Practical Ecommerce

Time to Re-Group and Review

The last few years in our business have been quite a whirlwind. We saw success quickly in the beginning and have spent a lot of time trying to keep up. Our busy season has ended and it’s time to review.

This year was the first year that we didn’t see tremendous growth in our business. We still have great traffic, and great orders, but we just didn’t grow as expected this year. I’ve been spending the last couple of weeks trying to analyze why this could be. The economy, the saturation of competition in our market, product availability (a huge issue this year)…there are a lot of variables. One thing that I noticed this year was how many more sites have popped up selling in the same niche as us. This is the downside to running a business that drop ships 90% of their inventory. The products are not exclusive to our site, and the business model is fairly easy to set up. We had more calls from frantic customers that ordered from another site only to find out weeks later that their credit card was charged but their items never arrived. The website they ordered from doesn’t have any contact info available and their event is just days away. They are stressed panicked and confused. Sometimes we can help and we get the sale, other times it is just too late for them to get anything online. They ordered from that website because their price on that item was so cheap. I’ve been doing a little research and I have found websites selling the same products as us at prices that just don’t add up. Some are less than wholesale, others are anywhere from $0.05 to $0.25 markup. Of course many of these are the sites we hear about from our panicked and frantic callers.

I’m not sure how to compete with this kind of pricing. Most of our drop shippers set a minimum retail price or a MSRP but even after submitting complaints to our vendors the sites continue to roll out insane prices. There is no way we can match those prices and I do feel that we have lost sales this year because of them. We offer outstanding service with knowledgeable and caring customer support that is available 7 days a week. A reliable and secure website with stock updates, excellent product photos, relevant and informative product descriptions. But most of our customers are only looking at their bottom line, when they see a wedding favor for $0.50 on one site and $1.00 on ours; we are more than likely to lose that sale.

It makes me sad that these other sites are coming out and saturating the market with prices that just don’t add up. I’m sure there are some that could be reliable and fulfill their orders, but how in the world do they stay in business?

This is something we are really going to have to consider as we enter our next busy season in January. I’m not sure how we can compete with rock bottom pricing, but we will just have to find a way. If anyone reading this blog deals with this same situation we would love to hear how you handle it.

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Comments ( 8 )

  1. LexiConn November 1, 2010 Reply

    Kara,

    Thanks for sharing the struggles and issues you’re business is faced with these days. It’s a common problem for many ecommerce merchants, and one we deal with in the hosting industry as well.

    It’s tough to get your message across when your "competitors" are selling something similar to what you offer at a fraction of the cost. In a commodity-like niche, price often trumps everything else.

    For us, where hosting can be found for pennies a day (literally), it’s a constant struggle to rise above the fray. We’ve found a few things that work though, to sell the service we offer as opposed to what some perceive as the commodity of hosting. You have to get people to see the value of your offering, and many times that means not capturing the majority of sales.

    Education and transparency are great tools in this "fight". We use white papers, web pages that explain "why us", blog posts that point out the dangers of low cost budget hosting, involvement in online forums and discussions offering that helping hand you mention in your post. If you can demonstrate what your company brings to the table vs. the other bottom feeders, you can win the right type of client.

    Your most powerful weapon is word of mouth advertising. Keep offering that great service, speedy shipping, etc… and harness the power of your satisfied client base. Get clients to post reviews of not only products, but your business in general using services such as ratepoint or power reviews. Use video reviews to tap into the youtube/video seo side of things. Offer an affiliate program to get others to sing your praises.

    Good luck, and keep us posted on how things turn out.

  2. furnituremart November 10, 2010 Reply

    Great.

  3. american November 15, 2010 Reply

    Great answer LexiConn. We are going through EXACTLY the same thing. Indeed it is very frustrating.

    Our business is down 2/3rds what it used to be a few years ago. I too have tried to figure out why. I put it down to a number of contributing conditions. I belive mainly it is because of the economy – people are just cutting back. Secondly, more competitors. It’s so easy to put up an insta website these days and your’re right, they just drive prices down and down. Their mentality must be that they can make less margin but with more orders. We will lower our prices as much as we can and that’s it. We can only go so low. Jobs have been cut and we are looking where else we can cut. Unfortuately, it’s just a sign of the times. There are many of us going through the same thing. I’ts great blogs like this that help us all to get through it together.

  4. Geoff November 16, 2010 Reply

    Kara, LexiConn and American thank you all for your comments. I am only just starting out with Christmas Gifts and I am having stacks of trouble even being found.

    I have heaps of links, over 40 pages, more product than you can poke a stick at and yet all of this is just sitting out there in cyberspace somewhere.

    Lexiconn is right though. More articles, product reviews, customer feedback, links from other sites etc is all that will get us found on the net to a place where people will find and start a relationship with us.

    Meanwhile perhaps we should contact each other and exchange links to get us started. Tell me what you think.

  5. Daniel Pacitti November 16, 2010 Reply

    Wow, How do you do all this and be a mom too? Your story sure is familiar. I am glad to read others stories on there who are promoting massive amounts of data and hoping that the search spyders find them! Hang tough, once it starts, all will be well. Thanks, Dan Pacitti http://www.mycoolbiztools.com

  6. Kara English November 16, 2010 Reply

    Hi everyone. Thank you for your comments, it is nice to know that I am not the only one dealing with this issue. My hopes are that these other sites will be a "flash in the pan" and our efforts of working hard and providing great service will pay off in the long haul.

  7. SouthWind November 27, 2010 Reply

    I have experienced the same thing this year, I started my online store in 2007 and this is the first year that sales did not double. However, I can attribute much of this to a major redesign that we did which basically reset our site’s ranking in Google and we according to analytics we are receiving only a fraction of the traffic compared to last year. But after many hours of SEO and tweaking, traffic is slowly rising, and Googlebot is spending a lot more time on our site. I’m really looking forward to 2011, I think it’s going to be a GREAT year for us. My goal is to double 2009′s sales volume for 2011.

  8. Dan Megan December 7, 2010 Reply

    Kara,

    Working within eCommerce mergers and acquisitions I often see similar situations. Particularly in drop shipping, as you already stated the barriers to entry can be very low. While many would say focus on service, and I agree that’s important, you also might think about educating the consumer.

    For example, provide testimonials specific to how you might have rescued someone’s wedding when they had been mis-lead by a competitor. Point out the fact that if there isn’t a phone number or customer support, is it worth risking such an events success over a few percentage points? Engage consumers with general advice about safe shooping regardless of were they buy.

    Also, work with the vendors. If your a valued longtime customer they’ll hopefully understand your frustration. It doesn’t help them either when retailers of their products work to ruin their reputations….

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