Will China put you out of business?
The short answer:
With an asterisk. Here’s the deal.
If you’re importing from China, you’re in trouble in 2016. Why?
- Amazon will ship from China by sea. Therefore, customers will buy directly from Chinese factories. Amazon’s got Alibaba and Wish to compete with, after all (Amazon supposedly offered $10b for the latter, but no dice). Amazon has its eye on vertical integration: factory > warehouse > doorstep; no private labeller required. It’s a brilliant play.
- Chinese suppliers control production, reacting more quickly to trends.
- Chinese suppliers can sell for less than you.
That doesn’t sound good, so hear this:
The market is impartial.
You import from China and sell on Amazon. Your supplier sells the same product for $5 less and wins the sale. The market chooses the most value every time. $5 less is more value.
Here’s the silver lining, though.
The market chooses the most value every time. Not necessarily the cheapest.
Never compete on price. It’s futile. Rearranging deck chairs on the Titanic. The question is: how do you provide more value than a factory? If a factory sells the exact same item for $5 less, what can convince people to buy from you?
Take a few minutes and strategize with me. Here’s how to sell on Amazon FBA in the next 24 to 36 months.
Wait, why are you telling me this?
This isn’t a “scare” story.
It’s a “do-something-about-it-before-it’s-too-late” story.
I know what works, and I feel an obligation to share it. HonestFew serves hundreds of Amazon sellers, some with $300k+ in monthly revenue. These FBA titans are winning in a changing market, and we’ve identified the patterns.
Follow* (there’s that asterisk) these 3 steps so you can win too.
And by the way, this isn’t a “pick 1” scenario. All 3 are top line revenue drivers, the 20% of activities that drives 80% of results.
Step 1: BE EXPENSIVE, BUT EARN IT.
Knee-jerk reaction: factories sell low, so I need to sell low too.
Take a premium position because…
- A high price increases perceived quality (customer thinks: “it’s expensive” = “it’s made of better materials” = “it’s better for me”).
- A high price increases perceived value (customer thinks: “it’s expensive” = “I paid a lot for this” = “I wouldn’t spend money on crap, so it’s good”).
But not everyone deserves to price high. You can only price high if…
- your product is actually good quality, and
- your product is well-branded.
Let’s tackle quality first.
If your product is head and shoulders above the others, price high and win. Quality pays for itself.
These companies aren’t the cheapest, but they’re still winning. They win because they provide the most value through attention to quality.
Take care of your customer, and they’ll take care of you. Quality is king. “How do I make a quality product?” you ask, taking out your notepad and pen.
I have 16 gifts for you.
Here are 16 aspects of quality from the Whole Foods and Disneys of the world. The goal of this exercise is twofold: (1) to find new marketing points (good things about your product you don’t talk about) and (2) to find weak points so you can fix them and charge more money.
Grab your product right now (if you don’t have it, imagine it), and ask yourself all 16 questions with brutal honesty.
“Is my product…”
“… aesthetically pleasing?”
“… reliable over time?”
“… free of defects and bugs?”
“… easy to maintain?”
“… versatile (works cross-platform; in different scenarios)?”
“… fault tolerant?”
“… standards compliant?”
“… law compliant?”
Would you rather uncover the flaws by yourself right now, or wait until you get that public, permanent 1-star review?
You’re cheating yourself if you skip this list because quality = positive reviews. Positive reviews = conversions. Conversions = sales.
With noticeably better quality, a factory selling the basic, ubiquitous model can’t touch you. By the way, “quality” isn’t about adding an e-book, lifetime guarantee, or bundle. Screw add-ons; make your main offering better. When was the last time Apple tried to sell you a phone by adding an e-book? Never. They just make good phones.
Everyone knows it’s true, but they don’t want to invest in product development. Ironically, a lack of investment leads to a lack of profit.
But quality isn’t enough.
A quality product needs presentation to match. A quality product with bad presentation might still win, but it’ll be harder. Building a brand is the 2nd of these 3 steps.
Step 2: BRAND
When I say “branding”, what do you think of?
Nike, McDonald’s, and Starbucks?
It’s a vague term, so let me clarify.
Branding is like online dating.
Branding uses words, images, and experiences to make people fall in love with you.
Let’s make a dating profile.
- About Me = sales copy
Writing is branding. Are you naturally funny? Sarcastic? Serious? Nonchalant? Playful? Driven? Choose a tone that’s native to you. Deploy it in the bullets and description (more on how to write great copy in HonestFew’s optimization guide). Example: I aim to make quality (there’s that word again), insightful, long-form business content. How am I doing? Leave a comment.
- Profile Pics = product photography
Pictures are branding. Dating photos depict you in different settings and imply a benefit to the viewer (e.g. a photo of you at a lavish restaurant says “I have money and good taste”; a photo with a dog says “I’m caring”; a photo with a cat says “I’m a sociopath”). Similarly, white-backdrop-only product photos is like a dating profile of only passport photos. It’s sterile, and doesn’t imply a benefit to the viewer.
- Flirty Messages = customer service
Messages are branding. How fast do you reply? Is the grammar and spelling correct? Is the content generic or personal? Take 30 minutes to infuse personality into your CS emails, like this one from CDBaby (this was reblogged thousands of times, winning $1000’s in free publicity). Customer service templates have leverage: write it once, send it forever. So, take time to improve your email templates.
- 1st Date = the sale
Physical presence is branding. The “date” starts when your product lands on their doorstep. They see it, feel it, and touch it for the first time. Super-tactical: when sourcing, make sure your margins allow for robust product packaging (check out our full guide on sourcing). For example, “Beats by Dr Dre” headphones sell for $300+. That’s a premium price. And they upped the “1st date” factor with heavy metal components in the headphones (weight and metal boost perceived value) and big, glossy packaging. Be Beats. Apple bought them for $3b for a reason!
To finish our dating metaphor, a serious “relationship” starts with repeat purchases.
Understand: you can’t build a business on 1st-time-buyers only. If people aren’t reordering, fix it!
Repeat sales are oxygen, and I’m about to show you how to breathe.
Step 3: BOOST CUSTOMER LIFETIME VALUE
Why are repeat sales so great?
Because they’re easier to make than first-time sales, cost less to acquire, and stabilize sales.
For example, you buy an Amazon PPC keyword for $5/click and win the sale (that’s a high CPC in an aggressive market). You spend $5.
+ $20 in revenue
- $5 ad spend
- $5 product cost
- $3 Amazon referral fee (15% of $20)
- $3.02 Amazon FBA pick and pack fees
= $3.98 in profit
But, if you can reliably get this customer to buy again, your profit becomes $8.98 per unit (no more ad spend: they’re already yours!). The customer’s lifetime value (LTV) = $12.96 (their 1st order + their 2nd order). And if the buy a third time, their LTV is $21.94. Get it?
Here are 3 simple ways to boost your LTV:
(1) AUTOMATE AMAZON CUSTOMER SERVICE.
Install software like Salesbacker or Feedback Genius to send automated Amazon customer service emails. These programs connect to your Seller Central account, you write email templates, and that’s it. Set it and forget it.
(2) PACKAGING INSERTS.
Print a card that goes inside your product packaging. If you followed my advice in Step 1 and charged more, you margins will allow for a nice card. On this card, prominently display a URL to a landing page that collects customer email addresses. Pitch it as a product registry (i.e. “register your product on our website to receive 60-day protection”) or a VIP club (i.e. “sign up for exclusive deals on upcoming products”). Either way, you begin a relationship that boosts LTV. Manage your growing list with software like MailChimp.
(3) SEGUE EMAIL TO SOCIAL.
In your emails to customers acquired through packaging inserts, direct them to your social media pages. Use Snapchat for the 13–25 demo, Instagram (we have a guide on how to get your first 1000 followers) for the 19–40 demo, and Facebook for the 30–65 demo to engage directly. Leave comments, reply 1-to-1, like photos, respond to DM’s.
In conclusion, factories will always win on price.
So don’t compete there. Instead:
- Price high
- Brand like it’s dating
- Boost your LTV
And when it’s time to bring in the big guns, call us. We specialize in boosting sales and reviews for Amazon businesses.