Why you must compete on price
for when you're selling products on Amazon
Hey, it's Beau Crabill here
and I get kinda questioned all the time
People try to argue with me
and I've seen consultants and other people who sell products online
either it being physical or digital or info or
any type of knick-knacks, whatever you wanna call it, right?
And there's people out there who think that
you don't need to compete on price
You know, just be the highest person in the room
You know, be the highest price
be, you know, luxury, be all this stuff
And, just, it's gonna be way more profitable
There's many issues with that
If you look at the biggest company on the planet
Earth, which is Walmart, what do they do?
All they do is compete on price
The reason I'm making this video
is I actually got on a call with a granola brand
They were out in Canada
They're wanting to pay me
to practically take over their Amazon business
And we had to say no to them
They were
See, this is where a lot of issues happen
And this is why, you're gonna understand this in this video
why you have to compete on price
And I'm not saying that you need to be, extremely low-ticket
I sell products in my Amazon store that are $6
up to literally $2,000, $3,000
We sell laptops, TVs, cameras
Microsoft, you know, Surfaces that are very high-end
thousands of dollars
So I'm not saying, don't sell high-ticket
I'm saying, compete on price
If you're selling something for $3,000
you better be the best, or be able
to be able to compete on price
I was just reading the book called Why Pricing Matters
Or pricing, it's something about pricing
A really good book by some two
It was by two PhDs, some really
People from like, Pennsylvania
But anyway, they talk about all the types of pricing
Which, there's like, consumer pricing
which is practically what like, consumers are willing to pay
There's competitive-based pricing, which is practically like, okay
our competitors sell at $20, so we're gonna price near that
up or down a little bit
There's also cost-plus pricing where, okay
we manufacture x-dollars
and we're only gonna make sure that we're profitable by x%
so we're gonna be at least 20% above
Most people in the retail business
price their products off of competitive pricing
Now, the reason why, if you're selling on Amazon
that you 100% must be able to compete on price
So practically think that
all the ways of pricing, you are in the competitive pricing
That whatever that you sell
Let's say you're selling
this random gadget right here, which is to charge your phone
you must be able to be competitive
And if you can be the lowest price
you're going to be able to make the most amount of money
People who disagree with me
Like, well Beau, you know, look at Tesla
look at all these other companies
One, I don't know if I wanna be Elon Musk
But then two, it's like, they're also not profitable
Again, so, I was talking to a granola company
They came to us, I got on the phone with him
It's like a 40-minute conversation, and I was checking them out
They were selling for $10.99
You can probably check them out if you're in Canada
They were selling directly to Amazon and through Vendor Central
They weren't being too profitable
And they wanted to pay me
to help and improve their Amazon business and get them
you know, fully up and running profitable
And I had to tell 'em no because he was not able to compete on price
His cost to manufacture the granola, which
I don't really know what he meant by that
I think he
It's like, I don't know how your cost is up
I think he gets the goods from somewhere then just
I think, really what he does is really pack the stuff up
His cost $5.50 for a 300-gram thing of a granola
Which, I was going over the conversation
I don't know what 300 grams is
I'm American, I'm not Canadian
But 300 grams of granola, his cost is $5.50
Shipping it to Amazon ends up being $6
So he's selling it for $10.99 on Amazon
At that price, he isn't profitable
And I was like, okay, well we need to be around
I said, for us to work with you
we need to be at $17 to be profitable on this granola
And he's like, how the heck are we gonna do that?
I was like, well, that's the only way
He's like, well, no one's gonna buy from there
I was like, you're probably right, let me look at the research
Then after I got on a call with him, I was like
you know, we can't sell this thing
We can't help you out because you can't compete on price
So, how, when you're operating your Amazon business
what's the ways you can start to compete on price?
So I taught
Like, you may be confused
You're like, Beau, but I heard you say that
you make a lot of profit selling higher-ticket products
Which, I do
We sell, you know, Xbox consoles that are a couple hundred dollars
We sell laptops, TVs, you name it
Generators are pretty, higher dollar amount
But most consumers, especially in America
This could be different from whatever country that you're in
but most consumers in America
the biggest factor that they kind of
think about when they're buying something is price
It can be in regards to buying a car
it can be in regards to buying a $4 scarf
it could be buying a sandwich, it could be buying an engagement ring
it could be buying whatever
Most people base things off of price
Like, that's some sort of factor
And with Amazon, with the online space
all what really matters at the end of the day is like, conversions
So the more sales you can get, the higher
you know, the more profit you can overall make with your goods
So because of that, when you're saying, you know
Beau, screw pricing
Pricing doesn't matter, sell it for more
One, I don't think it's ethical
I don't think you're providing a value
And I think for the long-term, is that if you
can't provide some sort of value to the customer
then you're probably not gonna be in business for much long
You know, it's kinda interesting
But anyway, the second thing is
you're going to miss out on a huge percentage of people
So if the market changes at all
you're gonna be left out to dry
So why does competing on price work so well
and why you have to do it when you're selling on Amazon?
Let's take, for example, this little thing right here
Let's say my cost is $10, and I'm selling it to an electronics store
And in my electronics store, let's say, I'm selling it for $18
So you'd think that my profit is $8
Now, the issue with brick and mortar stores
And this is why, the reason why selling on Amazon
and online work so well is because we can compete on price
is because our expenses our much lower
That's one of the #1 ways to actually really
I would say, to compete in price
is keep your expenses very low
Then also being with the right suppliers
But anyway, let's say they're selling this for $18
So their gross profit
before like, merchant account fees and employees, all this stuff
will be $8
However, they're gonna have some pretty big expenses
that better cover that
Let's say they're paying $2,000 for lease
Well, if you look at that numbers
now they need to be selling, you know, hundreds and hundreds of these
to be able to make a profit after that lease
Then let's say you add in a couple thousand dollars for just employees
Well now, you need to sell hundreds and hundreds more of these
Which, obviously they're gonna have different products in that store
So practically, what ends up being is that most retail stores
what they base their profits off of is revenue per square foot
That's where they actually price their goods
They go off of what's gonna bring in the most amount of revenue
per square foot
And that's a physical brick and mortar store
Because if their expenses per square foot is $50 a month
based off of employees, rent, warehouse, all these things
cost of inventory
Then as long as they produce $51, then they're in the green
So now, the beautiful thing about selling on Amazon
is we don't have all those expenses that cost us
to be profitable per square foot because
I'm running my Amazon business from my home
Something I love about it is I don't need to be going
I don't need to go sign a lease and things like that
so my expenses are extremely low for that
So now, what can you do to, one, be able to compete on price
One, be in an online space, and you're not
and you're reducing your expenses as low as possible
What that is gonna look like is going to be about
making sure you're shipping directly to Amazon
You're not paying extra for whatever random things
for prepping and things like that
But then the second thing is gonna matter the most
is having the right suppliers
If you wanna learn how to find the right suppliers
check out my Online Retail Mastery program
where I show you 10 different methods for finding suppliers
The links will be down below in the description
So, with that, with finding the right suppliers
the first thing that I always do is
if I have any type of supplier
Be an electronics supplier, be a refrigerator supplier
be a light supplier, be a supplement
whatever it is, right?
I wanna find competitive suppliers
I actually just, we just got in contact
or we're working with an eye supplement brand right now
And it was funny, they were working with an Amazon agency
Their cost
This is why just
Like, the old versus the new of like
old business owners, things like that
they just don't understand the Amazon space
is you don't have to lose money
Like, a lot of people, the book I'm reading about
Like, if you look at Tesla, you know, they're okay on losing
money on cars right now because they know that in the future
they're going to later be profitable
In the book, Why Pricing Matters
they talk about how another way to price your goods
in the cost-plus method
So like, what's your cost plus a margin
is you could also project saying, okay, well
our cost off of making one car
or let's say, one product is $10
and we sell if for $13 to make a little profit
But if we can produce 10,000, then our cost is $5
So that's kinda what Tesla's done
and why they've been able to kind of, you know, do that
But anyway, what I was getting at is we're working
we're now working with this like, eye vitamin
I actually have really bad eyesight, which is kinda funny
But anyway, is, they were selling
their product for like, $10.50
Their cost was $11
So after Amazon fees, they're losing like
$4 every time they sold this product
They were not getting many sales
And I'm like, why are you doing that?
Like, you have to be in business, your cost is
You know, we can probably help you get your cost
and it's pretty expensive for, you know, a vitamin
But you need to be able to be at the right price
So it's kind of a fine medium, is you need to be profitable
So if you create up your own brand, that's great
Be profitable, but you must be able to compete on price
Which, again, if you're in my business model
all what that's gonna relate to is having
the right competitive suppliers
and just so you can keep it very transparent
And if you're working with 4, 5 different suppliers
and, you know, that's gonna help you a lot better to figure out
what's the right price for a specific product
compared to just working with one of 'em
Because now, once you can lower your cost
your ROI is gonna go up higher than you lower
So anyway, to give you a math example
let's say you buy a product for $10
and after all fees and everything, you make $2
So, that's a 20% ROI
But now, if your cost is $9, you're gonna make $3
$3 divided by $9 is a 33% ROI
So your ROI went from 20% to 33%
but your cost only went down 10%
So that's why pricing matters so much
because the lower you can get your cost
Even it being like, 10% lower, you can see in that example
A 10% lower cost is a 13% extra return on investment
So anyway, competing on price, you gotta do it
A lot of people think it's not smart to do
Do you have to be the lowest price all the time?
No, but you wanna be competitive
Like, you can't be the 5th, 6th, 7th, 8th in price
That's why I never suggest doing dropshipping
I never suggest doing arbitrage 'cause it can be short-term
You're not gonna be able to go sell enough units
you're not gonna be able to go sell the right products
because you're competing on, I don't know, convenience?
Or, I don't even know what the heck people are competing on 'cause
at the end of the day, there's a lot of buyers out there
and recessions happen
You know, people, even more focused on price than anything else, so
That's all I gotta say, is if you wanna learn how to find suppliers
or learn how to start up your Amazon business
check out the links in my description
They're, I have an Amazon course that have
hundreds and hundreds of successful students, so check that out
If you have any questions at all, reach out to me
Comment down below in this video, subscribe to this channel
And have a great day, Amazon sellers
or soon-to-be Amazon sellers