How can I compete with other sellers if their price is lower than mine?

Novatech Wholesale posted this on Aug 25, 2015

Can I make money selling online?
One of the main concerns of a lot of you is pricing, "How can I make money if someone on eBay or Amazon has it cheaper?" I am going to try and make sense of that here as there is not a one sentence answer for this. If you feel you can't make money selling online, please read the following as it will contain a lot of useful information to making money online if you can't be the cheapest on the internet.

Our Markup
Let me try and explain our pricing. To start, yes, you will definitely find products on our site that you will find cheaper somewhere else, but we also have plenty of products you won't find cheaper anywhere else. We mark up our prices as little as possible, but just like you we have operating costs that we have to cover. It is a lot more work for us to sell to you one piece at a time to multiple addresses then it is to ship one large order to one address.

Our Product Types
We have several different types of products with all types of ranges in price and profit margins, below is a breakdown of the different types. To determine what type of product is that we have on our site, simply click on the product and then click on the additional info tab for these details and a lot more product info.

Latest and Greatest
We have the latest and the greatest. However, just because an iPad is a hot item doesn't mean that it is going to make you rich. When an item is hot the cost is a lot higher all the way up the chain straight to the manufacturer. There is a simple reason for this and its not because it is made of gold... The item is in high demand. High demand = High cost (its that simple). If nobody cared about an iPad, they would be $40 like the chinese versions. Now an Ipad is fine for a Brick and Morter store because that iPad is going to bring a ton of customers into their store where they can sell those customers accessories and other items that will make a great profit.

Last years Latest and Greatest (liquidations)
Now we are talking, this type of product there is great profit in. Let me explain why, you know how when you browse eBay and you wonder how can they sell it so cheap? Well, here is the secret. For example lets say Distributor A buys 1000pcs of a Dell Laptop that cost them $400 each that has a retail value of $700ea, well they will sell 2/3rds of that inventory for $600, Well guess what, they just made all their money back and they still have 333 pieces left. This is where you see the cheap stuff on eBay. It doesn't matter to Distributor A what the other 333 pieces sell for because it is pure profit for them. So they will go dump them for $200 or $300 and they are still making a ton of profit, these are called liquidations.

Class A Refurbished
These are a great profit maker to0. I know what a lot of you are thinking, refurbished, nobody wants to buy a beat up computer. Well those beat up computers are Class C Refurbished. Class A refurbished look and operate like brand new. One of two things happened here, either A the computer didn't pass quality control off the assembly line so it is opened back up, repaired with new factory parts and fully tested. Packaged back up in all that nice factory packaging and sold for a fraction of what a new one would be. The second type of Class A products are store returns that were returned within 14 days from the date of sale and show 0 signs of use or wear. These are also opened back up, repaired, fully tested, and repackaged in that nice factory way of packaging.

Open Box
These are great because they are still new items with full factory warranty but the box was opened. Maybe a company orders a ton of Dell Laptops, had the factory install custom software on them, and then cancelled the order before delivery. Well somebody then has to go in open them all up and restore the computers to regular factory software, these are the open box models.

Plain Box
Most of these were purchased from the manufacturer in bulk, also known as OEM. These are brand new products with full factory warranty, but they have no retail packaging at all. This allows us to buy new hot product much cheaper than if it came in the fancy box even though it is the exact same item.

How do I compete with sellers that are cheaper?
The age old question, but its not as complicated as you might think, this is where the beauty of drop shipping comes in. Sure if you had a huge pile of money sitting around and can afford to go buy 50,000 new bluetooth speakers of one model then you can be the cheapest for a short while as you will sell them out fast just like all the other sellers that are the cheapest. However, keep this in mind even with that many, if you want to be the cheapest, your profit margin is still going to be very slim, so if you want to process, pack, ship and then deal with 30 minute phone conversations all day with your customers asking you how to simply turn it on, or tell you its defective because they forgot to charge the battery all for a buck each in profit then you probably shouldn't be drop shipping.

One of the biggest advantages about drop shipping is the inventory doesn't cost you anything, so you can afford to let it sit as long as it takes without having to worry about a due date to pay back those big loans for purchasing inventory and then find youself having to sell it real fast at a loss just to make the payment. With drop shipping you can completely do away with that headache and wait on your profit.

Several years ago we had a consignment shop locally here, we had a lady come in and bring her set of China and asked us to sell it for $1200. We pulled up eBay and started looking around to see if we could find a matching set, we found several as the set was still in production, the average price was $350 and the highest we could find online was about $450. We told the customer this and she insisted she wanted to sell her set for $1200, we told her we would put it on there but it may take a while. Sure enough 9 months later the China sold to a customer for $1200 right on eBay and they were happy as could be when they received it. The set costs us a whopping $0.45 to stay online for 9 months (.05 x 9). Sure it took a while but the profit was worth it.

Imagine if we had 30k+ china sets to put on there and wait for the sale on, well with drop shipping you do, sure the higher priced items may not fly off the shelves every day, but if you let them sit I don't think we have any items that wouldn't sell at least once within a year. And if you have a lot of products on your site all doing the same thing, that can really add up to life changing money. With all the different selling channels out there these days you could make...

The people that make money on the internet either start out with a huge bank account to do it, or they have patience and wait on the sale, the sale will come it always does. We hope that this will help some of you find success selling online. Good luck to all of you.

Categories: Pricing