Small & Profitable vs. Aggressive & Scalable: How Do You Compete When Rivals Are Willing to Lose Money on Every Order?

Original Post

I’ll give you some context on our company first.

We mainly sell in the US, Europe, and Canada – Amazon is our main channel, with the US making up about 90% of our revenue. Last year we did around $30 million in annual sales.

We launched TikTok Shop US in early 2024. Got pretty lucky early on – pulled in about $6 million gross profit during the platform’s heavy subsidy phase. Once the subsidies ended, though, margins started sliding. Now we’re stable, but most sales come from in-house content plus ads. Ads are super inconsistent, so scaling has been a real struggle.

Our AOV is pretty high, so sending free samples to influencers gets expensive fast. More often than not, we lose money on sampling with no real payoff.

Here’s the frustrating part. A few competitors in our niche – all Shenzhen-based sellers – are playing a totally different game:

• Ultra-low pricing, selling at break-even or a slight loss

• Massive, non-stop influencer sampling with zero concern for short-term ROI

• Shipping 100,000+ units to overseas warehouses BEFORE they even have consistent sales

• Using all that sampling to flood TikTok with content, go viral… then instead of raising prices, they keep dropping them and sample even harder

We use the same factory. I crunched the numbers: at their current price, they’re losing roughly $2 per unit. Only break even on a 2-pack. They don’t care about near-term profit at all – they’re just piling up order volume and inventory scale. And they’re doing this across multiple products, not just one.

Weirdest part? They haven’t crushed us. If anything, all their content and seeding has actually boosted our organic orders on TikTok. Still, my boss is looking at their volume and getting impatient. He thinks we’re way too conservative.

Our team is small, lean, and built for margin – which worked great on Amazon. Now he’s second-guessing our whole approach.

We had plans to scale inventory last year, but held back because of the TikTok ban rumors. At the time, he was okay with it. Now that nothing happened, he’s saying only “stupid people” bought into the ban scare. He wants us to go all in.

Their main driver is influencer outreach (BD). We used to have two BD reps, but they left once we shifted focus to ads. Now we’re heavy on ads, which just isn’t scalable for our product type.

Our Amazon business is massive, so our TikTok revenue looks tiny by comparison. My boss is convinced we’ll get left behind if we don’t match their aggression.

I’m stuck. Should we copy their playbook? If we do, what does a team that can actually support that model even look like? How many people do they run?

Selected Replies from the Community

Reply 1 – The hidden economics of scale

You think they’re losing money, but at 100k+ units, their cost structure is nothing like yours.

• Product cost: Order 10k vs 100k, and the factory will slash prices – sometimes by half.

• Inbound shipping: They’re sending full container loads (FCL), way cheaper per unit than LCL.

• Last-mile: Thousands of orders a day means 3PLs give them near-carrier-cost rates.

That $2 loss on your spreadsheet could easily be $2–3 profit for them. Volume changes everything.

Reply 2 – Why they might actually be profitable

The math flips completely at scale.

• Product: Same factory doesn’t mean same cost. They might own the mold, paying only labor – cutting unit cost by 50%+.

• Inbound: Full containers drop per-unit shipping to pennies for small items.

• Last-mile: Volume lets them negotiate rock-bottom rates.

• Ads: Bigger budgets often come with better efficiency and data loops.

You’re calculating based on your costs, not theirs. Big mistake.

Reply 3 – It’s a capital play, not a profit play

No telling what their endgame really is.

They could be building huge top-line revenue to:

• Attract investors

• Hit a valuation mark

• Get better loans or terms

• Position the brand for a sale

Some companies don’t chase monthly profit – they chase scale and market share. If they have capital behind them, losing $2 an order is just customer acquisition cost.

Reply 4 – TikTok feeds Amazon – the spillover is real

A lot of sellers miss this: TikTok traffic spills straight over to Amazon. You said their seeding helped your organic orders – that’s the same effect.

They might run TikTok at break-even or a small loss, but the brand buzz cranks up their Amazon organic rankings and sales. That’s where they make real money. TikTok is just the top-of-funnel traffic driver.

Reply 5 – Managing up + strategy in one

You’ve got two problems: business strategy and managing your boss.

On the business side:

• Calculate your own break-even at scale so you can show real numbers, not guesses.

• Test the aggressive sample strategy on one small SKU first, let the data decide.

• Bring back at least one BD person to rebuild influencer relationships.

On the management side:

• Lay out the risks clearly, then let him make the call. Document your concerns so you’re not left holding the bag if it goes south. Sometimes you just have to let leadership learn the hard way.

Reply 6 – What a real scaling team looks like

We run a similar setup and this structure works for us:

• 1 creative lead – hooks, scripts, content direction

• 1–2 editors – cut, repurpose, resize content

• 1 influencer manager – outreach, negotiations, relationships

• 1 ads specialist – runs Spark Ads on top-performing videos

We run small team pods by category and track ROI per pod, not just order count.

Reply 7 – Stop assuming they’re losing money

You keep saying they lose $2 per order, but you have no idea their true costs. At 100k+ units:

• Factory pricing can be 30–50% lower than yours

• Full container inbound = pennies per unit

• Bulk 3PL deals crush last-mile cost

• Big ad spend often comes with platform rebates

What looks like a loss to you is likely solid profit for them.

Reply 8 – Know your timeline and risk tolerance

If your boss wants volume, understand those sellers are playing 12–24 months out. They can afford to lose now to own the category later.

If you’re built for margin, trying to out-spend them without the capital or stomach for risk is suicide. Play to your strengths – ride the category buzz they’re creating, double down on Amazon, and pick off customers they’re ignoring.

Reply 9 – Reality check from the space

I’ll keep it real: a $2 loss per order is nothing. I’ve seen Amazon sellers lose $4–5 a unit for months just to rank. On TikTok it’s even easier because you don’t need search rank – you need content.

Those sellers almost certainly view TikTok as a growth channel, not a profit center. The profit is on Amazon. And yes, Shenzhen-backed sellers operate on a whole different level.

Don’t race them. Outsmart them.

Summary: What’s really going on with the “losing money” competitors?

What’s your take? Have you dealt with sellers like this on TikTok or Amazon? How did you handle it? Drop a comment below.