11.11 Sales. How we did it? Facing the Intense Competition - Part 3
This blog is to focus on the Intense competition and how the business overcome this challenge. Enjoy!
Miss A started with those products she liked for a young lady. What are the products? Beauty accessories of course! such as hairbands and etc. She started buying some hair bands from local seller. She listed the product in popular marketplace and listed it nicely, and sales started to tickle in. She managed to enjoy some growth in sales as not much competitor at the start of her business.
Encourage by the development, she decided to leave her permanent job in 2016, and started to work on her eCommerce business full time. . Miss A had spent much effort and time on photos, artworks and content. This was the common advice provided by classes from Marketplaces. But normally they don’t mention the threat which was the competition from the international and local copying Vikings.
Her heartbreaking story started after she worked full time. In 2016, competition in eCommerce was getting hotter, local competition increased, and overseas sellers, especially China Seller started to flood Malaysia eCommerce market. Some of this sellers or traders are brutal like Vikings. They came and rob your photo, artworks and content, and duplicate it in multiple selling accounts.
Miss A was robbed brutally, with her listing copied by international vikings which use the exact picture and content, and some even improved on her artworks. The killing blow was that these trader also sells at price much cheaper than Miss A! These traders already save much effort in copying. Miss A of course complained and try her best to fight against the tide, but not much result from the marketplace. Actually, this were happening globally as reported by CNBC. Sometimes she succeeded in getting a listing remove, but more will pop up again to rob her other listings. She kept fighting alone, which means valuable resources was used in fighting such traders, and less resources were available to improve her business.
Performance subsequently declined, she got demotivated and that was the time we meet. I felt her rage and sadness. She was entirely right in her scope that it is not a fair game. In order to compete, we need to stay calm and analyze the competitor competitive advantage as explain in this Forbes article
Should we continue to fight for stricter Marketplace regulations, such as removing listing and suspending accounts? Amazon are very tough and harsh on account suspension. They can suspend an account INDEFINETLY. But then such harshness introduces other sets of problem as in this article by Webretailer.
Additionally, how effective will be the enforcement? If a seller is claiming that another seller is copying, who should spend the resources to determine who is right and wrong? And is the marketplace liable if they make the wrong decision and declare the original content owner at fault like below article by CNBC ? And in the first place, does the marketplaces have the authority or legitimacy to be the judge for sellers provided by trade and consumer act or law? Anybody with legal knowledge please correct me here if I am wrong.
I felt that there is too much grayness here. Although from the original seller perspective, it is an offense, regretfully there is insufficient solid reference and indication from the regulators and marketplace Additionally, a small seller like Miss A just don’t have the resource to fight. Perhaps there will be a day when local sellers can be united to lobby the politicians and regulators to set a better stage when eCommerce has grown to much larger size in Malaysia, but it doesn’t seem to be happening now. Don’t flame me for this. By all means, if you want to continue to fight this copying battle, you had my best wishes and full support.
Seller love and passion on the product, Photo, Artwork, Content of a product is important to succeed, yet all this are weak competitive advantage. These are necessary and a good push at start, but when your listings sale is better, it means your listing had grown fat and juicer. It will attract Vikings globally to plunder and copy your listings. Even if they don’t copy, there are many other ways to rob your listing.
So instead of fighting the copying tide, I suggested to Miss A to fight smart on strengthening our core competitive advantages to face the threat. We used Porter strategy as reference. For a small startup, Miss A did not want to to choose differentiation strategy such as branding and customer engagement due to the funds limitation. Thus, the competitive advantage we selected was the Cost Leadership and Delivery time.
For the delivery time, in my previous blog, I already blog how we setup our community to maximize delivery performance at limited manpower. Simple. we just had to focus on excellence in this. We always put aside everything, to achieve 100% in 24hrs ready to Ship and 48 hours Shipped. It is a cheap yet effective competitive advantage. It is simple as international seller take much more time to arrive! So guys, don’t ever let this home ground advantage go to waste.
Then we focus our effort in Cost Leadership!
Bear with me, as this takes some explanation. First, lets put aside differentiation and brands, as brand includes loyalty and hedonistic values. If this is not accounted, when two similar products is selling at higher price, and you ask Brand B why more expensive than Brand A? Brand B most probably will say “Our Product Quality is Better! And Brand A are from China!” Some will just “oh” and believe, but critical salesman such me will challenge, how do you define Better Quality? And why China product are inferior?
Now only if you know the product characteristic well, then you can be confident in issuing this challenge and not be hoodwinked. Thus, I suggested to Miss A to purchase a unit from all her top competitors for her targeted product. Then research on the product characteristic, get description on all the seller and create a competitiveness comparison table. The more she understands about the product, the better! For example, a yoga mat (MAT), you can compare thickness, material, water absorption quality, rolling and flatness quality.
Regarding China product are inferior comment, I suggest ignore this, as inferior product can be from suppliers all over the world inclusive of locally source product. Location of supplier is kind of irrelevant unless it is from 3rd world country, which China is not now.
After obtaining product characteristic, it is possible for you to plot a Price vs Quality chart for all players. Some has top quality, but very expensive yet some was dirt cheap but low quality. This is known as effort (Price) over Results (Quality) table. At the start a little effort can improve a lot but In this example, a 6mm MAT is just slightly cheaper over 10mm MAT, but an increase of 6mm to 10mm is 67% increase! However in the end, you need to spend a lot of effort (Price) to achieve small advantage. Example auto rolling MAT is 10X more expensive than normal MAT, just for the auto rolling function.
Thus, now Miss A have more solid info to make her judgement to find the sweet spot which brings maximum value to her targeted customer – Best Value Product. Best Value for the Money Spent! Not too cheap until the business suffer from a lot of unhappy customer, or too expensive until nobody wants to buy it. The key here is to quantity as many as possible of the “Quality” into measurable characteristics.
One a best value product price is identified, how to reach a competitive pricing compare to international seller? For Miss A it depends on 3 variables:
1. Cost Efficiency. Miss A worked in Perak, this state with an average household income of RM4k are much cheaper compares to 1st and 2nd grade in China. The 3rd grade city in China cost might be lower, but the language barrier will be in those cities. Then if she maximizes her efficiency, doing more in lower manpower hour, it will be lower cost also. So, I suggested that she put all complicated artworks aside, using template and uncomplicated photography to produce simple, direct and powerful listing in the shortest time possible. She had to avoid spending too much time and resource to search, hunt and going after the copying competitor. This will allowed her more time in finding the Best Value Product, which is rock solid. Also, if global sellers are using air freight, they can’t compete with sea freight!
2. BUY DIRECT. In the supply chain 101, the more middleman in the chain, the higher the price of the product as each needs a profit, thus making the product noncompetitive. So regardless for her to source locally or from other country such as China, she had to aimed to source directly from the manufacturer and remove the layers between them. In here her fluency in mandarin and her past working experience in China helped. She was able to keep trying with different supplier and if a supplier could not provide the competitiveness, she will bring the game higher up the chain, even to China. Yes, in times she got cheated or shortchange by supplier, but step by step, she collected a list of reliable suppliers.
3. Manufacturer Pricing Strategy. Some manufacturer prefers to give big discount to sell on bulk so that they had no need to handle so many customers. If a supplier is offering big discount such as more than 30% difference, for 5k quantity order compare to 500 quantity, then startup had to be careful, as manufacturer is looking for distributor or big player. These distributor is kinda middle person and can swamp the market with quantity in eCommerce. But some manufacturers, with the support of better management technology are able to now supply to higher number of customers. Although 5k quantity and 500 quantity had their price differences, it will be at the range of below 10%. Then this allowed a healthier competition between startup and big player. Again, this information need to make comparison with current top competitor selling price.
She had invested her effort and time, and in time started to accumulate a good database of competitive supplier. You see, information on hot selling products and the product’s content on marketplace can be easily accessed with tools and software’s. In Amazon, open service provider like https://www.junglescout.com/ is doing that, and it is high possibility that some Malaysia player already using their own software to extract sales information online. But these tools can never able to extract Miss A database of solid supplier which roll out Best Value Product with Cost Leadership and Excellent Delivery TIME.
Recently Miss A went to China Canton Fair, and the question she asked had cause the Fair sales representative avoiding her in order to handle other foreigners. Haha I guess she had reached the level that China seller in Canton Fair who were focusing on easy fat foreigner meat, were not interested in eating this lean and tough meat.
So, if you ask what is hot selling product? I suggest you should ask where the top seller buy their hot selling products. Of course, although I like to share, I cannot share Miss A supplier information, as it is precious to every seller. Thus, in the community, I explained to all members we can share sales information, but never supplier information, as that will be too high risk and sensitive.
However, some member trusted me, and it humbles me when they share with me their most valuable information. I had even visited China to deal with supplier for my members, and it is a very interesting story. But then this had to be left to other day as the word count is more than 1800 already.
Again, I hope my sharing of experience is helping you the reader in improving your business. The suggestion provided is just a reference, and there are many other ways for your business. If you can feedback and let me know of your ideas and ways, it will definitely help me in writing better for others. Next I will try to share our experience on trust and operation excellence.
Lastly again if its possible, please do like our facebook page as usual. https://www.facebook.com/kkecommerce/