Here’s a common question I am frequently asked.
“How can I as an individuals compete with Internet Giants with thousands of employees that could offer lower prices and probably more professional service than I ever could.”
The theme of this article is going to be based on the 3 generic strategic approaches that can lead a business to outperform it’s competitor. The three strategic approaches are cost leadership, differentiation, and focus/niche. Most companies has their strategic approaches along the lines of one or more of these. But there is always one approach that is emphasizes more than the rest, which becomes the company’s main strategic approach. I will go through each of them individually and quickly describe what they are how they play into our E-Commerce world today.
The first is “cost leadership”, which is when a company tries to offer low prices which their competitors can not. In other words they want to be the price leader in the market, offering prices so low that their competitors can’t make a decent profit if they try to undercut them. An example of a company that employs this strategy is Wal-Mart. Sadly, most of us will not be able to employ this type of strategy and be successful when it comes to dropshipping. Simply because a key to being successful in being a price leader is to have strong purchasing power. Basically, if you buy a lot, you get a good deal. And Walmart, can buy a lot!
The second is “Differentiation”, which is when a company tries to give the impression that they are unique and different. By differentiating, they can charge a higher price, because their seen selling something that’s unique. In many cases, this is also difficult for individual dropshippers, because it usually requires a significant amount of capital to create something unique. So unless you are dropshipping custom products from places like Cafepress, Custom Dropshipper or selling a unique product that you make yourself; chances is that you will not be employing this as your main strategy either. An example of a company that employs this strategy is Apple Computers, which are not exactly the cheapest computers, but are seen as being hip and unique.
The last is “Focus/Niche”, which is when a company tries to target a very specific niche. They focus a lot of their energy on satisfying the needs and wants of a very specific group of people. They outperform their broader competitors through paying attention to detail that their target market cares about which their broader competitor misses out on. This is an ideal strategy to employ for small businesses and the primary strategy that most successful dropshippers use. When using this approach it is extremely important that you understand your niche and target audience well, hopefully better than anyone else. This usually means that you need to have exceptional knowledge in the field, and in most cases the dropshipper is also a member of the niche himself. For example a successful dropshipper that sells car parts, should probably a car fanatic himself.
While I want to emphasize that all businesses should have a primary focus; all three factors should still come into play when it comes to managing a successful business. For example when employing focus/niche as your primary strategic approach, you should also provide great customer service(differentiation). So the next time you look at your business, ask yourself the question, “What’s my angle?”