Thursday, August 19, 2010

What happens when....

...your longterm plans run into future change?

I've spent many a year developing a product line, only to find when it finally got 'hot' that it went in an entirely unexpected direction. I always likened it to climbing a mountain through 5 feet of snow, and tramping down a path, only the find the latecomers skipping up the path behind me and reaching the summit first.

In fact, after the first three or four times that happened, I decided I wouldn't try to be the trailblazer anymore, because it almost never profited. An opportunistic claim jumper does so much better. Let the other guy dig the tunnels, I'll wait until he strike gold, and stake my claim right next to him.

That may be a bit of an involved analogy to what I'm going to say about Amazon, but there it is.

I've been wondering for years about Amazon's overall strategy of grow, grow, grow. Not so much focused on 'profits', but more interested in becoming the overwhelmingly biggest baddest gorilla in the jungle.

Trouble is, new technology is coming along laying down superhighways into the jungle and shrinking Amazon's habitat. They may end up being the biggest gorilla in an outmoded model.

If you stay in business long enough, you get to watch entire industries fall apart in creative destruction. Downtown Bend was a ghost town for my first decade of business -- because of the building of the Mountain View Mall and the Bend River Mall.

Ironically, they're all gone and we're still here.

I think the Barnes and Noble and Borders and Best Buys and Linen's and Things are Dinosaurs. I'll be long retired before all this comes to pass, but the big chainstores are on shaky ground, right now. Small and nimble boutiques which offer a specialized and unique shopping experience may end up being the survivors after all.

Because the internet can provide content so much easier -- if biggest is best, then the internet is the biggest of all.

So two things are happening: everything which has content that can be downloaded online is in big trouble. Books, comics, movies, music, etc. etc.

But unique boutiques still have a niche, albeit a small one, in which to survive and even thrive.

Meanwhile, product providers also face the biggest baddest competitor of all, that being the internet, so the big box stores are going to shrink in significance. If I can get everything at Bed, Bath and Beyond online, and get it cheaper, than B.B.B. doesn't look so big.

Whereas, I can go down to Kitchen Complements downtown, and chat with the owner and more likely find something that wasn't overwhelmingly mass produced.

It's going to take a long time for all this to happen, and by then the whole shopping experience could've shifted again.

I'm just saying it's a dangerous thing to have too long a timespan for one's plans these days. So Amazon is ready to start profiting? (I believe they only turned their first profits a few years ago, and I'm not so sure their profits will ever justify the gigantic edifice they built.

1 comment:

RDC said...

Retail is constantly changing. It is an dynamic area whith changes in concepts, focus, products, etc. Even those store that have been successful and have hung around for a long time, are having to constantly change their product mix. If a store focuses on cost reduction, then another might compete by focusing on selection, or customer service. Amazons model is to try and take advantage of the economics of an electronic retailer to focus on both price and selection (more the selection). They have beaten others by also having pretty customer service. Now the delivery of physical media (Books, CD's, magazines, etc.) is being replaced by electronic delivery. While that will impact some of Amazon's business I suspect they are selling more physical items through their web site (electronics, etc) these days then they are books. So their business model will not be seriously impacted. They will continue to evolve just as any successful player in retail has to.

I suspect that at some point ebook sales will break into two major suppliers. The consolidator, the organizations such as Apple, Amazon, etc. that has very large numbers and where you can pretty much go to find any particular book you are looking for (though they really need a common format or support for multiple formats for the consolidator model to be successful in the long term, and the specialty, the specialty will areas that have specifc topics or areas of interest such as a sports site and also recommends and lists sports related e-books. Now in that mix you can also include specialty online retailers. But in those cases the books will become an easy add on to their web site and where sales will be driven by the specific topics. Now you will also have some that will be successful by having a site that carries and refers people to specifc books and that focuses their audiences on a specific limited selection. In some ways the electronic equivalent of the small book store.