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Forget a pretty theme. Forget a catchy company name. Forget which shipping options you offer. They’re all important, but the most important thing you must get right from the very beginning is exactly what you sell and how you price those products.
No matter what industry you pick, there are really only two kinds of products and both can sell really well. First, there’s what we call commoditized products. These are the products everybody needs. Think of anything you buy at Walmart or Amazon that has a big brand behind it — food, golf clubs, clothes, kids toys, etc. Now think of the brands — Heinz, Callaway, Levi, Fisher-Price.
There are also products we refer to as unique products. These are usually one-of-a-kind, handmade products. They are products made in small batch runs or products that are made on demand. Think of a unique beaded necklace, hand-made frozen yogurt or leather iPad cases.
There are some major differences between commoditized and unique products, and which one you sell can have a huge impact on your online store.
Commoditized products are made on a massive scale in huge factories and usually shipped to vast warehouses in Western countries where they’re sold in stores or online.
Because everybody buys these products and they are produced en masse, they’re cheap and available everywhere. They are sold in stores like Walmart, Target and BestBuy plus online through Amazon and thousands of other online stores. Because they’re available everywhere, there is essentially an unlimited supply, which means the most common way to compete is lowering your prices. The theory goes that the lower your prices, the more you sell. It’s retail 101.
Now, assume that you decide to setup an online store selling kids toys from major brands like Fisher-Price, Mattel and LEGO. Because these are all commoditized products available from the likes of Walmart and Amazon, unless you have an amazing service guarantee or a new value-add, you’ll be competing with those big guys on price.
And it’s hard (dare I say almost impossible) to compete with Walmart or Amazon on price. They bulk buy, have a more efficient supply chain and also receive supplier discounts and rebates, meaning they can undercut you significantly on price. Your chances of success are slim.
Now think about unique products. Maybe you’re like Jessica Alba and Brian Lee at Honest.com, who create amazing baby products that are eco-friendly and made of natural ingredients. (For the record, we share an investor in General Catalyst, and I’m a die-hard customer — their diapers are excellent, but I digress.)
As the creator of a unique product or product line, you have a distinct advantage over those selling commoditized products. First, your products are your own. Since you make them, they can’t be purchased from anyone else, so it’s impossible to be undercut on price. You can test taking prices up and down as long as your margins will support it. Sure, there will be other products like yours, but if what you create is good enough you can easily win a spot in your customers minds where they don’t compare your product to those available from competitors. Two Guys Bow Ties, a Bigcommerce client who hand crafts wooden bow ties, is a great example of this.
Another big advantage to creating your own unique products is that you can build your brand into something uniquely important to your customers. A brand that occupies an emotional spot in consumers’ minds can command a premium price, even when competitors’ products are significantly cheaper. That means more revenue and more profit.
Finally, over the last few years I’ve noticed a massive shift away from big-box retailers and brands — and it is not about price. It has everything to do with entrepreneurs biting the bullet and building e-commerce businesses that bring their unique and interesting products to life. Think of the one-woman fashion label that starts at home. Or the husband and wife jewelry business where each piece is handmade right down the street. Or the teenager creating graffiti-inspired artwork and screen printing them on hats he sells from his bedroom.
These products are interesting, inspired and most importantly unique. To many people, those things are more important than getting something for the absolute cheapest price. Yes, you can go to Walmart and buy a t-shirt for $3, but a handmade shirt from a local entrepreneur is much more compelling.
Unique Is When Entrepreneurs Win
ABC’s Shark Tank is a perfect example of why uniquely interesting products win. Every week, a handful of entrepreneurs (many of them Bigcommerce clients like PetPaint, Yubo and The Smart Baker) pitch to five celebrity investors in an attempt to raise capital and expand their business. The fascinating thing about Shark Tank is that every entrepreneur has a product they’ve developed from scratch. And each week, hundreds of thousands (sometimes millions) of dollars are invested by the Sharks into these small businesses.
I doubt any of them could raise money from the Sharks if they were selling commoditized products. A unique product is often the catalyst for the investment from the Shark, who will then work with the entrepreneur to help grow sales and scale their business. Bigcommerce client Grace and Lace, who accepted a deal with Barbara Corcoran on Shark Tank, is the perfect example of this. Melissa’s handmade boot socks and leg warmers cost up to $40 a pair and have earned an incredibly loyal customer base. Sure, you can get socks for a couple bucks at Walmart and Amazon, but consumers have spent millions of dollars with Grace & Lace because their product is unique.
As I mentioned at the start of this article, both commoditized and unique products can be the start of a booming business. But if you want to beat Amazon and Walmart, there is a strong case for innovating and creating your own products.
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