Competing on prices (or not)

Ok so I have a small business of selling boardgames. I do that online on my website and on social media.

The boardgames I import from USA, EU and China (they are all English-language ones, even though I don’t live in a country that has a lot of people who don’t speak English).

I do preorders for stuff from Kickstarter/Gamefound as people from my country don’t have a lot of ways to pay for stuff or get it delivered here due to…reasons. And I also just buy stuff to be available for sale immediately. I kind of skew into preorders a bit more cause people generally like to order new things.

I’m relatively new to the market but I’ve got pretty great results already. When I just started I undercut my competitors prices a lot, but they were charging so much I was able to make a healthy profit while still going significantly lower (like 15-30% lower). It might have been a mistake, but I’m kind of new to this.

At first they didn’t notice much, but now I seem to have chewed off a sizeable piece of the market so they reacted.

My main competitor in particular always tries to undercut my prices, but there is a slight difference - I was doing that and still had a healthy 25-30% of profit, but right now he basically operates on 5-10%, 15% on a good day. I know that for sure as we get stuff from the same place and I know logistics pretty well.

Now, the question. I don’t think trying to just go lower and lower is healthy for both of us. Someone will eventually go down and the other one won’t have a lot of money also. And I feel like I should not compete on the prices, but instead do something else, but what?

We basically sell the same games, so making my product better is not really possible. I do have a much better service (not bragging, got a bunch of his clients saying they left specifically because he can be neglectful to his customers, slow to respond, outright rude at times, etc. But I feel it can only get me so far. At some point I started providing free delivery, and he soon followed to copy that. I have a pretty useful website, and he just sells on social media, so that’s also a plus for me.

It’s important to note that our buyers are on a richer side of the population. They don’t really run for a lower price, but some of them will. And im still not as big even though I’m steadily pumping money into marketing, so there is a lot of clients I’d like to attract, and I’m afraid the first thing they will see is that he has lower prices.

So, what do I do? Rise the prices and somehow provide more value? I’m kind of struggling to see what kind of value could that be in my situation though.