question about an online business -need some input

Discussion in 'Growing and Managing a Business' started by minnie, May 18, 2008.

  1. minnie

    minnie
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    I have an online business targeted at a foreign country. The business is registered in US.
    When I started this business I was the only one in that foreign market selling some beautiful and unique products (the potential customers would not have been able to buy the products at a decent price until I came into play) So, no competitors. This business is about 2 months old and during this time I did not have that many sales, but I expected it. During this time, I talked to my potential customers, giving them confidence that it is safe to buy online with a credit card (I know this may sound as a joke, but they were afraid of making purchase), I assured them that we're serious and hardworking.
    My prices are not that high and comparable to those in that country for the products that I am selling.

    So, now another business comes into picture. The same story- based in US, same foreign market. Their prices are way below even the market price here in US. I am selling my products at the prices that everyone in US sells them, except I ship to that particular country.
    Now, I don't know what to do.

    If I lower my prices to match the prices of my competitor, I would be selling these products way below their US market value . It is not profitable - maybe I would have a 10% profit if I am selling at the prices this competitor sells them. I figured that if these big business in US are selling the products at a certain price, that price is the market value. The market in US is way healthier than in that country and the potential customers base is maybe 95% higher than in this foreign country.

    It is obvious that they probably want to drive me out of the business, but as I said, I did not set my expectations too high in terms of profit. At this point, I don't really care if they are taking my sales, but at the same time, I feel that two months were wasted. Basically, they work for free. For me, it wasn't free, I have an inventory - they don't, I tried to create a personal relationship with the potential customers - posted a blog, pictures of myself and so on.

    So, my question is what do I do? I don't really know much about this competitor - I know that they don't have anything in their inventory - not that this would matter that much, but time is critical in my opinion when you ship internationally. For me, I would not trust them, their address is a PO Box address so I don't know even if this business is legitimate. However, they put some hard work on creating their website.

    My first thoughts were:
    - lower the prices and match their prices. Almost no profit and to be honest for an extra $200 it's not really worth it.
    - trash them on the internet :))
    - offer free shipping- it's going to be expensive and I maintain my prices. Basically, I would get to the same profit they're making. Although, I would not call it a profit.
    - offer some free products.

    My advantages at this point: good SEO, they are not even indexed in google - but they're paying for adwords, some customers that I talked to and I hope we will close the deal.
    Any other suggestions?
    Sorry for the long post:)
     
  2. Nazreen

    Nazreen
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    First of all, welcome to the Business Advice Forums minnie. Enjoy your stay here.

    Now back to the problem you have. The most important advice I can give you is that you don't rush and lower your prices yet. This competition of yours is a total unknown since they're not even ranked in Google. They might be legit or maybe they're scams.

    So the first thing you need to do is to learn everything you need to know about them. You must investigate if they're legit or not. If you've found out that they're not legit, you should report them to the authorities and to google. You should be the one to report them because they might drag your business down when they're a scam - people would be afraid that your business might be a scam too.

    If you've found out that they're legit, then maybe they're just doing this to gain customers. Usually businesses give free products and at a discount when they've setup their business for this reason. You could also do the same and sell at their price so you'll be able to compete.

    If they continue to sell at that low price for the next months, then you have a really big problem there. They must be getting their products at a lower price than yours from a wholesaler. If you're getting your products from a middleman or retailer, then you'll be paying much higher for your products. You must get your products from a wholesaler too!
     
  3. Hurbel2k

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    You target a whole country? I doubt that one competitor can kill Your business, unless You sell, lets say, airplanes or power plants or something that is sold in small quantities.

    That being said, distinguish Yourself. Your competitor is the cheap guy? Be the quality guy! If You go the personal relationship road with Your customers You will be looking for quality products anyway.

    The other thing is marketing. Keep Your website more prominent than Your competitors. Make contacts with people who are selling the same stuff as You, however in a different country. Meet them for a dinner and exchange ideas.
     
  4. minnie

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    Thank your for your answers.

    I am trying to answer all the questions to the best of my knowledge.

    I am not sure if they're legit, I contacted them for some additional information and they replied very quickly. The format of their email was the same format that I used, so probably they contacted me before. This is not the only thing they copied from my business. I have a phone number for that country that I redirect to my cell phone here. They have that too. I opened a bank account in that country, so people would have more options to pay. They did the same thing.
    If they're legit or not - I don't know. They spent some time programming their website and the design of their website is very attractive. So, probably, they are legit. Unless I place an order with them to see if they're sending my products:). They only have an e-mail address for the contact, so no name, no address, except that PO Box.

    Maybe they're doing it to gain customers. However, in this type of business you can only expect that one customer makes one purchase and that's it. The customers buys the products and never returns.

    They are getting the products at a wholesale price. I am doing the same. There are only a couple of wholesalers out there. The wholesalers are only selling the products that they're manufacturing. One will never find two wholesalers to sell the same product. They found a couple of wholesalers, I found more. However, I still have few products, because I stock up my items. Their average markup price is only 20%. In my case, the average sale is around $200-$300, if you're lucky. Imagine the profit, when you have about 10 sales a month. And then the work - package everything, take the car, drive to the postal office, send the package, drive home. If I were to sell the products at the same price, the profit would not be worth it. My prices I think they're fair - they're the same as the other US retailers that sell these products. And for that foreign country, I would have considered them cheap. Also, this type of business only works for a few months in that country - may through october (at most).

    I target a whole country, but within that country only a small group of people with the same interest. The competitor is the cheap guy but we're selling the same products. I can only distinguish the products if I manufacture them. In this case, I would have opened a business in US where the market is so dynamic.

    The last idea, about meeting other people is very good. I will look into that even though I don't know if I am able to find any.

    Another idea is to open this business in that country. People would then be able to come, see the products and buy. The work would still be a lot, but the country is still corrupt and you have to bribe people to let you do an honest business. It takes about 2-3 weeks to be able to open a business. Does it worth? I honestly don't know.

    Another thing that I am considering is lower my prices, I will not stock anything, put the same products that they have at the same price and hope that since I was in the business for more time people will come buy from me. But what do you think, is it worth it?

    Or, I will let the people decide - evidently they will send the products after they have them - usually in 3-4 days or more. And then, there's that transit shipping time. I send the products faster - I had a few customers calling me and they said they need the products in one week. I was able to help them and make the sale since I keep everything in stock.

    We'll wait and see. If you have any other suggestions, I am very open to them.
     
    #4 minnie, May 18, 2008
    Last edited: May 18, 2008
  5. minnie

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    Another thing, my mom tells me that they're laundering money. Maybe they are and in this case I surely cannot compete with them.
     
  6. DEADMAN

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    I'm not gonna give a long suggestion but what I would like to tell is that, it takes time for everything to get setup, and some website takes market so fast that it's really unknown how the website took reputation in the market that fast, and some takes little time. But the main thing, how you manage the website, proper design, easy client interface and immediate support 24/7. However Marketing is mus, maybe you lacked advertising it. More often I see some website are simple, but they sell alot and make profit.
     
  7. minnie

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    You made some good points.
    It's true that some businesses start off very quickly and are very successful.
    In my opinion, until now, considering the market that I know and follow every day (websites, blogs and other means) I would say that it was successful.
    Customer service in my opinion was very good - how many small businesses with 2 people working on it are willing to answer phone calls 24/7? I had calls at 3 AM. Also, considering that in the same time I am a PhD student, time is crucial for me.
    Oh, well, it was a nice dream.
     
  8. Fergal

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    Hi Minnie, welcome to Business Advice Forum.Are there other ways, besides price, that you can differentiate yourself from the compeition. Can you offer better quality, a better range of products or better customer care?
     
  9. minnie

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    Yes, this is what I am trying to do in the next few days. It's going to take some work, but hey, they really weren't fair.
    - I will change the design of the website - until now it was OK, but not that modern.
    - I will add some products to my website - some that they have and they put a maximum price on those to make profit. However, I know the market better than they do and I will try to add only products that will sell
    - Be better - vary the range of products. I am in the process of rethinking all the categories.
    - Customer care - I will give my best anytime.
    - I have two other ideas to increase my sales, but it's a public forum and maybe they're reading.

    Thank you for all your answers, if you have anything else let me know. I will keep you posted.

    PS: I know I let my emotions show in these posts - they varied from pessimistic to more optimistic, but I was really upset. You all pointed some interesting things. I will put them in practice.
     
  10. Nazreen

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    I think the best thing that you can do is to always be ahead of your competitors. As you've indicated, your competition might just be imitating your business. If that's the case, then you have the advantage. And yes, adding more stuff to your products' list should be one way of doing that.

    I have to congratulate you when you said that you know that country's market better than they do. Knowing the battlefield is one of the best advantages that you can have against your enemies. But you have to be always looking though. The battlefield (or market) can change from time to time. So you have to be wary of these market changes.

    By the way, how do you ship your products? Is the shipping cost already included in the final price?
     
  11. minnie

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    The customers have the option to choose the method of shipping (USPS express mail or UPS). I had customers who chose UPS because they were in a rush. Also, the cost of shipping is displayed on the order page and the customer pays for the products and the shipping. One time I made a mistake and I entered in the database a wrong weight for a certain item. I paid for the shipping cost difference, because I know that customer service is key.
    Anyway, I'm done updating the website - I changed the layout and it's very modern in my opinion. I added a free product with every purchase.

    I enjoy this forum. Writing all these ideas pointed me in some direction. Otherwise, I would still be wondering what to do. Thank you, all! I will keep you posted.
     
    #11 minnie, May 19, 2008
    Last edited: May 19, 2008
  12. Nazreen

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    Ok minnie. Best of luck!

    By the way, the reason I asked about shipping is because you can actually use this as a marketing tool too. You can use shipping in several ways to grab the attention of prospective buyers or to turn your old and first-time customers into repeat customers.

    Here are some suggestions.
    - Offer free shipping
    - Buy in bulk and get free shipping (like buy two products and get free shipping)
    - Offer free shipping on reorders or orders greater than a specific amount
    - Fixed price shipping for all your products
    - etc.
     
  13. minnie

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    Thanks for the suggestion!I just finished implementing it. Flat rate shipping for orders over a certain amount.
    We'll see what happens.
     
  14. Nazreen

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    You're very much welcome minnie. Hope everything will work out well in your business.

    By the way, it would be good if you can also share a little bit of your business experiences with the Business Advice Forum community. In that way, members of the BAF community will also learn from your experiences too.
     
  15. minnie

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    I will let you know. I have to wait for a while to see the response of my "marketing" campaign.
     
  16. minnie

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    OK. I have some news. I found out the name of the "owner". I googled his name and among the results I got a police report regarding someone with that name. The police report said something about a credit card fraud. Is it possible that someone would put that much work into a website just for this? I mean, the average transaction is around $300 or less, how many scams can one get away with it? Hmm, I would like to know more about this but I don't know how.
     
  17. Fergal

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    One thing you might consider is putting a section on your website with a list of questions potential customers should ask before purchasing your type of product. Obviously you will include questions that you can answer better than your competition. Example questions might include;
    • What's the delivery time?
    • Is there a guarantee?
    • Can you trust the seller?
    • etc.
    In this way if a potential customer visits both your sites you will be helping to sway them so that they look at yours more favourably.
     
  18. Nazreen

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    Another thing is to ask your old customers to leave a favorable feedback on your site. They might also do this by putting in false feedbacks in their website but you should do better if you put your client's business logos in with the feedbacks.

    By the way, if you have found the owner's name to be involved in a credit card fraud, you can actually report this to the authorities saying that you suspect that it might be the same person as your competition. Let the authorities handle things from there. In the U.S., I believe this should be reported to the Federal Trade Commission. Please correct me if I'm wrong in this.
     
  19. minnie

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    Chapeau bas, as the French would put it, or I applaud you.

    Very good advices. Fergal, I have alread a FAQ section, but when I read your questions I thought that these are the ones a potential customer should see before.

    Nazreen, that's a good point to start. You know what I'm really amazed: Usually, a woman might think about this business and start it, maybe with the support of her husband. At least, I read a little bit about the history of the big companies here in US, and every single one was started by a woman. On one hand you have all these companies started by these wonderful women, and on the other hand I have this competition started by a guy. For me, this is another red flag.
    I will definitely look into FTC and take it from there.
     
  20. Nazreen

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    Okay minnie, let us know of any updates. Your case is quite interesting and I'm quite intrigued.

    By the way, it doesn't matter if your competitor is started by a guy or a woman. The only thing that matters and the thing you should concentrate upon, is the success of your company.
     
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