The 5 Most Important Things I Have Learned About Ecommerce Competition

Posted on September 22, 2009. Filed under: Amazon, eBay | Tags: , , , , , |

I am a competitive person.  And those who know me would probably say that is an understatement.  So, I’ll clarify and say that I am a very competitive person.  And, fortunately for me, my family really loves me or else I’d probably have been banished awhile ago from Family Game Night.  It’s not that I’m a sore loser or that I gloat when I win.  I just take competition very seriously.  I always have.

So, it comes as no surprise that I am competitive in ecommerce.  I know who all my major competitors are on eBay and on Amazon and I study them and analyze their business practices.  It is much easier to study a competitor who is selling on eBay or Amazon than it is to gather information about how they are doing on their own website.  There is a wealth of information about other sellers available on these platforms. 

And, after many years of experience in life and in business, I would have to say that there are five main things I have learned about competition in the ecommerce environment.

 

1. Don’t destroy the competition; you need them. 

Running a race by yourself is not in your best interest.  Have you ever noticed that if you run a lap around the track by yourself, even if you run as fast as you can, that you still don’t run as fast as when you are running against others?  Competition makes you better.

But, in ecommerce, it is even more important to have competition.  Potential buyers want choices.  They need to have some way to validate their decisions.  If an ecommerce buyer can only find one seller who offers an item then they have nothing to which they can compare.  And I’m not just talking about price comparison.  A potential buyer subconsciously begins to worry about why no one else is offering the item for sale and wonders what pricing and terms someone else would have for the item if they were to offer it.  And there is a fear that perhaps no other seller is offering the item because it is an inferior item or there is some other unknown, but unfavorable, reason why no one else would be selling the item.

Sometimes we have had to create our own competition on eBay.  We manage 3 selling IDs and we have, at times, put the exact same item up for sale on 2 or more selling IDs.  We have done so when there is no other seller on eBay offering a particular item.  We might vary the title a little, use different pictures, and perhaps raise the price by a dollar and lower the shipping by a dollar so the overall price is still the same.

 Now, it’s a lot of work to create your own competition and to compete against yourself.  It’s simpler if you have others who will run the race with you.  So, while our goal is to always be the winner in ecommerce we definitely don’t want to destroy our competition.  We don’t need to walk away with the gold, silver, AND the bronze medals.  We’re happy with just the gold.

 

2. When you’re playing in somebody else’s ballpark, you have to accept that they make the rules and they may change the rules, sometimes without telling you.  You can take your ball and go home or you can learn the rules better than your competitors.  Winning on a technicality is still a win.

I find that on Amazon in particular, there are so many unwritten rules and a great many “internal algorithms” which requires skill to study and interpret and then decode to some small degree.  The more you sell on Amazon, the more skill you gain and thus the better you can play the “Buy Box game”. 

We noticed on Friday this past week that an Amazon competitor had earned the Buy Box for an item we had initially entered into the system and had sold well.  We never get into a knock-down-drag-out fight over the Buy Box by loweirng our price but we do always try to figure out why we lose the Buy Box so we can develop better strategies.  And it is rarely because of price that we lose the Buy Box.  Most of the time we have the highest price and we still own the Buy Box.

We realized that an Amazon merchant who had considerably more experience selling on Amazon than us had manipulated the system by putting incorrect information in the detail page, among other things, to earn the Buy Box.  A phone call to Amazon confirmed our initial suspicion and the customer service representative made some changes in the system to correct the detail page which then gave us back the Buy Box for that item.  We won the Buy Box back on a technicality.  But without taking the time to read Amazon’s rules and then having the experience to understand how they work, we couldn’t have used that knowledge to gain back the advantage.

It is so easy to get the sale on eBay if you are willing to lower your price and offer free shipping.  eBay will be sure to promote you and put you near the top of the page if you are cheap.  However, that low cost strategy on Amazon does not ensure success.  Earning the Buy Box is not necessarily given to the low price seller and experienced Amazon sellers often know little tricks that they use to get the Buy Box unfairly.  So while it takes nothing more than a cheap price on eBay for a seller to be a winner, it takes much more strategic thinking to come out on top on the Amazon platform. 

And the ultimate platform, of course, is your own ecommerce standalone website.  Becoming a website owner, after selling on third party platforms, is kinda like moving out of your parents’ home when you turn eighteen after having been taken care of all your life.  There are no more curfews or a long list of rules but also gone are the days when Mom cooked you breakfast and Dad paid the electric bill.  You have all the freedoms you have been dreaming about but along with the freedom comes the responsibility for doing all things yourself and paying all the bills, too.

Fortunately, in ecommerce, we can set up camp at more than one venue.  We can establish an ecommerce website to have ultimate control over building our own business and developing our own brand recognition.  We can become skilled at selling on Amazon so that we can sell items at a decent price which gives us the margin to provide excellent customer service.  And we can sell our secondary market items, such as stale inventory, at a low price on eBay to turn over slow moving inventory more quickly.  We can have the best of all worlds as long as we are willing to give up some freedoms in exchange for not having to do everything ourselves. 

 

3.  When you’re running a marathon, you don’t worry if your competition is sprinting wildly ahead in the beginning of the race.  It’s really all about who can go the distance.

With the tough economy and eBay raising their selling fees, we noticed a trend that several of our eBay competitors were steadily lowering their prices.  Specifically, these sellers were auctionning off older inventory below cost and putting a lower Buy Now price on new incoming merchandise than before.  We watched as they continued to take less and less margin on new items and they reduced the variety in their inventory by clearancing anything more t han a few month’s old. 

When one seller would lower their price by $2, another seller would lower their price by $3 and the first seller would lower their price by another $2 (for a total of $4 off) and the cycle kept going.  While we could have jumped into the fray and started rolling around in the dirt slugging it out with everyone else, we decided to take a different approach. 

We completely gave up on the battle for sales of newly released  items on eBay.  Anytime we received a new model, we rushed to put the item up on Amazon and then we put the model in our eBay store when we got around to it.  We knew it would sit in our eBay store for awhile since we were priced higher than everyone else on eBay selling the same product.

Instead of lowering our price on just-released models, we expanded into offering parts for these hobby related items.  We ordered in a complete line of parts since only one other eBay competitor carried much inventory of parts at all.  The margin for parts is great but they are not as sexy to sell as the main items and they require a significant investment.  And we also focused on international sales since most of our competitors who offered cheaper and cheaper prices didn’t sell internationally.  And, with those changes, we pretty much walked away from eBay sales and focused almost entirely on selling on Amazon and on our own website where the margins are what we need if we want to remain in business.

Over the last 12 months, we have watched eBay competitors implode.  In an attempt to hang on, some sellers began offering preorders and ultimately sold preordered items at their cost or below simply for the cash flow.  And while that may work in the short-term, when all the old inventory is gone you have nothing much left.  Clearancing old inventory of which you only have a limited supply, selling new items at low or no margin, and pre-selling items below cost is not a sustainable business model.

And now there are fewer competitors on eBay and those who are left don’t have a wide variety of inventory.  Even with most of our items sitting in our eBay store, we have experienced quite good sales on eBay in the past few weeks.  While we are focused primarily on Amazon and our website for this holiday season, we have plans after the first of the year to revamp our eBay store and auction descriptions to once again compete heavily on eBay.  We’re going to give our eBay store a facelift.  And it will coincide with our efforts to clearance merchandise left over from the holiday selling season.

 

4. There are no minor league players in ecommerce.  Every online seller is judged by the standards of the professional league.

When a buyer visits a third party platform or an individual business’ website, they have expectations.  Most online shoppers don’t have a separate set of expectations for “hobby sellers” and a different set of expectations for “business sellers”.  Buyers expect their items to arrive in the condition stated (and on eBay, they sometimes expect their items to arrive in a condition better than what was stated) regardless of the type of seller who is offering the item for sale.  There is no such thing as “well, stuff just happens” when it comes to customer satisfaction. 

Online buyers really don’t care whether you delayed shipping their package for a week because your cat had an ingrown toenail, for example.  It isn’t like the buyer is asking you for a favor that you can get around to doing when it is convenient for you. 

There is selling locally (brick and mortar or flea market), there is Craigslist, and then there is selling over the internet which is the definition of ecommerce.  And when online shoppers make an ecommerce purchase, they want their expectations managed within a reasonable tolerance level.  Most buyers will accept a slight variation in the overall shopping experience but deviate too far out of that range and you’re kicked out of the game.  There is no minor league sports in ecommerce.   You want to be an online merchant then you are either all the way in or you are out.

 

5. There is no place for an ego in ecommerce competition if you really want to win.

If 100 people running a marathon have as their goal to finish the marathon first then only one person out of those hundred people can be successful.  But all 100 runners can be winners if their goal is simply to finish the race.  Success is an internal measurement that is not dependent upon another person’s definition of success.

In our business, we don’t measure our success by how big our piece of the pie is in relation to our competitors’ pieces of pie.  We just start out knowing how big of a piece of pie we want and then we measure our success against that stated goal.  The overall pie that everyone has to share could be smaller or bigger than we originally thought but as long as we get the size piece that we want, how the remainder is divided up is unimportant.  Caring about the distribution of the remainder and comparing the size of your pie to your competitor’s slice is not about winning and losing; it’s about ego.

And when you begin to focus too much on your competitors, because of your ego, then your business strategies tend to become more defensive than offensive.  It is important to study your opponents so that you know their strengths and weaknesses but be willing to accept that a competitor’s success doesn’t necessarily mean you have failed.

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2 Responses to “The 5 Most Important Things I Have Learned About Ecommerce Competition”

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I like that
“no minor league in e-commerce”

A very insightful line that one.
Combine that with you “piece of pie” and my reading is

YES, any website can compete with amazon or ebay if you are a pro and have carefully eyed out your piece of the pie.

An in our experience, that is entirely true, our website outperforms ebay, and bonanzle in terms of sales, contacts, and customer retention.

Great pointers here, very good focus.
cheers
vince.

[…] The 5 Most Important Things I Have Learned About Ecommerce Competition « TheBrewsNews thebrewsnews.com/2009/09/22/the-5-most-important-things-i-have-learned-about-ecommerce-competition – view page – cached Posted on September 22, 2009. Filed under: Amazon, eBay | Tags: competing against other online sellers, eBay top seller, ecommerce competition, knowing the competition, third party sellers, winning the Amazon Buy Box | — From the page […]


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