How Can Others Sell Cheaper Than Me?

This is a question that drop ship retailers pose all the time.  “My supplier said I should charge full MSRP for my items.  But I see people all over the place selling for much less than me.  Why?”

Do They Stock?

Well the most obvious answer is they could be stocking the product.  While drop shipping may be our preferred method of product fulfillment, we all know that better prices can be obtained by buying in bulk and stocking the product yourself.  Remember however that stocking isn’t the be-all end-all solution.  Stocking brings on a whole new list of challenges, such as storage, paying someone to pick and pack, and property taxes.

Low Overhead

Your competitor could also have much lower overhead.  Does their website look like they made it for free?  Do they only have an email address for contact (i.e. no customer service toll free number?).  All of these are ways to keep a businesses expenses down, so he can afford to sell cheaper than you.  But, doesn’t that kind of give you an idea of how well they treat their customers?

Are They A Start-up?

They may be the new kid on the block.  Arguably, when a business just starts out, price is all they’ve got.  They’ve got no track record, no online reviews, and no loyal customers.  Once a company has been around a little while, and some of these things are in place, they should be able to raise prices and take advantage of their hard work.

Different Strategies

They may just have a different scheme than you.  Their overhead is low, they’ve got no additional mouths to feed, and they’re able to get free rent in their mother’s basement.  For whatever reason, they’re comfortable with 10% margins, rather than 30%.  Maybe they use those drop ship products as loss leaders, and really make some hefty margins on other items on their site.  It’s easy for us to think that every other retailer out there is in the same boat that we are, but that often is not the case.

Be Careful

With all that being said, you’ve got to be careful and find a happy medium.  Don’t price yourself out of the market.  There are plenty of things you can do to justify your prices, but being too high can make all of that a moot point.

Conclusion

The pricing game can be evil, cut-throat and dirty.  Nobody wins when a pricing war is fought.  While the lowest price can be a way to get quick sales, it generally isn’t a great long-term strategy.  There has got to be other reasons people buy from you, whether it’ a superior customer experience, excellent customer service, or unique product selection.  Without any of these other things, pricing wears out fast.

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