Cash Flow is King: Edging Out the Competition as an E-Commerce Reseller
The Competition is Stiff
E-commerce is booming, but with heavy-hitters like Amazon, Alibaba, and others dominating the space, resellers are often left wondering how they can be competitive. You need a leg up if you want to stand a chance in a market that is highly saturated with other sellers, promoting the same products that you are.
At Plastiq, we studied how 40,000 e-commerce retailers leverage the cash flow provided by paying for inventory on credit. Here are three secrets we discovered that will help you become an e-commerce reselling powerhouse.
3 Ways to Succeed
1. Start by honing in on your niche
Identify a¬† specific type of product to sell that the market needs, but within a product category that doesn’t already feel oversaturated. Testing, iterating and diversifying your sourcing is key here.¬† Starting small with low quantity lot purchases is a wise choice while you’re trying to find your selling niche. While this method may seem slow, it can allow you to experiment with selling a variety of products individually, before you invest in a large inventory of products that are too difficult to sell, store, and ship
How Plastiq gives you an edge: Use 60 days of cash float to test new niches with small orders and remain liquid to jump on the opportunities that rise to the top. Always be testing new products.
2. Sell popular products lower than the competition
Arbitrarily dropping prices to outgun the competition usually ends the same way.¬† Every competitor races to the bottom with only one company left standing. That remaining company ends up with razor thin margins and commodity pricing, with no consideration for product differentiation or branding. But what if you could still use this same aggressive discounting strategy, but in a smarter way.
Instead of eating into your profit margin to sustain customer discounting, you could just as easily bring down your supplier costs. Growing your margins on both sides of the transaction is an easy way to give you more flexibility in your discounting strategy and increase your bottom line.
How Plastiq gives you an edge: Negotiate early pay discounts (i.e. 2/10 Net 30) with suppliers and use credit card cash back rewards to eat up some of the lost margin. And always have cash and/or credit on hand to snap up special deals before the competition.
3. Focus on selling high-margin products
Pull out those business school textbooks, because we’re going back to class on this one.¬† Remember the four quadrants of product pricing and marketing?
To grow your e-commerce business, you will want to start by selling high-quality, high-margin products. Selling high-quality, low-margin products will limit the growth trajectory of your business. For example, if you’re selling high-quality permanent markers, your customers may love them, but you will only be making $1 – $2 per sale. You should consider how much it would cost to obtain each item and perform a cost analysis for things like labeling, packaging, shipping, and warehousing. You’ll have a better understanding of how to properly plan your inventory based on your budget if you take this approach.
How Plastiq gives you an edge: Early pay discounts, special partner fee discounts, tax write offs for finance charges and credit card cash back all contribute to increased profit margins. On-time payments with suppliers can build relationships that help you edge out competitors for the best priced inventory, and increased cash flow means you can move fast on great deals before anyone else even knows about them.
While the landscape is highly competitive for e-commerce businesses, it is possible to stand out as a reseller. Strategies aren’t one-size-fits-all. You should consider all of the factors that apply to your business (e.g. cost, niche, goal, etc.) when deciding which strategies to grow your business.