Competition or Profit: Which Should You Prioritize?

Competition or Profit: Which Should You Prioritize?

Sean: Ladies and gentlemen, thank you so much for tuning in tonight. We are starting again with our Leadership Stack Live. And for tonight, it’s just me, no guest, because we want to keep some of these shows continuous between me and the community. And I want to be able to answer your questions about leadership, entrepreneurship, and management as best as I can.

First question, how can I know if a product has demand?

One easy way to know is to use SEMrush. That’s what I use, or you can use Google Trends, which is also free, or Google Keyword Planner, which is also free. So if you have a Google account, you can use that and put in the keyword of the product.

For example, if you’re selling titanium mugs, you could put that in and check how many people here in the Philippines or Metro Manila are searching for that keyword. Keyword volume will pop out. That gives you a pretty good idea of how much demand a certain product has.

Or, for example, right now I’m doing a lot of road biking, so you could search for a road bike gear set and the search volume returns if it’s like a thousand search volume upwards. I’d say that’s a pretty good keyword. And you could also see how competitive the keyword is to how many people are ranking or bidding for it on SEM or Search Engine Marketing, which is the pay per click model of Google, where they really make money and you could gauge product demand from there.

Google Trends would help you know if something is just a fad or if it’s sustainable. So from Google Trends, if the chart is not that great, then it’s not sustainable. Why don’t I just take you to Google Trends right now and show you how that works. So we are going there, Google Trends.

Sean: Sure, we’ll know the demand for the product if it has increased or not based on the chart here. Sub region, there’s not enough data, apparently. So I would have to refine this to perhaps the brand, Shimano Deore XT.

We could try that one. That’s the name of a particular gear set that is pretty popular here right now and we’ve got the search volumes coming in. So in the Philippines, you could see that Cagayan Valley has a lot of interest for that. Metro Manila would be fifth. And you can see that it’s not a fad because the search trends are pretty consistent over the year. It has good search volume.

So that is one really good way to know if a product has good demand. I hope that helps and I hope I answered the question.

How do businessmen predict upcoming trends and make a business out of it?

So I showed earlier Google Trends. If you weren’t here, for those of you watching on different channels, this is it, so you could put in anything here. For example, you could put in, let’s just say, sunglasses. There you go.

So if you’re doing business, you know that sunglasses are not a fad. The trend is pretty stable at this number of searches each month. Got a lot from Mindanao, Visayas, Northern Mindanao, Metro Manila comes sixth.

So, yeah, Google Trends, definitely. This is free. You can use it 100%. Put in your queries there and you get a lot of ideas of what product would be sellable and if the trend is a fad or not.

For a new business, should I buy bulk orders of a product and sell it, or should I get a small batch first?

I think we should all start with small things first. Because if you risked too much, too soon and it turns out to be the wrong thing, it’s just going to break you. I mean that’s really it. That’s going to be too risky. That’s going to just eat up your capital.

So I have shared this time and again that the Lean Startup Method is one of the best ways to do things, which is starting small. Eric Ries, who authored the book, actually said that you should have the minimum viable product or the MVP and get a fast feedback loop going for you.

Try to sell the MVP, the prototype, put in a tag price, whatever you think it would sell good for, and if people say it’s too expensive or it’s too cheap, then you calibrate. What’s important is the feedback that you get at the beginning. You learn from that, you iterate, you improve the product, you improve the pricing, and you get to know your target market better.

And then if you have enough data, that is when you double down on getting a bigger batch of products, of whatever it is that you plan to sell. That’s how I do it. That’s how I’d say you should do it. And for a lot of companies, it has worked out very well.

I am interested in starting a business that I see is popular in other countries. However, I have not seen the trend take off in the Philippines. How do I know if I should take the risk?

Okay, I’m going to go back to the Eric Ries’ Lean Startup Model. I’m not going to reinvent the wheel. That’s worked well for me and a lot of people. First off, maybe you want to buy one or two of that product or business. Whatever it is. If it’s a product business, buy a thing or two or maybe 5-10 samples. Have it shipped here in the Philippines.

There’s a lot of services that you could use to be able to do that and they would ship it right at your doorstep. However, I have not taken that you’ve not seen the trend take off in the Philippines. I think a lot of people might also be trying to see if that’s going to take off in the Philippines and it might just not be you. I want to do some research on Google if there are forums already here in the country that talk about it. Maybe Reddit has a forum about it. I don’t know.

But if you want to do your own research, definitely buy a sample size of that product. It could be five, it could be ten. And you go around your circle of influence and ask them, “Hey, would you buy this for this price? This is what it does. Is it something you’re going to buy if you had the money now?”

If they say no, you might not have a great product that the market might not be ready for. If they say yes, if a lot of people say yes, then you know you have some good thing going on. And you move forward to people you don’t really know that well and you ask them as well.

So from family to friends to acquaintances to maybe strangers, if you have the guts to just go in front of a stranger and ask them about it, that’s going to give you a lot of data to work with, a lot of research to work with. And you would have a lot less risk to deal with when you finally decide that it’s the right time for you to buy it in bulk and sell it here. I hope that helps and I hope that answers the question.

Next question, how can I become a reseller or distributor of a certain product?

I don’t think it’s hard. You just need to contact the principal and ask them: What would it take for me to be a reseller of your product or distributor of your product? But if you ask them, “What would it take for me to be the exclusive distributor of the product in the Philippines, or in another country?” Then that’s a different question altogether, because they’re going to demand for you to sell a certain volume.

If you don’t sell that volume, for example, you have to sell 500,000 pieces of this product because you’re the exclusive. If you don’t reach that certain volume, then you can’t be exclusive and there are other people who will be also distributing alongside you. You’re going to compete with each other. The game is hard enough. The game of selling a product is hard enough.

It makes it a lot more difficult when you’re selling the exact same product with a lot of other people. So this is why a lot of big businesses who have the capital and deep pockets to fund, being an exclusive distributor, they definitely go that route. They really try becoming the exclusive distributor because of the fact that the game is much easier to play that way, but you have to move hundreds of thousands of pieces of those products.

That would be a challenge because you need to sell nationwide. You have to have the distribution network, the advertising channel, the marketing channel set up and so on and so forth. It’s a tough game, but being a reseller or a distributor, I don’t think that’s tough. I think that’s as easy as sending an email or calling their head office and cutting a deal with them.

Next question: What are the advantages of a reseller business?

The advantage is mostly it depends on the reseller business that you’ve got. So if you’re a consigner, you have a lot of advantage because you don’t need to pony up capital at the get go. You just sell and sell and get a part of the profit. But if you’re an outright reseller, that means you buy the inventory outright, that’s a lot more risk for you.

But if you’re confident about the product that is going to sell well, buying it outright is better because it’s cheaper. You get to have a better deal when you’re going to buy everything. So going back to my example earlier, if I’m going to be selling titanium mugs and I’m sure it’s going to sell well and I have a supplier, maybe the manufacturer is supplying me or I import it from China.

If I buy it outright in bulk I get a much bigger discount, which means if I resell it, I can sell it at a bigger profit margin. But if I’m a consigner, what that means is I don’t buy it outright, I just display it in my shop or just sell it online. Usually that means you’re a dropshipper and you get a smaller percentage of the sales.

But that’s a lot less risk for you still, because you don’t need to pony up that capital to buy a lot of the items. So there are a lot of advantages if you’re just reselling. I’d say if you’re starting out, go for the consignor route, because it’s a lot less risky and you get a better idea of what things you could sell well and what things are pretty slow for you.

I’m not sure if the question is going to be compared to anything, because it doesn’t stay there. But maybe one of the ways to look at the question is: What are the advantages of a reseller business vs starting your own brand and selling your own products?

Starting your own brand and selling your own products is an uphill climb. But when you are on the top of the hill, then that hill is protecting you from competition because you’ve got your brand going on for you if you’re able to do it well.

So there are pros and cons. The longer game would be starting your own brand and starting your own product lines. That’s definitely the longer game. That’s a lot more profitable if you got things going good for you, but it’s also a lot riskier. It’s a lot riskier.