There are good reasons to start an Amazon FBA business. For one, you will have total control over your life, the destination you want to go to, and where you spend your time. Your reason might be different from mine. That is okay, but we all have our “why.”
The lifecycle of an entrepreneur is different for everybody. Some have difficulty balancing work and family, and others have problems with importing from china.
Amazon sellers come across problems that pertain to all of us. Some bigger than others. On today’s topic, I will break down the biggest problem I see Amazon sellers face and offer a solution.
“I’ve been getting into selling on Amazon using FBA, but I’ve noticed some items being repriced so low I’m not sure how many of these sellers are even making a profit.”
The above question frequently occurs when you browse Amazon FBA forums. Profit margins are getting so thin that it doesn’t even make sense to sell on Amazon anymore. It’s a bloody red ocean of sellers trying to outprice their competition.
We all understand the price has a lot to do with winning that share of Amazon’s Buy Box or winning the click on the search page, but maybe Amazon sellers place too much importance on price. Alternatively, worrying so much about having the lowest price among your competitors, I recommend avoiding a price war as a method for coming out on top. It rarely works out for the best, and we’ll take a look at why that is.
Price is still important. Over 82% of Amazon consumers consider price to be an essential factor when selecting a product. Even more impressive is that three-quarters of consumers in the US who shop online go to Amazon to check prices before purchasing. In other words, Amazon is known for having low pricing─low prices with high competition results in razor-thin margins for Amazon sellers.
You don’t want to play that game—the game of reducing prices to be the cheapest option. Start reducing your prices to rock bottom all the time, and you’ll soon be pricing yourself out of business.
A price war is defined as “a competitive exchange among rival companies who lower the price points on their products in a strategic attempt to undercut one another and capture a more significant market share.
A price war is even more common under wholesalers who try and win the buy-box. However, this applies also to those who are on the private label route like I’m.
To avoid participating in the race to the bottom, I have two solutions you will have to understand.
Most of the time, price war happens because of one seller and not because of the whole market. There is one seller whose price is so low; it leads to others sellers adjusting their offer because of it.
It helps to understand who that seller is that prices so low. And those who adjust their offer. Build up a report, or some sort of spreadsheet, where you take note of all sellers in your marketplace. Questions like:
- How often do they change their price?
- Is it a Chinese seller? Where is he/she from?
- Are they building a brand?
- How many products do they have in their catalog?
- What is the quality of the product?
- What is their floor price?
- Are they selling FBA?
Suppose you drive down your product prices in a price war. In that case, you may begin setting unrealistic expectations for your customers. Consumers equate ‘low prices’ with ‘cheap products.’ It may not be a fair label, but we as humans have a built-in tendency to associate lower prices with lower quality.
Imagine you’re a shopper on Amazon searching for a pet glove.
And you see the same pet glove everywhere. You keep scrolling down further and further, but all you see is that same cheap pet glove.
Then… all of a sudden, you see something exciting and popping out. It finally isn’t the standard blue pet glove you have seen page after page.
This time, it is different in its:
By adding in a different color, design, or something extra. You are differentiating yourself from the competition.
There are many ways you can differentiate your listing from the others, and like this example, you can use more than just one way to do so.
Not only will you sell more of your product by differentiating, but you will also be able to price your product higher. By adding in a simple, inexpensive accessory, you’ll increase your product’s value in the eyes of the shopper. Your listing will stand out from the competition. It does take a bit of extra time and money to find and source the right accessory to compliment your product, but it will be worth it once the sales start rolling in!
Here are nine ways you can differentiate your product from the competition
As more and more Amazon sellers start producing goods in China, you might want to take another route and source your goods locally. The keyword here is might, as sourcing locally does have negatives. However, more shoppers are looking for higher quality and consider a label with “U.S. manufactured” as such. So it’s an excellent differentiation factor if you can make it work.
Just like the above example with the “pet gloves.” The color stands out.
Colors don’t just make your listing stand out. They also speak to your customer in a certain way. Chase, Citibank, Barclays, Bank of America all use the color blue for their branding. Why? Because the color blue stands for trust, security, and formality. It’s precisely what a bank stands for.
Colors like red and blue both create different responses. Even more interesting, the same colors tend to stimulate similar responses in different people; in other words, yellow evokes similar feelings in people from Europe to the United States.
You can take multiple differentiation factors with each other and combine them for even better results. That is what happened with the “pet glove” example. Next to having a different color, they also decided to make a kit from the product.
By adding a simple, inexpensive accessory, you’ll increase your product’s value in the eyes of the shopper. At that point, you can ask for a higher price.
One factor I don’t recommend, but so many Amazon sellers are doing, differentiating on price. It will tank your profit margins and make your product look cheap in the eyes of the customer.
The person who wins in a price war is the customer, Amazon, and the seller who has the highest capital and can sell the longest on a loss. Although I believe all sellers who compete on price lose.
By solving a problem
Entrepreneurs must solve problems to make money. It’s the game that we play. So why not directly go and fix a problem you discovered in a niche?
Discovering problems can be done in several ways. One, you can check the reviews on a listing. By looking at positive reviews, you can learn what customers are liking. By looking at negative reviews, you can learn what problems occur in the niche.
If you don’t see a solution for the problem you are reading about repeatedly, go and fix it. Are there already sellers providing a solution you might want to search further or see if you can compete with them.
Branding can be a powerful way to differentiate your listing from the competition, but it doesn’t directly guarantee increased sales.
Branding can include:
- graphic design
- customer experience
In today’s world on Amazon, you at least want to put some effort into branding. Coming to the market with bad pictures is not going to help you.
Take a look at the following brand, Liquid Death.
If you are still skeptical about the power of branding after the above stats, think again because even 20+ customers are crazy enough to have tattooed the brand on their bodies.
Again, they sell water in a can…
You can sell the best, highest quality product on Amazon, but if your images don’t show that, a customer won’t buy from you. It makes sense, right? Customers can’t feel, touch, or smell the product you are selling. The only way you sell your product is through copywriting, photography, and a sales video.
And with only around 20% of customers reading bullet points and descriptions, photography and videography get even more critical.
Take a look at yourself. When you land on a product page, what is the first thing you do? You look at the picture, right? If the pictures look promising, you look further towards reviews, read some bullet points, and buy the product.
Without great images, you cannot get the sale you were hoping for, even if your product is the best in the market.
Lastly, I want to go over differentiating by the audience you market towards. It’s one of my favorite ways to come up with new ideas.
Let me explain how it works with an example. Take a look at the following market, phone tripod.
The market consists of tripods of all sorts of different designs. Some differentiate on color, some on the tripod’s flexibility, some add an accessory like a wireless remote. All in all, a lot is happening in the niche. You will have a hard time selling a phone tripod in the current market.
However, the following brand is taking a new approach to differentiate. They aren’t targeting the general tripod phone keyword. It’s difficult to sell in that niche. What they do is target the fitness industry with a tripod for your phone.
Like you can see, it’s a simple selfie tripod but explicitly targeted towards the fitness industry.
You can take this example further and develop an idea in almost every niche, if not every niche. However, you do want to make sure there is a target market for your product.
It will not work if you take the selfie stick and target it towards gamers. Although, I don’t personally think that will work.
What you want to do is see if there is keyword volume for it. I use a tool like Magnet from Helium 10 for this.