for online multi-channel retailers. Our Etail Vantage Platform (EVP) solves the real-world problems of mid-high volume merchants by enabling coordinated multi-channel commerce through dynamic integrations to: sales channels, suppliers, product catalogs, shipping solutions, ERP systems, and marketing channels.