Using Competitor To Your Advantage
When operating an eCommerce site, you're very unlikely to be the only website offering a particular product
. If you find your marketplace gets very competitive, working with your competition can be a preferred option than trying to battle against them.Selling shoes on the internet has become one of the most competitive areas around. Large retailers are now focusing heavily on this area, and high-street chains also increasing their profile on the internet, it is a very tough place to make money.
After witnessing increasing competition and having to constantly reduce our pricing, it was becoming increasingly difficult to grow our business and show a healthy profit. Many shoes were being retailed close to the wholesale price we were paying for them and margins were becoming increasingly tight.
As well as this, the range of products that needed to be kept in stock to provide customers sufficient choice meant that cashflow was always a problem. If a shoe didn't sell quickly, it needed to be discounted, reducing our margins further.
Stocking new brands would also be an expensive exercise as we'd have to commit thousands of pounds to get a decent range, with no guarantee that anything would sell.
After looking long and hard at our business, I realised that the main issue we had was that of stock - we didn't have the financial ability to be able to hold the stock levels needed to attract customers, so found ourselves in the situation where we were paying for visitors to our site, but were losing a lot of business as we often didn't have the style/size they wanted.
I decided therefore that tough decisions needed to be made; a few of our brands were working well, so we'd keep these. Everything else would be discontinued and not replaced by new stock.
Instead, we'd become an affiliate and partner with several other online retailers, offering a selection of their products on our site.
Customers would see a product listed on our site. If we have this in stock, the Buy button would go through our checkout process. However, if this is not an item we have, the customer sees a 'Buy now from xxxx' link instead. When clicking it, they're taken directly to the product page on the merchant site.
This new direction has meant we can add almost any brand to our site now at no upfront cost to us. We've also been able to make very large cost savings in terms of staffing, warehouse and IT costs, yet also provide our customer base with a much larger range of products.
By concentrating on a small number of merchant sites, we've been able to negotiate better than normal commission rates, and have established relationships that we hope will become long-term.
The new strategy means we're already on course to better profits for last year, yet hold far less inventory. As we move forward, we can concentrate on our site profile, rather than constantly having to juggle stock levels.
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