I am a US internet retailer. I buy items from a US corporation and resell those items to US customers.
There are of course other US retailers who buy there items from the same US corporation and also sell to customers in the US.
There is a third situation: There are NON-US internet retailers who buy there items from the same US corporation and sell there items to US customers. These retailers deliberately sell at a LOSS to undercut US retailers.
I have a big problem with this! NON-US retailers who sell to US customers at a deliberate LOSS are hurting the US economy by undercutting real US businesses! Any thoughts on this? Is there any procedure for bringing this up before a NAFTA board. Thank you.
You lost me right there. You are making two assumptions that suggest to me that you will not be successful in this business unless you adjust your perspective a bit.
You said that each US seller is being ‘forced’ to sell at break even or loss. In reality, you aren’t being forced to do anything and while you are playing the victim there is always someone else figuring out an alternative model that will work in this marketplace. If you expect business conditions to remain static, you will never succeed as the most successful business are constantly reinventing their model to suit current circumstances.
You called your competition idiots. Ah, but are these the same idiots who are apparently taking business from you, aren’t they? Are you saying that those people are idiots and yet they are beating you in business? I would hate be outsmarted by an idiot, but the reality is that they are probably pretty smart and not losing money as you suggested.
Don’t pretend you are being forced to do anything.
Label your competition as idiots at your own peril.
Look for ways to compete and win against the competition, and be flexible enough so that you can take advantage of your strengths.
If a company outside the US truly does sell goods bought from a US company at a loss, it will actually benefit the US trade deficit. Are you sure they are actually losing money, though? After all, most online businesses are very cheap to start up, so forcing out competitors by dumping prices makes little sense. It could simply be that they are buying much larger quantities than you are, earning them much larger discounts.
If a company is buying goods legitimately and taking a loss reselling them that’s hardly an issue for trade regulations or boards, that’s simply a [interesting] business decision.
Christian brings up a good point about volume discounts. An alternative is that they’ve done a better job in modeling their long term profit per customer and discovered that they can take a loss on the first sale and make it up over subsequent purchases. I’ve worked with many companies who were able to sustain these sorts of losses while their competition was so focused on huge margins on every sale that they missed the opportunity.
Unless something illegal is going on, like fake products being sold, there’s really nothing wrong with a US company or an overseas company, choosing to lose money. It’s their decision and either they make it work over the long term or they don’t.
Sounds like you need to find a way to compete on more than just straight price.
Actually the WTO takes this kind of thing seriously when it comes to large scale dumping of goods below market value. For example, when one country sells a commodity at a loss in order to push the market in their desired direction that is a serious thing that is absolutely against trade regulations under some circumstances.
But, it’s unlikely that something like that would happen on a small scale or with individual retailers/distributors. It’s not really possible for an organization to sell at a loss at a large scale unless they are counting on some other subsidies or otherwise will benefit long term.
There are plenty of small companies who will sell at a loss as a loss leader, but that’s not illegal and wouldn’t be enough to affect a whole market. Like Ted S said, usually those companies are essentially paying (in the form of a loss) to gain market share, and have a long-term strategy that would accommodate such a plan.
You use the word UNDERCUT in caps, as if that is some sinister thing. But really, you are just competing against a world market. Isn’t your goal to eliminate the ability of other organizations to UNDERCUT you so that you can UNDERCUT them? Rather than feeling spite against competition, I’d spend my time looking for ways to win out.
Winning on price alone usually isn’t a good strategy for a US retailer. Look at service, support, quality, etc. and try to develop a competitive edge.
Fascinating and good to know too. I didn’t think about the broader implications of this on a mass scale. Thanks for correcting me on that!
Thank you for the comments - very good forum. Let me clarify. All of the retailers originally mentioned in my first post buy there items one at a time and have them drop shipped to customers in the US. Does not matter where the retailer is physically located.
No retailer has any stock at all because the US corporation we by from also does the shipping and has major contracts with the shipping companies like UPS etc…A retailer cannot afford retail shipping. It is all drop shipped by the US Corporation to US customers only. The NON-US retailers could in know way afford to have anything imported and then pay huge shipping for individual exportation back in to the US to customers. So they simply do the same thing as the US retailers.
The corporation who does the shipping for the retailers sells there items at the same wholesale price. There is NO discount for quantity and NO quantity shipping ever takes place to a retailer. i.e. all retailers pay the same price for all items - no exceptions and once again it does not matter where the retailer is located.
Because the US Corporation (Supplier) has no MAP (Minimum Advertised Price) policy individual retailers (Sellers) can price there items as low as they want. Since all the suppliers wholesale prices are known and can go no lower we know who is selling at a loss. You can’t say that a seller has a different supplier because with very few exceptions the supplier has complete exclusivity on its products. We can also tell who uses this supplier just by comparison. All the sellers are well known by all the other sellers (they just never ever talk to each other!).
In summary: Each US seller is forced to sell at break even (or loss) because of these idiot NON-US sellers selling at a complete verifiable loss. This causes US sellers to just give up thereby hurting our US economy. Thank you.
Thanks for returning to your post and adding more info… let’s dissect this further.
The only reason to continually undercut would be for lifetime value, which requires profit on a future sale or accompanying service, or to remove other players from the market and that only works if the barrier to getting back in is high enough that the undercutting company can then step up their prices safely. Direct shipping via a third party negates that protection.
A perpetual loss on a business makes no sense and, even with great funding, would eventually end so clearly there is something else afoot for your international competition [Sagewing, I’m sure I’m missing an angle on this one still…]. Could be an accompanying service offering [warranties for example] but if we assume it’s straight product sales…
When a company sells “wholesale” single orders and then direct ships, their prices are just one step away from being a direct sale and therefore made very close to the top of the margin chain. There’s lots of room for reduction between that and raw goods cost. You suspect the prices are the lowest. You suspect they are no alternatives. But reality may be very different… your there are always better terms, discounts for purchase guarantees, direct purchasing [via the actual manufacturer or to their location and thus bypassing import costs] or a host of other routes to get a better price based on volume or willingness to do something you are not doing.
If you haven’t done so yet, you should place a few test orders and see what’s happening with shipments, packaging, product origin, cross selling, value offers, etc. The results may surprise you.
Odds are no matter how they eek out the difference to undercut you their margins are tiny and not something you’d want to compete on in the first place which is why you simply can not be about price when you are a low-chain reseller. You need to find a way to either move up the ladder to where there’s more room between the raw goods cost and the resell cost or sell on value beyond price.
As for the US economy, if everything you suspect turns out to be dead accurate this actually yields some positive upsides. A US Corp is selling product to another company creating revenue here. That company is in turn returning the goods to US consumers who save money giving them more to spend elsewhere and adding cash from a foreign nation at a loss to them with their gross profit returning to the US. Since they remain dependant on the US company I don’t see a long term play that would force a monopoly or prohibit future market interest if they introduced higher prices. That you can’t profit in the middle is an impact to your bottom line and the potential reduction business, but if your model is reselling on price alone it wasn’t viable to start with… eventually someone always figures out how to buy it cheaper.
My business operates in that carefully regulated microcosm of the business world - eBay and has been for 9 years. This world requires that all sellers are created equal (and getting more so every day). Therefore there can be no special programs or advanced business plans. (you can’t even have a link to the outside world) anything that does not relate to selling on eBay is removed. All seller listings conform to a strict set of rules with no exceptions.
This makes for a controlled petri dish that can be distilled down to a few points.
The no 1 driving force for buying on eBay is price - top seller or not it is no 1 especially now in this recession/almost depression. If you have something that is unique OK. But if there are two or more identical items then 90% of the time the lowest price will get the sale.
The products from the supplier I use are saturated throughout eBay. So bad that even the suppliers themselves say that competition between members is ruthless. (and it is) But they do nothing about it like implementing a MAP pricing policy! I understand why from there perspective. As someone said in an earlier post. They are still at the top of their margin chain.
High volume sellers including me get special credits and what do the others do with theirs? You got it - lower there prices some more which ruins it for everyone else. The ones that really anger me are the ones who are not even US Citizens. Our supplier allows anyone to sell. Most of them have no idea what they are doing, so they lower prices all the way to the bottom or below. They don’t understand basic principles of business like establishing value and making some kind of profit! They should not even be selling at all. I am trying to figure out what I can legally do about this?
You are right. I cannot be sure that our supplier is treating every seller equally. I have an “in” in the form of a special representative. But I don’t know how far I can push, if she knows, or is telling me the truth? The rules are published on there website but I think there is some “deviation” going on within there ranks that they may not even know about themselves? Thank you.
eBay. Single items. Drop shipping. And psudo-wholesale. That’s a bad spot and you’re on the wrong end of a market where the guy next to you pays less rent, has less wants and can beat your price just by accepting less margin.
My advice is to stop fixating on how you are going to change a market dynamic and find a better market to sell in. There’s no law [aside from what Sagewing mentioned on countries & mass scale] that prohibits selling at a loss or smaller profit… There are ones against MAP. Commodities on eBay are brutal and as they tell you about growth, truth is it’s often a shrinking channel… people don’t respond to the auction format like they once did.
As far as your competitor, given the facts you’ve provided I’d put good money that it’s either terms they don’t tell you about [to make a poor analogy, a car dealer doesn’t tell you that yesterday’s customer got better rates either] or someone going direct to source. That’s the problem with not being visible to the value chain… you may get the best rate from your vendor but you’re using the website, they may be talking to the CEO.
Then you have the person making the product who sells it to someone else legitimately or not… the counterfeit rates on many types of consumer products, especially CE, cosmetics and clothing are insane.
Finally you have you have the [very common] multi-layered wholesale… As in a company (A) makes a product and sells it to Target (B), Walmart (C) and your guys (D). They mark it up a few points and sell it to you. Target & Walmart need big margins so you can still beat them but you aren’t actually at the true direct price so company E comes in around you, finds company A, negotiates terms with them and beats what D can sell it to you for. At my last job people bought products from middlemen all the time and called up shocked to learn that they were not the “exclusive” supplier, they weren’t even a company we directly knew.
Don’t speculate. Test buy from everyone beating wholesale prices… You’ll discover a lot for very little.
You can always compete on more than price, but that doesn’t mean you can do it in the same way you’ve been operating. Things change.
p.s. no matter what they say, your supplier likes this all… more sales, same terms is more profit for them.
Yea ‘wrong end of a market’ pretty much sums it up.
he business you describe is stuck in a competitive market that is only focused on price, and you have ability to compete on price. You have no other competitive edge in that market, really. So, I would say that you need to either develop a competitive edge other than price OR find anther marketplace, open a non-ebay store, etc.
Last time I checked it is much cheaper to ship and import items into the US than any other country. Why do you think all of our manufacturing is outsourced to other countries and the middle class [the lifeline] of america is gone?
That’s absurd, I have done my fare share of drop shipping and there has always been a performance incentive
There is not a policy because America has no money and almost every big corporation is sucking what it can, while it can, wherever it can, however it can. Even if it means a smaller profit margin.
Or because stated MAP risks violating various local price fixing regulations, triggering consumer activism groups and lawsuits. Hence the move from forced prices to “right to refused to do business”.
Not to mention, a pricing policy only makes sense if the manufacturer is projecting brand and wants to protect key retailers to prop up visibility. For a generic enough line lower priced retailers just mean faster turns and more sales back to them.
You are right, sorry for going off on one of my rants. I myself am feeling the tight squeeze of America’s economy. Outsourcing is a sore issue for me because I honestly believe whoever signed the bill that lowered taxes or tariffs(whatever it was) that made outsourcing from our country so cheap is responsible for today’s economy.
If I remember correctly when it was happening the reason was “but it will make products cheaper and more accessible”. which in some small cases they did I guess.(maybe big cases too idk). Regardless of the current product cost the fact will still remain that if America isn’t working. More specifically if America’s middle class isn’t working because of the lack of manufacturing jobs. And the cost of living keeps going up(including housing) America is…
I cant even think of the word, is there a statement lower than depression or 3rd world country?
Thanks for the follow up. This thread runs the risk of becoming a debate about the US economy or policy and let’s avoid that so it can stay open and developing around the core topics.
That said there’s a great article from Wired mag which touches on several of your, and the OP’s, points around product costs, market competition & value. The gist is that, when you consider management time, shipping costs, opportunity of waiting for product [slow boat from china is 4-6 weeks], product quality issues and ensuing management & returns, building domestically or with N. American providers can be price competitive and therefore an advantage long term for brand reputation.
Of course this was just one company in the CE space’s opinion but if you relate it back to this thread, it’s very possible that the issue here is split shipments somewhere between this “wholesale” provider are what are causing the competition. It is a global market and that wasn’t anyone was or could have stopped… but the implications cuts both ways and can be overstated in value to companies making products or misread by those selling them.
Now that said, I’ve worked for “premium” brands over the past 6 or 7 years and while products came from all over and generally competed against others at 70, 50, even 25% of the cost, we learned how to market, build reputation and secure partnerships that made things about far more than just price. Take up any issues you have on the policy, but don’t let them become a roadblock for your own success… it’s ultimately going to hurt you most if you do.
Back on Topic
I remember just a couple of years ago, buying a boatload of 32GB memory cards from China for dirt cheap. I thought I was going to be rich! Come to find out they were all fake and it cost 30dollars per item to ship back to China.
WTF for a memory card that I only paid $10 dollars for? Luckily after a couple of months worth of negotiations and legal action vs ebay and paypal I received most of money back.
if your competitors are selling fake products it would be easy to see how they are so much cheaper
My supplier seen how much money I was making on eBay and decided they needed in too. Knocking me right out of the market.
Could the competitor actually be a part of this corporation?
I followed a lot of Corporations,LLC’s and entities to prove my case on this, it wasn’t easy
The search engines aren’t being very nice to a lot of people that I know.
Are you certain someone is taking your sales and it’s not just a lack of traffic? When did traffic fall? Last month between the 6th and 18th?
Thats when my spam sites dropped, not saying your site is spam, but maybe how it was linked is. (spam is such a nasty word with so many meanings)
the sites that were directly linked with bad tactics dropped near the 6th and the sites that had good direct links but bad links pointing towards my good direct ones fell off about the 17th
You are welcome to your opinion but the above statement will be hard to defend. There is no evidence that the US would have fared well if we had ignored the global market and forced production/manufacturing to remain here in the US simply for the sake of saving jobs. Historically that approach doesn’t have good results in the US it almost certainly would have hurt the economy significantly.
Again there is not much to support that statement. A trashed economy, even with a worst case scenario, doesn’t necessarily put us into a depression let alone make us a 3rd world country. Even if the US were to default on it’s debt, which is unlikely, it seems more feasible that we’d see an Argentina style scenario rather than a Zimbabwe type scenario.
MAP policy has it’s pro’s, con’s, and legal constraints. Had to do some research on it because at one time I had eight suppliers but now I am down to two and one of them does have a MAP policy. The other one (who causes all the problems) does not. When I did have eight. One of them was in the super hot LCD/Plasma TV market. I tried it as an experiment - (stay out of the hot markets!). Competition was 10 times worst and I could not understand how sellers could sell supposedly brand new identical items for 50% wholesale? I gave up just in time for the recession. Somebody much smarter than me might be able to figure that mess out?
The post someplace above was right about a performance incentive and I touched on that in an earlier post. We high volume sellers do get an incentive but like I said they use their incentive to lower their prices further? It is a never ending downward spiral effect. In the competitions eyes more incentive means they can lower prices which is not the intent of the incentive but of course abuse runs rampant.
It is true that the supplier does not care because they are at the top of there margin and would not be able to give incentives if they were not. All they care about is how much product goes out the door and they have created a machine to do it in the guise of online sellers. They even have there own website marketing company that sells websites to there members for $1000’s. I did that back in 03 and I had to use eBay profit to pay it back. Then being new to websites in general they never told us to maintain ownership of our domain so I just let it go. An auction house took it of course and when I wanted it back in 07 I had to pay $400 to get my own domain back!
Of course the internet is glutted with these websites all selling the same thing. There owners being sucked in and having no idea how it all works? They have to pay bigger bucks to learn. The learning is dished out very slowly so owners don’t catch on to fast and realize what is going on.
Back to eBay. This is where I would want to see a MAP policy. It would create a barrier at the bottom somewhere above cost so we could at least make something. This is where other facets of a sellers business would be put in to play. It would make sellers think and implement other strategies as mentioned an an earlier post resulting in true business competition. Thank you.
We high volume sellers do get an incentive but like I said they use their incentive to lower their prices further?
I’m sorry, but this contradicts what you wrote before. Earlier, you wrote that they are selling at a loss. Now you write that they are using the volume discount they do get to lower their retail prices. This would still give them a profit margin. Also, how is this different from, say, Walmart using their much lower wholesale costs to sell their good cheaper than what you pay in a mom and pop grocery store? What you are describing is not only fair, but also fundamentally a very American business style.
You have chosen to add your volume discount to your margin, while your competitor have chosen to lower retail prices. This will obviously give your competitor an advantage. I can understand that you’re frustrated that your sales are going down. In stead of spending time bemoaning the fact that your business model is no longer competitive, I would suggest you either work on changing it to make it competitive, or to find a different niche.
Well - based on all available information I have they are selling at a loss. I am assuming that all sellers are being treated equally being I am just as big as they are . But it could be that the supplier gives greater incentives to one seller over another? That would mean they habitually lie every time I talk to them on the phone. That would be grossly unfair in my book but I guess that is the American way too - isn’t it? to stab each other in the back! I am former military from a different time I guess - when being American meant something?:mad: