Amazon Versus Walmart. Who will emerge victorious?

To understand why Walmart survives while at the same time Amazon thrives you must look at the basic business models of each shopping experience.

Walmart is a traditional mass merchandise retailer. Walmart offers products for sale and hopes to make a profit on everything they sell. They also rely on the shoppers choosing to pick up additional items while they are in the store so the net shopping cart value can be quite high in many cases.

They have marketed themselves as having a large selection and generally low everyday prices. Shoppers may visit a Walmart store because they want to see the merchandise, try it on, touch the fabric, read the instructions on the box, or ask the department merchandiser a question. There is a lot of psychology involved in a Walmart shopping experience including the store layout and product placement. Thru marketing, they have convinced their customer base that Walmart is low priced on all items. If you do any amount of comparison shopping you know that Walmart is low priced on what they considered the Market basket products that every mass merchant retailer should be selling. These are also the products that most consumers can identify as a good value if the price is right. Everything else in the store may not be a great value but the customers won’t take the time to comparison shop. After all, who cares if that 300 pack of paper plates is 10% more expensive. The customer the customer is already in the store so they just throw it in the cart along with all the other impulse items they see as they shop.

Amazon is both an e-commerce retailer and a third party selling platform.

Amazon’s business model emphasized growth over profits. Jeff Bezos was fortunate to attract enough investment capital to grow the business without the pressure of trying to be profitable. Even with massive year over year growth, it still took around 15 years for Amazon to turn a profit.

As an e-commerce retailer, Amazon offers many private label products they have developed. They have these goods manufactured for Amazon, they buy and sell in large quantities, and they normally make money on the sale.

As a third party seller, Amazon charges sellers a fee after a listed item is sold. This fee includes some level of Amazon customer service, marketing services, and order payment processing services. The fee varies by product category. Amazon probably makes a little profit on each sale but not much. Amazon business model calls for cash flow growth rather than actual profit in these areas.

Amazon as a subscription service. Amazon sells Amazon Prime subscription services offering free shipping, Amazon prime video, and several other services. These services, will not necessarily profitable, do build customer loyalty.

The major differences between Walmart and Amazon with regards to revenue.

Walmart sells, or at least hopes to sell multiple items to every shopper coming in thru the front door. This increases profitability since many of the items are larger profit impulse items.

Many Amazon orders are single item checkouts. Customers come to Amazon, shop for a specific item, put it in their cart and checkout. Even with Amazon’s affinity sales algorithms, it is a difficult web site to shop. You normally will only search for your specific items of interest and seldom add impulse items.

Both retailers have a bright future and both are taking steps to build market presence in each other market strengths. Amazon is opening and has plans to purchase brick and mortar stores, and Walmart has made many major purchases of online, e-commerce sellers.

Strap in, the next 5 years or so in the retail world may become very interesting.

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How Soon Can You Expect To Make A Profit With A New Drop Shipping Business?

You could start to make a profit from drop shipping in your first month, or you could work forever and always lose money. It’s all up to you, the choices you make, and how hard you want to work.

  • You need to choose unique products that are not facing huge competition in the e-commerce world.
  • You need to choose products with a high enough selling price to maximize your chances to make a profit.
  • You need to negotiate the best prices possible from your suppliers.
  • You need to find suppliers that will give you rapid order processing and shipping service so customer satisfaction is outstanding.
  • You need to answer customer questions and handle customer service issues rapidly.
  • You need to target your marketing to the correct demographics to most efficiently use your marketing dollars.
  • You need to vigorously control your business expenses to try and maximize potential profits.

If you are successful in handling the issues above and choose the right products, you may have a chance of being profitable.

What strategies exist to identify profitable dropshipping products?

Research, then more research, then a lot more research.

To find a profitable product you need to know the potential competition, what they are currently selling, and what they are selling the product for.

You need to know what areas have problems with no current solutions.

You need to know what products people are looking for and what they are willing to pay.

You need to be an expert so you can identify products that are currently being sold that may be marketed incorrectly. These are the kinds of products you can create an effective advertising campaign to reach the right customers in the right markets.

Take a walk thru your local mass merchant. What do you see? If you just see a big mess of assorted products, you need to look more closely. In a big brick and mortar store, every product in the store is placed there for a reason. Each store is organized by departments, and each department has an employee or staff at the corporate level that is in charge of each department. These are called buyers, category managers, product managers, merchandisers, or some other descriptive term. These are the “experts” that have done their research and determined what should be in the product mix or what should be offered for sale.

You need to develop your research so you become the expert with regards to your chosen product. Research and product knowledge are your strategies.

Can a small business outsource their marketing manager?

The question is can a small business outsource their marketing manager?  But just as important is the question, Should a small business outsource their marketing manager?Yes, as a small company you can, and many companies do outsource their marketing services.

Yes, as a small company you can, and many companies do outsource their marketing services. You outsource to get access to marketing skills you could not otherwise afford.  You outsource to access part-time “experts” to form and deliver your message.

Just make sure you can clearly communicate your company image and marketing goals to your outsourced manager so you can work towards a consistent company brand, image, and presentation. It was your idea, dedication, and hard work that started the company in the first place and you should have the best input about the direction you want for your company.  Try and maintain a working relationship with one marketing manager and don’t jump from marketing company to marketing company unless you are not getting the results you desire.

One of the most important messages a marketing program can project is consistency and a standardized image in all stages of the company presentation. You want customers to see you as a valued, professional company and a unified look on your website and marketing materials helps to build trust with your customers.

How do I start to import product from China into the USA and Canada?

Over the years I have exported many products to Canada from both China and from the United States. Fortunately, I was over 18 so I never had to face any of the issues you will face. I am not sure about the age of majority in Canada but to legally sign contracts you need to have reached that age. You may need to be at that age to set up an Amazon sellers account, register a business, open a business bank account, deal with Freight companies, and customs agents.

In the US the age is 18 is sign contracts, register businesses and all the other legal stuff you will need to do. The Good news is Income tax laws. In the USA the tax man will take money from anybody, and I would guess Canada will be similar. You will probably need to contact an accountant or Tax attorney for Canada specific regulations.

You want to create your own brand and yes this is legal to add your own label here or have the factory apply for you if the quantity is large enough. With China factories, everything is negotiable based on the quantity of order.

When you import you will have to make sure the product is labeled made in China. Most factories are very aware of this requirement so it is almost a no-brainer. If your laptop bags are constructed of manmade materials there should be no special labeling requirement. If you want to make them out of animal skins, you will need some additional documentation to show they are not made from endangered species skins. Other products like electronics, chemicals, food products, nutritional supplements, children’s toys and clothing, and more, all have must stricter requirements for labeling and certifications.

Product selection.

Do your research and planning carefully. You have mentioned laptop bags. If possible, pick products you have an interest in or are knowledgeable about. This simple step will make it a lot easier to develop unique sales content for your Amazon listings. Your goal will always be to figure out why a customer would buy from you rather than from one of your competitors.

Take a look at the listings of competitors selling on Amazon, you will see product after product being sold using exactly the same sales copy and photos as everyone else. You need to develop a unique look and sales approach to attract customers to your listing. I did a quick search on Amazon CA for laptop bags and there are only 503,901 listings to choose from. Many, many choices and many look very similar to each other.

Use unique high-quality photos and in use photos, Clothes on real people instead of mannequins, Auto parts installed on vehicles, product shots showing the product in use, anything to let your customer see the intended use and the benefits of the product.

Write unique sales copy detailing the product’s features and benefits. How will this product help the customer? What will it do for them? Will it make some part of their life easier or better? Will it solve a problem? Find something to say that your competition does not mention. Always list accessories required to hook up the product, tools required to install the product, anything necessary to enhance the performance of what the customer has purchased. The extra sales you make can make the difference between making a profit on a sale, and making a really good profit on the sale. You can charge a higher price since the customer will hit the buy button based on convenience. They don’t have to order from someone else, the items may help qualify for free shipping, etc.

Vendor selection.

You want to buy from China. There are a lot of options available.

  1. Aliexpress is good if you only want to buy a few pieces at a time. You won’t get the lowest price and shipping may be higher but, if the supplier does rip you off you have only invested a little bit of money.
  2. Alibaba- Many sellers are listed, some are factories, some are only trading companies, simply taking orders for the factories, and shipping to you. Again, for you as a small, newer seller, verification of the seller will be difficult. You pay upfront when you place the order and take your chances about when the product will be shipped, and the quality level you will receive. My recommendation is to hire an inspection service to do a quality check before the merchandise is shipped. If you receive a container load of bad quality merchandise it will be very difficult to negotiate a refund or return privilege to get the problem corrected.
  3. Search engines- You may be able to identify factories from their websites. Similar problems to buying from Alibaba.
  4. Trade shows- This would be my number # 1 choice to find suppliers. There are trade shows available for all types of product categories and located all over the world. Use your favorite search engine to find a listing of trade shows. Most major shows have many foreign factories exhibiting at the shows. These factories are usually very reliable since they do spend a lot to attend and exhibit at these shows. As a bonus, you may find a local supplier available where you can buy smaller quantities as needed to test the market.

Shipping and Customs clearance.

If you are only placing small orders that are being shipped by mail or EMS service, simply ask your supplier to quote you a delivered price to your destination. It is called CIF price and means the cost of merchandise, insurance, and freight.

If you are shipping larger orders by container, it will be best to use a freight forwarder and customs clearance agent. Some companies will handle both these functions, sometimes you will need to use separate companies. The freight arrangements, documents, required, and customs forms will be a little difficult for a beginner.

That is about it for a simple explanation. 500-page Textbooks have been written to cover most of the details and even them not everything can be covered easily.

If you have any further questions, please feel free to ask again.

Is e-commerce passive income?

E-commerce, especially with the acceptance and growth it has enjoyed over the last 20 years is still a great way to make money. But… and you know there is always a But with every question. E-commerce is about more than just throwing a few items to sell on a website or sales platform like Amazon or eBay. It is hard work and definitely not Passive Income.

Your success will depend on several things:

  1. Finding a unique product to sell. The competition for selling common items is intense. On all of the major sales platforms, you will find lots of sellers of similar products and razor thin profit margins unless you have something unique to sell.
  2. Developing unique and creative ways to advertise and market your product. You must figure out a way to make your products stand out from all the other similar products. You must give your customer a reason to buy from you instead of all the other competition. Write unique and creative sales copy. Take high-quality photos showing your products in their best way possible.
  3. Customer service. You must be able to answer customer questions in a timely manner, ship goods quickly, and handle any follow-up issues the customer may have. Be knowledgeable about your products so you can offer assembly or installation tips. You must appear professional and trustworthy before you can expect to give your customer sensitive information like credit card numbers.
  4. If you are going to sell from your own website you must market the hell out of your products so people know you exist. Customers can’t find you if they don’t know your name or if you even exist. You must be willing to use free marketing, social media marketing, paid advertising, email marketing, and whatever else it takes to drive traffic to your website.
  5. You must continually strive to improve. Add new products, seek out new marketing opportunities, and stay ahead of the competition.

Now when going thru all of the above points, nowhere do I mention passive income. E-commerce is not a passive business even with all of the advances made in the field of automation and performance apps. E-commerce takes hard work all the time. Researching and sourcing new products and new suppliers, writing and creating attractive advertising, and most importantly developing hands-on customer service.

Why you should try and sell higher priced items when you have a Niche.

Welcome to the world of retail. You will always have to remember that you have costs associated with any order. Then remember that it costs the same to process a $15.00 order as it does to process a $50.00 order.

When you have a niche, hopefully, you have chosen one that is unique that will allow you to sell higher priced items and make higher profits. If your product isn’t really unique or low competition, you really don’t have a “ Niche”.

You will pay someone to process an order, review it, make sure the payment has cleared, print a label and send it to your shipping department. They then must pick the merchandise from your inventory, choose the right sized box, package the merchandise securely, and ship it out. You then have to pay your customer service staff to notify the customer with a tracking number and to handle any customer service issues that might come up. You must also factor in the cost of potential returns.

Even if you are a solo operation and do all of these things yourself, you pay with your time and effort, because after all, time and your effort are valuable.

Here is a basic example. The numbers are just guesstimated to use as an example. I will assume you use Amazon to sell your merchandise.If you don’t use Amazon replace that selling fee with your sales, advertising, and marketing costs per order.

Item # 1 Sells for $15.00. The cost of goods, $7.50. Amazon selling fees ( estimated 15%), $2.25, order processing costs $3.00. carton costs, $1.00. Gross profit before fixed overhead and taxes= $1.25. That’s a lot of work to make $1.25.

Item # 2 sells for $50.00. The cost of goods, $25.00, Amazon selling fees, $7.50, order processing costs, $3.00, carton, $1.00. Gross profit before fixed overhead and taxes= $13.50. Decide for yourself. Which priced item would you rather sell?

You have to sell over 10 pieces of that $15.00 item to make the same gross profit as selling one $50.00 item. That is 10 times the effort and order handling.

Some people will say, “Let’s sell the low priced item and make it up on bigger sales volume”. It can be done but why work that hard?

You are young, you have a head full of ideas, but no money. How do you proceed?

Your young, your mind is filled with ideas but you have no money. Why not continue to work at your 9 to 5 job, use the time to learn about how a business is run and gain experience to help you when you are ready to execute some of your ideas? Take the time to live below your means and save as much as you can so you have some money to fund your ideas when you are ready. Everybody has to start somewhere and seldom do people have the skills to start at the top. Take your 9 to 5 job seriously, be curious and learn all you can, and you will find that you might even earn the respect of someone who can eventually be your mentor to help you succeed. Remember, you don’t find mentors, mentors find you based on what they see from your performance and dedication.

While you are developing your skills, take the time to firm up some of your ideas. Start making a plan or even a simple outline to determine what you want to do, what skills you will need to execute your idea, and how much it will take in terms of investment or time. Taking the time to commit your ideas to paper gives you something to build on, something to turn into an executable business. If you only keep your business ideas in your head they will never be more than simple ideas.

What should you do when you get a drop ship order?

When you use the drop shipping model for e-commerce here are some things you should always do.

  1. When you process payment send your customer a receipt of the transaction by email. If you are using a sales platforms like Amazon or eBay/ PayPal they will do this for you.

2. Process a purchase order to send to your supplier with customer shipping info so supplier can ship item. Do not include your selling price on this purchase order.

3. Make sure your drop ship supplier uses your company name as the shipper on the mailing label. This is really important. You are the seller. You want your customer to remember your company and come back to you for future business.

4. Once your supplier has shipped, send your customer the tracking number and a nice message like “we appreciate your business” or “thank you for your order”. Ask your customer if they would like to receive your news letter by email. Keep in touch with your customers regularly. Make sure you include your website link and maybe a discount promotion to encourage your customer to take a look at your website for possible new orders, new items, etc. This type of marketing is the cheapest advertising you can ever get.

5. If you can, try and make arrangements with your supplier to include some promotional literature or brochures featuring your company, website, products, and promotions. Good drop ship suppliers will do this for you. Most will not want to be bothered with this extra work.

Use every opportunity you can to keep in touch with your customers. Build an email mailing list. Send them regular mailings featuring special promotions, new items, customer testimonials, pictures of satisfied customers using their new item, etc.

How you can keep up with your competition.

Being a retail entrepreneur, whether you choose e-commerce or brick and mortar, is not a passive business. Especially since the internet makes it so easy for potential customers to shop and compare.

To stay ahead of your competition you must continually study, research, and learn about your market, your chosen product categories, the market trends, and your competition. It is not an easy task.

Every major retailer like Walmart, Target, or Amazon, among all the others, have hundreds of employees whose job is to monitor their assigned product categories for new products, market trends,pricing, promotions, and competition so they can stay competitive. These employees go by many different names depending on the company. They could be called buyers, merchandisers, category managers, product managers, etc.

I suggest you limit your product offerings to a few categories to make it easier for you to keep up with what is going on with your industry. Just about every product category has a trade association. These trade associations sponsor trade fairs or shows to allow their members to exhibit their merchandise and give potential customers the opportunity to view many companies all in one place. The trade associations also produce newsletters to keep their members up to date. It is a great idea to subscribe to them for the latest industry news. Also, make regular shopping trips to major retailers to review what they are offering in your chosen product category. It’s ok to take advantage of their expertise.

Often, the first piece of advice given to new retailers is to sell products you already have knowledge about. Having an interest or prior knowledge about a product category makes your learning curve so much easier.