If you’re an Amazon FBA seller or about to be, then chances are that the majority of your competitors are China based businesses, which could pose a bit of a problem to the longevity of your business.
If you’re thinking ‘why does it matter where my competition is from’, well, for most countries in the world – you’re right. It doesn’t matter. But China and Amazon FBA is a different story… for a couple of reasons.
The first, is that China is where the majority of the world’s products are manufactured, which gives China based businesses an advantage over us Amazon FBA sellers in terms of their ability to speak the language, build a relationship with the supplier, and negotiate a better price point than we ever will.
In some circumstances, the China based competitor might even be the manufacturer of the product, in which case they’ll have a huge cost advantage, meaning competing with them on price is very difficult.
Another reason that Chinese competitors can cause headaches for Amazon FBA sellers is because in my experience they have a high risk tolerance, they’re accepting of very thin profit margins, and they’re willing to incur huge losses in the short to medium term in order gain a decent search page ranking and lots of profit in the long term.
Historically, they were also known to take part in black hat tactics and cheat their way to the top, but fortunately, Amazon has clamped down on this in recent years, and the playing field has become lot more level in that respect.
If you’re now panicking because you’ve realised that all of your competitors are China based with a probable cost advantage, then fear not, because there are a number of different tricks & strategies that you can follow in order to come out on top, despite not having the same cost advantage they do.
1. Registering for VAT exemption
If you’re about to start selling in the UK or you already do and you’ve generated less than £85k in revenues in the last 12 months, then you absolutely need to tell Amazon to classify your business as being VAT exempt.
For reasons that I won’t go into, if you’re not VAT registered because you’re a new UK based seller or haven’t hit the £85k threshold yet, if you’re classified as VAT exempt then Amazon won’t increase your fees by the 20% tax rate.
However, every foreign business selling int he UK, has to be VAT registered by law, which means that on a like for like basis, your profit margins are going to be higher than any of your foreign competitors, giving you an immediate advantage.
All you need to do to benefit from this tax advantage, is head into your Amazon account and then create a case with Seller Support. Tell them you’re a UK based business that isn’t registered for VAT, attach your company’s certificate of incorporation, and within a few days you should find your tax exempt status approved, and your Amazon fees around 20% lower. Result!
2. Building A Brand That Resonates With The Customer
One area that many competitors from the East struggle with is building a brand that resonates with a customer from the West.
Because China’s culture, traditions and language construct are so different to ours, their attempts at branding & writing compelling reasons to buy the product are so off the mark, that they automatically give the customer the impression that the product itself is cheap, poor quality, and unlikely to work. You can easily see examples of how bad some brand names and listings are, just by spending 10 minutes or so scrolling on Amazon…
This amount of poor branding presents the western Amazon FBA seller with an opportunity. And that is to create a brand name and product listing that resonates with the customer, and doesn’t just look like a load of nonsensical words cobbled together in a random order!
As westerners we have a huge advantage over the Chinese, and that’s because we speak the language of our customer, and we understand them – because we’re from the exact same culture.
This is something that foreign sellers are always going to struggle with, and so it’s essential that you leverage that and use it to your advantage. Make sure your Amazon FBA brand name sounds English and ensure that your listing makes grammatical sense and focuses heavily on the customer’s pain points, with compelling reasons included for how the product solves them.
Doing this will help you to generate sales over cheaper priced competitors, because it gives the customer more confidence that your product will be durable, high quality, long lasting, and from a reputable brand.
3. Creating A Brand Story
A key tactic that I use with all of my products, is the inclusion of a believable brand story. With high levels of competition on Amazon, a brand story can help you to stand out from the crowd and sell, regardless of who your competition is. The story behind the brand that you’ve created doesn’t need to be true, but it does need to be believable.
So, rather than making claims like you invented the generic household product that you’re selling, instead, as an example you could build a brand story that explains how you used to be in the customers shoes with the problem that they’re currently facing, and, because there wasn’t a high quality solution, you decided to source a manufacturer and provide one to the market.
If you can include a picture of yourself with the product to make it as believable as possible, that’s great, but if you’re not comfortable doing that, just head to Adobe Stock Images, find a model, and get your product photoshopped into their hands. This is something that Chinese competitors don’t typically do, despite the fact that it really does help with converting shoppers into customers.
When putting your branded offering together, don’t be tempted to just think of a random brand name, get a cheaply designed logo made, and then expect customers to buy from you. You need to ensure that every single aspect of your brand tells a convincing story that resonates with the customer and makes them believe that your product is the best option available in order to solve their problems.
4. Make It Clear You’re A Small Business
Following the rise of huge corporations and the effects of the pandemic, nowadays customers want to support small local businesses as much as possible. In order to persuade customers to buy from you over what may be cheaper competitors, within your listing don’t be afraid to inform them that you’re a UK or US based small business, started by either you as an individual, a family, or a couple of mates. I make a point of doing this on all of my listings, and I know it works at convincing customers to buy from me, because I’ll often get customers emailing to say they wanted to support a small local business, versus a much bigger foreign one.
Where applicable, Amazon recently started putting a ‘small business’ badge on search result listings, which from what I’ve seen, very few foreign sellers manage to get.
’So check your listing, and if you don’t have it, raise a case with Seller Support and ask for it. Another easy way to highlight to the customer that you’re a small business that is deserving of their support.
Whether you’ve just started selling on Amazon or not, at some point you are going to face competition from multiple Chinese sellers, some of whom may indeed be manufacturers with very low cost prices. So, make sure you use these techniques to give yourself a better chance of competing, despite the fact that your cost pricing is higher.
If you want to learn more about how you create your own Amazon FBA business, then check out my free training where I run through my exact 5 step strategy that I’ve repeatedly followed to continue launching successful products.
Or, if you’re ready to begin your journey and want to start with the best chances of success, check out the Smashers Academy.
P.s. if you want to learn more about my journey (highs and lows), check out my Amazon FBA review here.
