Suppliers play a vital role in any dropshipping store. And whether they implement MAP (Minimum Advertised Price) policies or non-MAP policies determines how much of a profit you end up making.
In today’s podcast episode, I give you actionable tips to make profits even if you use Non-MAP suppliers.
If you have any questions or suggestions, feel free to let me know in the comment section.
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Hello everybody, Anton Kraly here from ecommercelifestyle.com and welcome back to the podcast. If you have been around for any amount of time, maybe you're a podcast listener, or maybe you're part of my coaching program, Drop Ship Lifestyle, you should be well aware that I prefer to always work with MAP suppliers whenever possible. If you don't know what that means yet, M-A-P, it stands for Minimum Advertised Price and some suppliers have these policies where when you become an authorized retailer to sell for their products, you'll actually sign a MAP agreement, again, a minimum advertised price agreement. And what this basically states is you're not going to advertise their products under below a certain price and normally the way that calculation works is you take the wholesale price which is what you would pay your supplier for a specific product and then you multiply that by a stated multiple, and that becomes the MAP price.
Now, sometimes suppliers will also just have their own wholesale and own MAP but again, typically it's based on that calculation. So let's just say hypothetically MAP was three X wholesale, that would mean if you were authorized to sell a $500 product where $500 was your wholesale cost, then MAP would be $1,500. And the reason that suppliers and brands have these policies in place really is to protect their own brand value and also to protect their retailers like us so they have people that actually want to sell their products.
One example I often give is with iPhones. If you wanted to go out and buy the newest iPhone, I have no idea what it costs, but let's just say it was a thousand dollars. Well that iPhone would be a thousand dollars if you went to Target to buy it or Best Buy or AT&T or Sprint or Verizon. The only way the price might change is with, if you get a contract and they basically buy it for you and you pay it off, but forget about that, just think about the core value of the product, the core price. That will not change, and it will not be go below minimum advertised price.
Now, the reason brands like to do this is, let's just say wholesale of an iPhone to any of the stores was $500 and let's say next week, Best Buy decided, "You know what, we just want to become the number one seller, we're going to sell it for $501." What would happen? They would sell out. Everybody would go there and Target and AT&T and Verizon and all the other stores would stop getting sales. So that would hurt the retail market. It would hurt all the retailers and it would hurt, in this case, iPhone or Apple as a company, because now the perceived value of the phone is $501, so that's why MAP policies are important. That's what they are. That's why they exist.
But the truth is that not every brand you reach out to that you're going to want to work with will actually have a minimum advertised price policy. And especially if you're in certain parts of the world and certain countries, MAP policies, actually aren't enforceable because of what are, in my opinion, really stupid laws that shouldn't exist, but they basically say that suppliers can have MAP policies. So that's not the case in the US where we do business, but we have a community all around the world so maybe you just don't even have that option. So what I want to do in this episode of the podcast is give you some actionable ways that you can actually still make a profit when working with non MAP suppliers. So the first thing I would recommend that you do is just get approved for everybody and anybody that you can get approved to sell for.
If you find 50 different brands in your niche, reach out to all 50, get approved, get their price lists. Because when you have a price list, when you're an authorized retailer, it doesn't mean you have to sell their products, it just means you can. So what you're going to end up with is a whole bunch of price lists and you'll know which suppliers are MAP and which ones aren't. Now for the ones that aren't, what you're going to want to do is actually create your own price lists and what you should have, even for non MAP suppliers, is one column of pricing for wholesale, that's your cost to them, one column of MSRP, which is manufacturer's suggested retail price, and then you'll want to make your own column, and you can just label that competition. And then what you're going to want to do is spend a lot of time doing research specifically on Google shopping.
So let's just say, hypothetically, you have a new supplier, we'll call them supplier A and supplier A sends you their price list with a hundred different skews in it, a hundred different products. What you want to do is go on Google shopping as if you were a customer and search for those product names and then see what your competition is selling them for. And then what you want to do is take the average and put it in your new price list. Now, if there are some people that stand out with extremely low prices, I don't want to say you should just write them off to begin with, but what you should do is take their company names, whatever their websites are and search them and see if they just have terrible reviews and ratings because if companies are selling products with next to no margin, there's a good chance that they have really bad customer service.
There's a good chance they either ship late or don't ship at all and there's a good chance they're not going to last. That's why I say, when you want to get that competition price, you really want to look at the stores, the averages, the ones that actually look like legit established businesses. Now, the next thing you want to do is see what the average price is that they're selling for and see how that stacks up against your wholesale price on your price list. So let's just say again, hypothetically, your wholesale cost was 500 bucks. Well, is the average competition price $2,000? Is it 1500? Is it a thousand? Whatever it is, plug it in there and what you want to see is that price being at least double what your wholesale cost should be. If it's less than that, then that's a red flag. In my opinion, it's not worth moving forward and uploading that supplier's products to your websites.
So let's just say, hypothetically, supplier A gave you their price list, your wholesale cost was 500 bucks, but then you see on Google shopping, the average price people are listing it for is 700. You do not want to do that. You'll never make money. Just simply move on. Don't upload them. No harm, no foul. Focus on the ones again, where the competition price is at least double the wholesale price. Those you can definitely still make money with. Now, something else that's important to note is you might be putting together this price list and you might see that, "Wow, my profit margin here is four X." Right? "My product that's $500 wholesale, the average price is $2,000. I would make $1,500 per sale before fees. Maybe I can just go ahead and sell the product for 500 less than everybody else and get all the sales."
Listen, do not do that. It may seem tempting. It may seem like you can stand out based on price and still make a huge margin. It's a bad idea, because if you do that, your competitors are going to start undercutting you, and then you're going to undercut them, then they're going to undercut you and eventually there's going to be no money left. So what I would want to see you do is take that average price that's being listed in Google shopping as long as the margins are there, match that price and then the way that you're going to get people to choose you over your competition is by focusing on every single thing that I teach in module five of the Drop Ship Blueprint, which is all about optimizing for conversions. If you're not a member of Drop Ship Lifestyle, yet just go to dropshipwebinar.com.
You can get a free training there. It's two hours long and I also make an amazing offer for my program Drop Ship Lifestyle, but again, you can get that at dropshipwebinar.com. So again, don't try to just compete based on price because it will be a race to the bottom and you definitely don't want to be the one that kicks off that chain reaction and that starts that. Now the next thing that's important is as you start to run ads, and as you start to get traffic, your numbers should look good early on because again, you're not competing based on price, but what you need to do more importantly than when you're working with MAP suppliers is monitor your KPIs, your key performance indicators inside of your Google ad account more frequently. Maybe you do it every Monday, Wednesday, and Friday, maybe you do it twice a week, depending on how much traffic you have.
But what you want to do is keep an eye specifically on your Google shopping campaigns in Google ads and see if you see a huge dropoff in your clicks. See if you see a huge drop off in your sales. And the reason that could happen with non MAP suppliers is because somebody could step in and just undercut everybody. So you got to keep an eye on that. You have to be more fluid, I would say with your ad strategy, because you need to be able to adjust if people are trying to beat you on price. So again, you can still make it work, but it's something you want to monitor more closely so that you're not wasting money on products where somebody else is willing to make 5% per sale.
Now, another thing I'll note that kind of varies from the traditional way that we optimize for conversions is when we work with MAP suppliers, we do use price match guarantee policies so people know, when they're on our stores, if they see this product for less money somewhere else, then we would match that price. Obviously, the reason this works is because we're competing with other MAP brands and other MAP retailers, meaning that the price is going to be the same everywhere.
If you're selling for non MAP suppliers, do not use a price match guarantee policy, because like I mentioned, even if the prices are at a certain level right now, somebody technically could step in next week, undercut you by 30% and then you could have people reach out saying, "Hey, can you match this price?" and you know the margin's not there. So if you're selling for non MAP brands, do not use price, match guarantee policies. And finally, the thing I'll say is you might find a whole bunch of brands that you could potentially sell for.
You might get a whole bunch of price lists and you might see that there's a percentage of them where the margins are still great. You can list them and do business as usual, but then you might find some that seem to have great products, but the market is just down because somebody is undercutting everybody, or because the average price is too low where your potential sale price isn't at least double MAP, so what do you do there? Well, one option is just don't list the products at all. Another option is think, "Can I private label these products?"
So I'm at a standup desk right now and let's just say, one of the suppliers made these standup desks. They weren't, they don't have logos on them or anything. They're very simple, just a piece of functional furniture. Okay, well, "Can I sell it for supplier ABC and can I call that Anton standup desks and still use them to Drop Ship the products, but now not be competing based on the search term for their brand name?" This is a way you can stand out. This is a way you can still sell for other companies, still Drop Ship, still follow the whole model, but do it in way where your margins can be maintained, and where you're not competing on price. So as long as that supplier has something that's a bit unique, as long as they have something that is high quality, as long as there's the potential for you to mark it up enough to make a healthy margin, then private labeling is also a great option to add into the mix of everything else on your store.
And I've actually recently done a podcast on private label Drop Shipping So if you want to know more about that, I will link it up in the show notes in the description, check that out. It's really relevant right now so you'll want to see that and that'll do it for this episode guys. As always, if you got value, please let me know by leaving a comment. The best place to do that is by going over to Apple podcasts, leaving a five star review and letting me know what you thought. And if you're here right now and you're brand new and you're just like, "Anton, I need advice for getting started." Then my advice is go to dropshipwebinar.com. I'll link that in the description as well. That's where you can learn how we build highly profitable, semi automated online stores. So go to dropshipwebinars.com if you're new. I will see you there. If not remember, we post two new episodes a week every Monday and Thursday. Make sure you're subscribed and I will talk to you in the next episode of the podcast. See ya.