Tuesday, November 24, 2015

Turnover Tuesdays - Competing Against Amazon

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

Week 1 - First attempt at reselling
Week 2 - My second straight fail
Week 3 - My iPad mini collection
Week 4 - Bed Bath and Beyond
Week 5 - An iPad Idea for Your Staples Gift Card Collection

Let's discuss that dreaded topic.  When you have to compete with Amazon.  There are two scenarios.  The first is when Amazon is selling something that you want to sell but you haven't bought yet.  Basically, unless you have wonderful margins, just don't do it.  Not worth the headache.

I want to focus more on the case where your inventory is already at Amazon and you didn't realize Amazon sells the item or they started selling after you bought.  That's the worst!

The reason we love iPads so much is because they sell fast and Amazon won't sell them.  Makes for good profits.

I Hate Amazon

I love selling on Amazon but I hate when Amazon sells on Amazon.  They usually have a very impressive inventory and don't mind cutting prices.  You cut the price, they cut right back to your price.   Guess who gets the buy box the vast majority of the time?

Fast Moving Item - Low or High Inventory

If I have an item that moves really fast and you don't have much of it, what do you do?  I will usually match Amazon's price for a while and see how that works.  Usually I will get a couple of sales randomly (sometimes people actually care if you are charging sales tax and sometimes you will randomly get the Buy Box).

In addition, when you have a popular item, Amazon sometimes runs out of stock.  If that happens, jack up your price.  It's like you're selling iPads again.  Just make sure to sell before they get it back in stock!

Slow Moving Item - High Inventory
I've had scenarios where I've estimated 100% or even 300% profits on an item and begun selling them, to the point where I called the company to try and buy wholesale.  Thankfully that didn't work out.  I sold a few and I was looking for more.  Bam!  Amazon starts selling.  They undercut me by 50%!

Now, the only thing that's nice about Amazon is that they have an autopricer algorithm most of the time.  They will lower their price to match yours up until a certain point.  You can keep lowering your price to see how low they will go to match.

Sometimes you think you are in the clear since they didn't lower with you and then one week later after no sales, they lower again.  Oh I hate Amazon selling stuff!

What can you do?

1) Keep cutting until Amazon doesn't cut with you.  Eventually you will sell, but at not nearly the profits you thought
2) Match Amazon and wait.  Can take a long time and you might start paying Storage fees
3) Have your inventory removed and return it.  Not a bad idea.
4) Secret option number 4.  Match Amazon at a low price.  Hope they go out of stock faster and then jack up your prices.  Never done this successfully.

In my scenario, Amazon was willing to cut to almost 33% of their original price.  How do you deal with that?  At that price they can have the sale

Real Life Scenario from a Friend

This floor mat was selling for about $120 on Amazon with a 50k rank.  The item could be bought for $70.  There was a $20 amazon fee at $120.  The return should have been close to 20-25% on just the sale.

The problem is that Amazon was selling it too.  My friend waited and waited and no sales. He started to cut and then cut more.  Amazon kept matching him.  They went all the way down to $65 with him.   Then he waited, trying to get Amazon to lose inventory. Nothing doing.

In his words, "So I finally undercut Amazon, Took me another month to sell 3 items.

You may be patient and willing to play the long game.  Usually Amazon plays the longer game.


Try to avoid selling when Amazon sells.  If you do go for it, make sure it is a popular item. Otherwise go home and cry.