A question to the forum.
Say in your town, there is only one water melon seller. He sells a lot of water melon and he gets special pricing from his suppliers.
You thought it was a good idea to break into this market. So you bought some water melons (at higher wholesae price) and start selling to the people in the town.
The big guy doesn't like you going onto his tuff, so he goes to your regular customers and starts underselling you. He can easily do special deals with them, say 20% below cost. He is big enough, be can afford loses to a few customers and make it back from his remaining customers.
Government regulators are useless, they take forever to investigate and do nothing. So how do you tackle something like this?
1. You have an edge over the first vendor either in quality, service etc. Maybe you deliver the big and heavy melons to the door, maybe your melons taste better, maybe you are just a funny guy who is liked by customers and it does not matter if you are a bit more expensive because they like to buy from you. If you enter such a monopolized market situation you must have something that makes a difference.
2. Having said this, you have a point. Therefore, it is no use lowering your prices. If your competitor wants to hit his own profit, let it be his problem. You provide something different and you are ready to give more for the value instead of cutting the price. A basic marketing principle: leave no money in the hands of your customer! Give more for the same money but never give a discount! Every single penny saved by the customer may end up at your competitor.
3. Being a beginner you have an advantage over the first vendor, who has become comfortable with his product and suppliers. This means he is not as flexible as you are. He has a long cooperation with suppliers he would not like to change because he gets good prices. You can source for any supplier. He has developed a selling method and structure over the years which is surely far from perfect (since he has been alone for a long time, he could afford some laziness). If you find the weak points of his system and make use of them, you can go along.
4. If it does not work, you still have very little to lose so you can start selling cantaloups.
Competition is a basic feature of a capitalist economy, and it is a very good thing indeed. It gives a chance to new entrants to do business and thus keep the market moving. If you understand how it works you need have no fear of competition any more.
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Good post dude.
The watermelon is a very high volume low margin industry. So customers are careful with price and constantly compare prices. I try to give a better service but at the end of the day, a watermelon is a watermelon and profit in their pocket comes first.
Secondly, there are not many suppliers in this industry, it's dominated by three majors. So their price are very similar and my volume is not big enough to ask for a better deal.
Don't want to sell cantaloups, just Watermelon dude
Quoting from [jadedev]:Good post dude.
The watermelon is a very high volume low margin industry. So customers are careful with price and constantly compare prices. I try to give a better service but at the end of the day, a watermelon is a watermelon and profit in their pocket comes first.
Secondly, there are not many suppliers in this industry, it's dominated by three majors. So their price are very similar and my volume is not big enough to ask for a better deal.
Don't want to sell cantaloups, just Watermelon dude
Sounds like Hostile Business Environment...
1. Well, in this case I will try to cut costs (outsource forwarding, storage, simplify retail area etc).
2. I pick the smallest of the suppliers (not the one that supplies my competitor). I make them clear that my turnover will grow in a short time (which is the case with every new business). I try to get a contract with them with turnover bonuses, and at the end of the year they will give me a return bonus according to the turnover.
(I am only considering legal ways to gain the upper hand - we do not want to miseducate anyone do we).
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I've cut my overheads to almost zero but my volume is just not increasing. It takes a lot of work to gain a customer and to gain his business. They usually start off very small and slowly build up volume.
Also, I don't carry too many type of watermelon. There are various sizes and quality. It's a real struggle to stock to many type, cash hungry. If I don't sell, then they do into the bin.