One of the difficulties eBay sellers have when selling on Amazon is the fact that they don’t have to create their own listings most of the time. I know, most of us actually see that as an advantage, but I’ve been asked many times by eBay’ers “how do I compete if we are all using the same listing?”
In other words, they are used to competing with other sellers through the quality of their listings, not just the popularity of their goods. Many Amazon FBA’ers have the misconception that competing is all about price – the lowest price wins. Because we all share the same listing, there’s no way to compete, right? In my world, the lowest price usually loses…margin. So how do you compete on Amazon? When it comes to competing, the price should be last, not first on the list. Assuming as a premise that the price at which you wish to sell your item is already right and has sufficient margins, here’s the different ways you can set your goods apart from others while still sharing the same listing:
FBA – Our most powerful tool. Being an Amazon FBA seller vs. a merchant seller means you can charge a premium because Amazon will fulfill your goods for you and Prime buyers get free 2-day shipping. When I see FBA sellers charging less than merchant sellers I scratch my head (most of the time – sometimes merchant sellers are unreasonably high priced). Why charge less than them? We don’t compete directly with merchant sellers most of the time and offer a huge advantage over them.
The Buy Box – Because Amazon FBA sellers are in a special class (like Amazon itself), we are eligible for the “Buy Box” if our price is among the lowest prices. What happens is people come to our product listing and we are the one offered prominently and then there is a tiny link for “see other offers.” A huge number of people will simply click on the “buy now” or “one-click” purchase buttons and be done with it. You do NOT have to be the lowest price to be in the buy box, but in the mix. I’ve often gotten the buy box and not been the lowest FBA price.
Your Listing – While our ability to change the listing on Amazon’s catalog to our advantage is limited, we have the ability to use item notes. Amazon wants these notes to be product related and not self-promotional (we are selling to Amazon’s customers unlike eBay). I am often surprised by people who don’t take advantage of this simple way to set their product apart. So what constitutes a competitive note? Here are a few ideas:
- You are a better seller than someone else – “Sealed in plastic to keep clean in the warehouse,” “fresh batteries included,” etc., show how your item is better than another around the same price.
- Details – Is your book full of highlights? Does your collectible game include all the pieces? Did the author sign the book? Say so! Even if it might seem a negative, the fact is many buyers have been disappointed to order something and not have it meet their expectations. By telling them what to expect, you are setting yourself apart as someone they can trust. Obviously, new is new so there may not be a lot to say if a product is in perfect, new condition except maybe “Brand new, sealed in box.” The point is, don’t overlook this opportunity to set yourself apart. Saying something is better than saying nothing.
- Define your categories – similar to “Details,” what we are talking about here is to give the buyer a clear idea of what YOU mean by “Collectible – Very Good,” for example. While we as sellers are required to follow certain guidelines set out for us by Amazon, most buyers are not aware of these criteria and may have a different idea of what is “Acceptable” than you do. Be specific. I have basic descriptions for all categories of used books, collectible games, used software/video games and other used media. Again, this is about setting expectations and providing comfort to the buyer. If you are looking at two items that are the same condition and similar prices and one has a lot of detail and one is blank, which one will you choose? Many people will choose the detail over the blank description even if there are some negatives in there. Better the devil you know…
- Promote the FBA benefits – this was more important when I started as a seller than now. Today a lot of buyers are pretty familiar with the FBA program because they are Prime members. However, I still often include it at the end of a listing description. I might say something like “Eligible for FREE Super Saving Shipping! Fast Amazon shipping plus a hassle free return policy mean your satisfaction is guaranteed! Tracking number provided with every order.” With this I am reminding buyers why they want to buy from an FBA seller like me versus a merchant seller. Plus, Prime buyers are impatient. They know that they will get their product in 2 days for free or overnight for $3.99 – such a deal! J They will not care that there are other sellers for a lower price because speed is more important than price. In fact, most Prime members search by Prime prices and don’t even see merchant prices. Yep. Read that sentence again. I know this is true because it is how I shop on Amazon as well. I click that button and I’ll pay a higher fee if it seems reasonable to me. I want my stuff fast. The last time I ordered from a merchant, it took 12 days! An eternity!
- Logo – Does your online business have a professional name and logo? That is appealing to consumers. If they are looking at two sellers at the same or similar prices, it might be why they choose you over them. The perception is that a seller with a logo is a “real” business.
- Seller rating – All things being equal (or close to equal), sometimes consumers will decide based on the seller’s reputation. This is a bummer for new sellers because there’s not much they can do to increase their number of ratings quickly. However, if you keep your approval rating in the high 90s and address negative feedback immediately, you’ll be seen as a responsive, quality seller. It will pay off in the end.
Ok, let’s talk about price for a minute. There are ways to compete on price and keep your margins up.
Psychological Pricing – There are certain prices that are more appealing to customers than others. We have been trained as consumers for years by marketers that $19.99 is less and “better” than $20.00, for example. Have you seen all those weird prices out there? These are often a feature of repricing tools, not smart marketing. On an unconscious level, sellers want to pay a familiar price. Some of them will choose $19.99 over $19.89. Yes you read that right. They will choose a higher price over a lower price simply because it is more familiar and comforting. I price nearly all of my goods at a familiar, “normal” price even if it is not the lowest price for this reason. One of the few exceptions to this rule is $25. That is because Amazon offers free shipping for goods at $25 and over. Non-prime members will definitely choose $25.00 over $24.50 or $24.95, for example, because they get free shipping which is worth a lot more than a few cents. You ignore psychological pricing at your own risk. It is a hugely powerful tool.
Quality Pricing – If there is a price that is that $4 and then most of the other sellers’ prices are $19.99 (like a used textbook that sells new for $75.00, for example) what happens when the buyer shows up? For some buyers they will buy at $4 and laugh all the way to the bank. For many others, however, they will look at the $19.95-$19.99 prices and choose one of them. Why? Because the $4 is seen as “too low” in the mind of the buyer. They feel that the $4 item must have something wrong with it whereas the $19.99 item is “right-priced.” Depending on the consumer, that level of discomfort may lead to them buying the higher price item that they perceive to be “right” and “quality” over the bottom feeder price. This is yet another reason why offering the very lowest price is not always a good idea. It makes people wonder if your items fell off a truck somewhere.
Expenditure Pricing – Is this item something that someone routinely buys for a business or as a business expense? Buyers will be willing to pay more than if it is something coming directly out of their pocket. I’m thinking here about software and office supplies as well as certain types of entertainment/gift items. If their company is going to reimburse them (even if they work for themselves) and write off the expense, they are less sensitive to price. This is not to say you should overprice your item, but you don’t need to lower it to compete, either.
Crowd Pricing – OK, not to overlook pricing, obviously this is one way to compete. This is the least advantageous to you, however. If every other seller is pricing their item at $39.99, why would you price it at $39.75? You might say “I want to be first, I want to sell mine quickly, etc.,” but the fact is you are shooting your nose off to spite your face. You can sell yours for $39.99, too, and make the extra margin and sell it quickly. If all the prices are around $40 and you are in the pack, then your item is perceived the same as the others. There is no reason to compete with yourself and lower the price. Assuming an item is selling several units a day/week/month, you can ALL sell your products for the higher price and be happy. Plus, look above to the other ways you can set yourself apart and compete without lowering your price. I’m not advocating price fixing here, but there’s no reason to race to the bottom, either. We can all make money and satisfy our customers.
I hope this blog post is read by FBA sellers who are today engaged in the “race to the bottom” price-wise. You don’t need to cut into your margin to sell a product. Other sellers are your colleagues as much as they are competitors. If you start from the premise that everyone can make money here, then the competitive aspect of the business becomes more subtle, but still effective. Make sure your listings, pricing and ads (if you use them) are the best they can be and watch your profits grow as you maintain your margins rather than cut them to the bone. Making more per item is a better selling strategy than volume sales at a tiny margin, believe me.
Is there another way to compete besides price that I’ve overlooked? Please share with other readers in the comments below!