What follows is a ridiculously long winded account of my recent troubles.
2012: Progress So Far
After a great start to 2012 in terms of sales and revenues for my ecommerce site things began to quieten off a little in March. Nothing too major, but despite website traffic remaining at decent levels, there seemed a marked drop in enquiries.
My revenue / profit target for March was eventually met, however this was more due to a few bigger orders finally completing than anything else.
April started really quiet as well and half way through I was staring at the possibility of the single worst month since records began! (Well for the last 2 and a half years anyway.)
Having spent much time analysing performance, checking competitors and re-looking at my own pricing decisions led to some uncomfortable conclusions.
What’s Gone Wrong?
Anyone who has been in the eCommerce game for a while understands that there is a ton of stuff to look after, in no way can you simply upload products, set pricing and then sit back and relax, it just doesn’t work like that.
Well, I guess if I’m brutally honest I think I kind of took my eye off the ball with some pricing decisions I’d implemented at the end of last year.
There was a worldwide shortage of hard drives due to flooding in Thailand (I think?) and the net result was that prices of these components shot up, some more than tripled in price.
Once we had burned through our stock we started getting hit by these price hikes so I made a decision to adjust online pricing. Not so much for our PC’s but for the upgrades i.e. people deciding to add in another hard drive to a build.
My thoughts were that we could absorb the majority of the cost in our PC systems and didn’t want to raise the prices of them.
Anyway, as 2012 has progressed prices have started to drop on these drives, there still far more than they were mid 2011 however they have dropped a fair amount.
Guess who didn’t drop the price of them on our upgrade options?
I think these have made us look expensive overall.
I don’t think that this one factor would have singlehandedly caused such a drop off in orders however there are some more factors to take into account.
The Next Problem
Our product range includes a series of high end multi screen stands, the ones we use are top quality in terms of construction and adjustability however they are expensive, very expensive.
This hasn’t been so much of a problem so far as it has always been difficult to actually source these types of stands from other suppliers, and we knew from working with other manufacturers products that they weren’t much cheaper and were far worse in terms of usability and construction.
Now, in mid 2011 we got offered the chance to import some similar stands in from Taiwan, this is something I seriously considered. The pricing on them was cheap, we are talking in some instances up to £250 a unit cheaper than what we were currently purchasing them for!
After looking at a sample though the quality of these imported units was low, combined with the fact that we would have to place very high minimum orders, pay upfront and have a 6 – 7 week lead time meant that I turned down the offer.
I just didn’t want to be in a position whereby I held around £40k – £50k in stock of stands which I didn’t believe were very good.
This wasn’t the only reason though, we had been in touch with a UK manufacturer of AV equipment and had been working with them to develop our own range of stands.
Now for one reason or another this design and development process got dragged out far longer than I originally thought but we stuck with it because we genuinely believed that the new range would offer at least as good quality as the ones we were currently using at a considerably lower unit cost.
Wouldn’t you know it, these cheaper imported stands started turning up on a fairly major computer component retailers website. I could tell by their pricing that they were happy to make around £20 – £30 a unit on them!
Obviously due to being stuck with these higher cost stands meant that if a customer found one of these cheaper stands and then bought their own monitors and cables then we were looking pretty high on the pricing front.
What a nightmare.
Anybody directly price shopping on us against competitors must have thought that we are a right rip off!
As if the above wasn’t bad enough we noticed that a company who were traditionally more mass market then us on the PC front had started heavily marketing in our niche.
Now I’m not one to shy away from a bit of competition however due to the way their site works they were advertising computers starting from something like £300!
If you actually follow the process and add some essentials like Windows and more than 1GB of RAM(!) and match our spec then we are very competitive on a pricing basis with them.
The problem for us is that they let people downgrade the spec so that a customer could walk away with a computer for a lot less than we would go down to.
In reality it’s a bit like comparing apples and oranges as the computers and spec the competitor offer in this low price bracket are pretty crap.
There are good reasons why we don’t drop our spec so much but I guess that’s just down to a difference in philosophy really.
All that being said I think we have to be realistic and think that there are customers who will always opt for the cheapest thing, combined with our small mistake on component pricing, and massively more expensive stand hardware it would be easy for anyone looking to think we are way out on pricing.
Worry & Stress
When you suddenly realise all the above it certainly makes you focus!
I won’t lie and say that there wasn’t any sleepless nights, there have been plenty but I am the kind of person who thinks that a positive attitude and a bit of hard work generally pay off.
The first (and easiest) thing to address where the pricing issues on our upgrades, this was done and I also took the opportunity to completely review what upgrade options we offer overall.
I’m very pleased with how they look now and pricing is very competitive, I even managed to teach the site a few new tricks so that upgrade options for our computers work far better than before.
The next issue to tackle was the stands.
Do we bite the bullet and stock the cheaper low quality imports?
It’s an easy answer but with difficult consequences, NO.
I will not start selling stuff I don’t believe in.
Cue a phone call to our new stand manufacturers and a few nudges here and there and we finally got a date to look at some finished units.
To say I was hoping they would be good was an understatement, the fact is they needed to be otherwise we would have wasted the last 8 months waiting for them.
Well, they arrived today and all I can say is that they are AMAZING! Woo Hoo!
The build quality and finish of them is just superb and they look like a real premium quality product, far superior to the cheaper imported units and better in virtually every aspect to the range we are currently selling.
Unit cost on them is much better than we are currently having to pay and they will really allow us to compete against these cheaper imported units.
Overall a massive relief.
Our first major delivery is just a few weeks away and having looked at where our new pricing is going to be I just know they are going to be massively successful for us.
The final problem is what to do about the competitors selling low spec / low quality computers / low priced computers?
Well, like the stand decision, I will not sell crap and I stand by that decision.
I think we can adjust pricing slightly which always helps, let’s not kid ourselves.
But the main thing I think we need to do is establish our business as the experts in our field.
Historically we have always offered top quality products at realistic prices, we are not bargain basement by any stretch, but likewise we are certainly not overpriced either.
I think we need to build on this and actually put more time and effort into showing potential customers why our products are better, why our systems will be far more suited to their needs and ultimately why they should trust us to deliver what they need.
I’ve been writing like a maniac over the past few weeks and publishing lots of content to our blog (the ecommerce site blog, not this one!), and really thinking about what makes our stuff special.
I’ve had ideas about maybe restructuring the site a little, increasing the range of products we supply, and looking at how we communicate everything to website visitors.
Not everything we have thought about will get implemented, I have to keep reminding myself that even though there are some real issues which need resolving, we are still a good business and have until very recently being doing pretty well in a difficult economic environment.
Just to bring you right up to date, we have picked up a few decent orders over the past week and it seems like with a bit of luck we will just about stumble across the end of the month in a low, but manageable position.
I’m hoping that changes made so far have influenced this mini upturn and have my fingers crossed that we will start getting back on track soon.
So, that’s where we are, and I guess the above is a longwinded excuse for not posting more content here…
I promise to get back on track with this blog, I also have some great ideas for content here as well.
At the moment I’m positive, enthusiastic, stressed and tired all at the same time, the joys of owning a business I guess!