Why do some online retailers charge so little?

[001]

So I have been working on pushing more sales online and while I was poking around the online wax world I have been looking at some of the most popular companies and the story is the same... 3 oz for $1.50 6 oz of tarts for $3, a good many of them right around 50 cents per ounce...

Now, I am assuming they have the same (or more since they use fluted molds) labor then I do, and I know if I charged that much for my tarts when factoring in sales, packing and all that would be $6-8 per hour, why would they do that to themselves? Maybe they think that is enough to make it worth it?

I guess this is a bit of a bitch fest but I sell my product for more, I value my time and I wish some other retailers would do the same.

Am I just looking at the walmarts of the online wax world or is this sort of standard?

-001

[SliverOfWax]

There's no answer to your question. It's not possible to know what goes on in someone else's head. Thankfully, in America we can charge what we want to charge, even if it bankrupts us.

[Darbla]

I have wondered if they live locally to some suppliers, so they buy in bulk and have no shipping costs for getting their raw materials. I have noticed the same thing you have, and that's part of what's kept me from trying to develop this hobby into a business. There's just too many people already selling this stuff for as cheap or even cheaper than I can make it.

[deb426]

There are so many variables that play a part in retail price. If you can buy wax and containers by the pallet and your oils by the drum, and if you can pick it up, that can cut your costs to a fraction of what a hobbyist would pay for the same products. If you live in or near a metropolitan area, you can charge a lot more than if you live in a rural area. If you are a hobbyist, you might be happy to cover your costs and make a little extra. If you cheat like the overseas producers and only scent the top of the candle, you can cut costs. If a celebrity's name is on the label, the rules go out the window. There really is no way to compare. Just make your product and set your price. If you can't sell it for the price you want, you will have to decide whether you want to make it for less.

[classiccandle]

I'm sure the larger companies save by buying in bulk and have automated a lot of their processes and can make more product with less people. As for the smaller folks it would seem to me that they don't factor in enough profit to sell their products at wholesale and charge only enough to sell direct and make a profit. Case in point - I use 415 soy wax which is much cheaper per case than any paraffin wax but I've seen many people selling 12 oz paraffin candles for cheaper than I sell my 7 oz soy candles. I don't worry about those sellers as much because the majority of them don't generate enough business selling direct and eventually go out of business. What's the fastest way to go out of business? Compete on price.

I typically try to charge 5-6 times my cost to factor in selling at wholesale plus I'd like to get paid too and when I get to the point of hiring employees I can do that. It also allows me some wiggle room to not raise prices when my supply costs increase. However, there's a breaking point for that too...lol. I've only been selling since February and have my products (almost exclusively candles and melts although I have added soap and lotion in the past few weeks) in one retail location which I make between $300 - $600 a month so far. Sales started going down around May but seem to be picking back up so I'm hoping this fall/winter sales will be much better.

[001]

The thing that gets me is if they raise their prices they would be doing less and making the same or more. These people seem to be pretty popular but they are by no means the only vendors I see popping up, one very popular vendor charges $2 for their "two ounce" "Scent shots" This seems reasonable, and is in line with my prices and this particular vendor sells thousands of them per month.

Now there is another vendor who does 3 fluted tarts for $1.50. Let's say they cost .20c each (conservative estimate) with 5c for packing they would make .85c per pack, now if they order over $35 they get free shipping. So that is 24 packs of 3 so give or take $20 profit, take out credit card expenses- about $1 and you have $19. Take the $7 on average for a regional A box it would take if it fits and you have a total of at most $12 to pour and pack 72 tarts? Absolute insanity. If they sold them for $1 each they would only have to pour and pack 15 of them.

Now my online sales have begun to sort of 'take off' the right people are getting my product and the reviews are good so I am hopeful for this season. I have learned a lot about the buying patterns of the online wax community though which is very interesting, and I'm beginning to tailor it to the market and achieving success. A whole new world for sure.

[debscent]

You are making a HUGE assumption they are making a good profit.

[TallTayl]

You are making a HUGE assumption they are making a good profit.

Very good point.

Many companies use smaller products (such as soaps, melts, sachets, etc.) as loss leaders to encourage purchase of higher margin, higher profit inventory. Likewise, huge volume on low margin items can be very profitable if the manufacturing processes are lean (the main reason why I L.O.V.E wholesale).

OTOH - with so few people actually knowing their actual product costs it would not surprise me to learn they are underpricing themselves.

[SliverOfWax]

It's also a huge assumption to assume they even know if they're operating at a loss. You'd be surprised at the people who simply aren't bright enough to figure costs. Years and years ago I saw where someone wasn't including incoming shipping charges in their cost; i.e., cost of shipping wax, jars, etc.

Even if someone doesn't include labor costs and just considers it a fun hobby, there is also the additional cost of electricity, gas, whatever they use to heat and melt wax and preheat jars, etc. . That's a real cost that someone has to pay in real money.

Seriously, it's folly to worry about what someone else charges. Aside from the fact that it doesn't have anything to do with you, it's really just a waste of time. You'll never know and there's nothing you can do about it.

[001]

I guess it's true that I am assuming they are making a profit. As for wholesale, high volume low margin that was actually what I was thinking of now. I have had 5 wholesale accounts for some time now and I am looking to expand in that too and is why I was really looking at the online retailers and the way I found most of them was the almighty youtube which is the way to find low cost wax retailers.

SOW I had encountered the same thing when it came to shipping locally she thought because it was an up front expense and had to be reported that way then they wouldn't include that into the cost which was a mistake, she also didn't include things like paper towels, paper for invoices, labels, She was selling her 8 oz JJ for $3... that was quite a fun show talking to her. I haven't seen her since though.

[funkymonkey66]

I think some online retailers charge lesser amount hoping to build a following then they can slowly increase the price overtime.

Thing is, the people they find themselves catering to are not ever willing to pay more. Someone else comes along and then they flock to that vendor and you're old news.

I think that's the biggest mistake people make just getting into the online market.

I always made it a point to price at the higher end and use better raw material, I went after a more sophisticated client base. I can't compete with the nickel and dime vendors nor would I ever want to. Over the past 12 years I've seen at least 25 come and go. It's sad.