We have recently decided to test out a major component of our business model:
Customers are willing to pay full price retail on baby accessories if they are receiving rock bottom prices on nappies + reliable delivery & customer service which takes care of them.
We are bringing on new brands and product lines at full price retail to test this.
At MyNappies we are like most startups – completely strapped for cash! At this point most of our sales come from products which the recommended markup can be just 6%. Seeing as we aim to be the most competitive you can imagine what our markup is, let alone how negative our margin is….
This makes the decisions around which brands and products to bring on very critical.
If the stock you bring on does not turnover as quickly as you anticipated it is cash wasted. That cash could have been better invested in other new stock or increasing the levels of stock for existing products which are growing in sales. Worst of all a poor product or brand can harm the customers trust in your business.
We decided to make the approach to adding new brands to our website a little more scientific.
1. Research which products and brands are valuable to your competitors
The best way we found to do this was by going to their homepage then viewing the source code to see which keywords they were targeting and which words they used in their meta name.
What you are looking for here is brand names and product types. For example in the second screenshot above the site clearly values the business of those customers looking for prams, strollers and baby clothing.
Their would generally only be 2 reasons why a retailer would want to target a product or brand.
1. Lots of people need or want this product or brand. It is high volume and will drive traffic. e.g. the way Big W put whole pallets of Coca-Cola at crazy prices out the front of their store a couple of times a year.
2. It is a high margin brand or product that customers already know. Once you have customers this is where you make money.
Once this is complete on the homepage you should do the same thing on each of their category pages to get a deeper picture of the products and brands which are valuable to them.
Repeat this same research process for as many competitors as are relevant to your industry or niche. At MyNappies we generally do this for 3-5 competitors.
2. Research the brands and products your competitors are targeting on a product review website.
In our case we use the the major Australian product review website – productreview.com.au.
You now type in the name of every brand, product and any individual products which you dug up while on competitor sites.
You are trying to find two things here.
Firstly, an indication of the amount of people reviewing the product or brand and the average weighting they are giving it.
Secondly, whether there is a better quality or volume product or brand in the same category your competitor is targeting.
I hope you have realised by this stage you need to be tracking all of this information. Probably in a spreadsheet. Or at least a word document to start with and later turn it into a spreadsheet once you have some resemblance of how to create consistent order.
3. Next use Google Adwords research tool to determine the search volume for each of the products and brands.
You can type in multiple words in the words or phrases box before searching. In the results the numbers you are looking for if you trade in the domestic market is the local search volume.
The volume of traffic should also give you an idea of why your competitor might be targeting a particular product. If the search volume is comparatively low it must be because the product has a high margin or is sought after by a valuable customer type.
From the keyword research you should also take note of how competitive the word is for SEO purposes.
4. Get the suppliers price list
No point second guessing. Any brand or product you have not ruled out due to them performing poorly at some point in the process so far you need to contact them. You are looking to get their price list and trade application so that you have all of the information needed in order to make an informed decision about what to products and brands you are bringing on.
Once you have the suppliers price list I would also suggest putting the products into a product review website like myshopping.com.au, Get Price or Google Shopping. This will allow you to gauge the level of price competition in the industry on price.
So at this point you will now have the following information at your fingertips:
What products, brands and categories are valuable to your competitor and why.
The search volume and SEO competitiveness of the potential product
How price competitive your industry is on a particular product
Whether there is a superior alternative brand or product in a category your competitor is targeting
The customers perceived quality of the products and brands
Obviously you need to combine the above information with your particular strategy and other relevant information. For example some products our competitors target are currently out of our price-risk range – they sell for $500+ and require a larger cash investment. That’s not too say they always will be but it does affect our current decision making.
Using all of this information you should now be in a position to prioritise which products/brands/categories you are going to bring onboard. This method should result in a more efficient and effective solution – delivering more value to your customer with a more efficient cash investment for your business while taking advantage of possible weaknesses in your competitor.