Something like 6% of retail sales take place on the internet, which means 94% does not. Yes there is still this implacable army of people who believe there is money to be made starting up a business selling on the internet. The idea is overhead cost is nothing, you can undercut the competition, and win on quality of service. Pure delusion.
Here is the insurmountable problem: online, customer acquisition is more than any possible mark-up you can add on. The higher-ticket the item, the more it costs to acquire a customer. Right there, end of story. But when you add on the attempt to undercut everyone else, then it is just sad.
If online sales where the way to build business, how come Apple computer is building stores all over the world, and is the most successful retailer in the history of planet earth, in terms of profit, sales per square foot, etc?
Not only does Apple sell its own products, it wholesales them to ATT, the MacStore and other retailers too. And there is no product line so narrow and so well known and so easy to buy online as Apple. yet the stores thrive!
It is important to ask oneself in business, with all assumptions or received wisdom, "what if that is not true?" Well how can you tell if true or not true, or as the Chinese say, 对不对
Write down your assumptions, and then test them. Form them as hypotheses, and test them.
As Chinese carpenters say, 测量两次，切割一次
don't build a business on assumptions, when you can know.
Feel free to forward this by email to three of your friends.
Here is the insurmountable problem: online, customer acquisition is more than any possible mark-up you can add on. The higher-ticket the item, the more it costs to acquire a customer. Right there, end of story. But when you add on the attempt to undercut everyone else, then it is just sad.
If online sales where the way to build business, how come Apple computer is building stores all over the world, and is the most successful retailer in the history of planet earth, in terms of profit, sales per square foot, etc?
Not only does Apple sell its own products, it wholesales them to ATT, the MacStore and other retailers too. And there is no product line so narrow and so well known and so easy to buy online as Apple. yet the stores thrive!
It is important to ask oneself in business, with all assumptions or received wisdom, "what if that is not true?" Well how can you tell if true or not true, or as the Chinese say, 对不对
Write down your assumptions, and then test them. Form them as hypotheses, and test them.
As Chinese carpenters say, 测量两次，切割一次
don't build a business on assumptions, when you can know.
Feel free to forward this by email to three of your friends.
4 comments:
Check out this article:
"Why Amazon Is Special and Apple Is Not—in 1 Paragraph"
http://www.theatlantic.com/business/archive/2013/02/why-amazon-is-special-and-apple-is-not-in-1-paragraph/272791/
http://theweek.com/article/index/235488/how-long-can-amazon-go-without-making-money
If even amazon cannot be profitable online, what chance does a small, new business online have?
What's kind of disturbing is what will happen after unprofitable Amazon eventually goes out of business after putting the real "brick and mortar" stores (e.g., Radio Shack, Best Buy, etc.) out of business? Will there be a renaissance in small business to fill the gap? Who will be left? Or will Amazon actually then become profitable with no more competition from the brick and mortar stores?
The Atlantic article is interesting, and well fleshed out in the comments debate. Neither Apple not Amazon is going anywhere bad soon, but both are open to competition. I recall when Yahoo was unassailable by the dozens of billion dollar start up competitors, until two kids started google and crushed yahoo. Overnight.
Amazon does not need to be profitable, since pensions are obliged to buy its stock and so fresh cash infusions are guaranteed monthly. yes, no one should try to start-up a business online. Keep this clear: the ONLY value the internet has brought is lowering the cost and widening access to communication and research. if you think it has done anything else, then you are making an error. If you are basing a business model on the thought that the internet has done anything else, you will lose money.
Surely Amazon.com is 94% brick and mortar. When I search for things to buy, I often end up, through amazon, buying something from a brick and mortar store. And now that Amazon is starting to charge tax, will we not see the showrooming tables turned on Amazon? Will we not see people walk into a local brick and mortar and show the local merchant the amazon best price? And will the local merchant not match that price plus shipping and handling (which may be higher all-in on amazon than a local purchase?) There is a huge advantage to having it right now.
Also, retail is theatre. We working at the specialty level are exempt form all this trouble. Bookstores that act like they love books are doing well. B&N is dying. Crown Book is gone. No loss there.
At some point the pendulum will swing back. Have a business meets the needs of customers.
Post a Comment