How To Cripple Low-Ball Amazon Sellers & Reclaim Your Market | Part 2
In part 1 of this series, we left off invasive sellers low-balling a fairly priced product and how to counter attack.
To make this example work, you need to have a pretty good idea of how much your item costs across the board.
In this case, the four-pack of chocolate bars costs no less than $2.90 retail, but averages at $3.69 in most stores.
Shipping cost for the four-pack of chocolate bars is set around $0.80 per unit.
Now let’s say the total for the chocolate bars comes out to $4.00, which includes shipping and the price point between $2.90 and $3.69.
Let’s make your price for this item $12.99, this is your spread:
Your cost (including shipping): $4.00
Your price on Amazon: $12.99
Minus Amazon Fees: — $4.63
You finish with: $8.36 ($4.36 net profit)
You’re making back your initial investment and you’re making enough profit to buy an extra pack of chocolate bars and keep the roll-over going.
Every once in a while this product, like so many others will get infiltrated by a low-baller that clearly doesn’t understand the way it all works.
Let’s take a look at a Low-Baller we’ll refer to as “Vivi” (don’t ask why J.
Vivi started selling her chocolate bars at $10.79 when she first hit the market.
Vivi’s cost (including shipping): $4.00
Vivi’s price on Amazon: $10.79
Minus Amazon Fees: — $4.30
She finishes with: $6.49 ($2.49 net profit)
She makes back her initial investment, but doesn’t have the nut to buy another four-pack with her net profit.
A long-time seller of the chocolate bars took notice of Vivi’s ways and tested her. He priced his down to $9.99 and saw that within the hour, she had priced down to $9.79 to claim the Buy Box.
Quick note: What Low-Ballers don’t realize is that differences of only a couple dozen cents don’t win the Buy Box for long. The rotation gets switched up regularly, but this is why the “race to the bottom” happens so frequently on Amazon.
Back to Vivi’s “drop-point”. She reactively dropped to $9.79, without taking a look at the math:
She gets $5.64 back, and only $1.64 of that is profit.
Now Vivi’s competitors know how to play her and that’s exactly what happens in the picture you see below:
So what is the strategy you see in the picture above?
Why would AMAZES sell the same SKU twice and both below margin?
1) Buy box domination — by “trapping” Vivi in the middle there, he can ensure that the Buy Box can only go between the two of them.
2) He ensures that Vivi’s only option is “down” (not that she’d ever dream to run a higher price point).
By the time you read this, Vivi is DONE.
She crashed and burned in spectacular fashion.
Of course, there was more to it than getting out-flanked by a seasoned competitor, so let’s break it down for you as the lessons to be learned here apply to everyone:
1) NEVER put all your eggs in one basket — this isn’t just some cliché. Vivi had a few SKUs in her line-up, but when she noticed how quickly the chocolate bars sold, she focused all her resources on that SKU.
2) When the hunter becomes the hunted: remember how I told you to watch for any SKUs that sell nicely that your low-balling opponent might have exclusivity in? I found one where Vivi was making a nice profit at a $20.99 price point and set mine at $9.99.
Once I did that, all her bets for income were now on the four-packs of chocolate bars.
3) Lack of categorical diversity — Vivi focused almost exclusively in the food category. I, on the other hand, have three categories that I specialize in, so when one goes to shit, I still have two pillars to hold me up.
That right there is probably one of the easiest strategies to employ: become an expert in at least three categories. I’m presently working on opening a fourth category, just for good measure.
Just make sure you don’t go overboard — do not start selling in all categories.
Part of your success hinges on having a definitive grasp of the categories you sell in. So unless you’re some kind of Renaissance man, pick what you know best and work with that.
On Diversity:
This topic deserves a little more time as it is key to your defeat of enemy Low-Baller forces in more than one way.
There are elements spread out through the calendar year that will affect your sales without there being any low-balling involved.
Here are some examples:
1) One of my top-selling home devices plummets once winter ends. Reason: It’s designed for arthritis sufferers, who feel less pain during the warmer months.
2) Some of the toys I sell stop moving after the TV show they’re based on reaches its season finale.
3) Sugar-based food I sell shoots way up in May…care to try guess why? Because college/university students tend to gorge on sweets through finals.
4) While those TV show toys might stop selling after the season finale, water guns are suddenly booming in sales.
There you have it — master your expertise of what works in a select few categories and hedge your bets so that there will always be a counter-effect when things don’t go so well in one area.
Enjoying the series so far? Don’t hesitate to follow to be kept up to date on the next installments.
