QR Code Update: Even the Dead Can Use Them

In reply to a post yesterday on QR codes, a past participant in my seminars who trades gravemarkers emailed me this note...

On Jan 12, 2017, at 8:06 AM, LR wrote:

HI John,

 

Hope your new year is going good.  I read your blog every day ...  Several monument companies have jumped on the QR code idea without much success.  They give the QR code and charge a lifetime charge for the website but my customers just are not buying into the idea,  The last one I did I have a company make a QR code that liked to a Facebook site and the customer liked that and cost was only $45.00 for a QR reader.  Who knows how it will all go in the future.

 

Samuel

You'd think people would be dying to have a QR code on a gravestone.  (hahaha... what a wag am I!) So you can LIKE the dead guy on Facebook?  Does a dead guy care what we think? Well, who cares, if it is what he wants.

This is a main reason for teaching, the things you hear about...

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Dangers of Import - Retail

The problem here is two-part, one is import/retailing, and the other is not competing on design:

At the small business level, we enter the market at the place of the void, products are solutions to problems, and there are no solutions you cannot improve upon.

Your own designs are a solution to a problem not yet addressed, so you'll own that market. You never need compete on price.  Off the shelf is a solution already established, so you cannot own that market.  You are obliged to compete on price.

A retailer is better off to buy from importer who designs his own products.  As the designer, the importer has come up with new-market-tested items, still rare enough to make a retail store exciting, plus acceptable to USCustoms.

A retailer trying to gain savings by cutting out middleman causes losses...

Swope had another smaller shipment en route from Morocco and could see more difficulties ahead. Ornate wooden jewelry boxes with some Mother-of-Pearl inlay were part of the Moroccan shipment and Swope learned that Mother of Pearl qualified as a “wild product.” 
“One of the most unpleasant parts about this whole thing is that I felt like a criminal. I felt like I was in violation. I was just feeling awful,” he said. “They were holding all my merchandise and I couldn’t talk to them.”
Sorting through the mess was time consuming and Swope estimated it cost him more than $20,000. 

A common retail tactic is to "stack 'em high, watch 'em fly" ...  that is to buy a bulk order and use it as a loss leader...  that is great with a product off the shelf overseas where you can get bulk prices, and a known commodity, but exceptions prove the rule.  That works.  but not buying small quantities of known off the shelf, or buying any quantity of unknown off the shelf.

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Copycat Follies - Part Two

Yesterday in part one, we began reviewing an article featuring a fellow complaining of copycats.  I promised to follow up on this part and the rest:

In some cases, factories will make products that physically resemble ones made by prominent brands. Quality may vary... ...Other times, a Chinese partner factory will produce extra units of a product they agreed to make for another company, and sell the surplus items themselves online or to other vendors.

Jack Ma, founder of Alibaba, drew criticism when he told investors in June (paywall) that fake goods “are of better quality and of better price than the real names” and come from “exactly the same factories” as authentic goods. But there’s some truth to his comments.

Yes, true, but no, not a problem.

Scenario one: products that physically resemble the original of varying quality.  When was the last time you went shopping for something that "physically resembles what you want, but is of varying quality?"  Not recently?  Can't recall.  Now there is the problem.  People who want the real thing will buy it.  People who do not care, or cannot afford the real thing, will not.  Those who trade in product that physically resembles the original but of varying quality, do not sell to the customers of the original.  They sell to those no one else wants, product no one else offers.

Keep in mind factories must design, finance, produce, market and deliver the goods.  It is not as though they do no work for their money.  They just go after market no one else wants.  Why waste any time stopping that which has nothing to do with you?

Scenario Two: A factory produces more of the real thing than ordered by you, the idea-maker.  You mean to tell me you have created a product, for which there is a market, and you cannot figure out how to meet the entire market?  Obviously if the factory does an overrun to meet a demand, a demand of which you are unaware, then you are losing out for your lack of perspicacity.

You really ought to learn from your supplier how he finds markets you cannot, which you could not perceive.  And then work with them.  There are agreements that effectively encourage our suppliers to make enough to cover the entire world demand, plus pay you, but once you are infected with the disease of rent-seeking as manifested in Intellectual Property Rights conceit, then you cannot move on to the better way.  A way I was taught by those thriving in international trade way back when, and I teach in my seminars.

What the Chinese do is right an just, natural, fee market activity.  Capitalists immediately draw on racism when they are confronted with people behaving well.

Many analysts and historians have attributed Chinese counterfeiting to perceived aspects of Chinese culture like its emphasis on memorization in education, or an authoritarian government that stifles innovation.

You see, according to the rent-seekers, there is something wrong with Chinese people. They are counterfeiters. Never mind that they are not, no one has established that they are, by any definition of the word.  Let's just proceed from the basis that we get everything, no one else gets anything.

Let's not. Instead, pause for a second, take a deep breath, and proceed as if there is nothing inherently wrong with being Chinese.

(Shenzhen's) rise throughout the ’90s and early ’00s coincided with a boom in outsourcing among global multinational corporations. Instead of overseeing all the manufacturing of all the parts inside a product, large global hardware companies signed contracts with local manufacturers in Shenzhen to make and design products piecemeal. These contractors would then turn to smaller sub-contractors to help fill orders.

Here inadvertently, we come back to a fundamental point in international trade.  What we exploit when we import is cheap management.  Not cheap labor.  All that work that is management-intensive, we off-shore to people who do it better, we exploit.  We exploit cheap management in international trade, not cheap labor.  Trade patterns confirm this.

But to the text: Subcontractors is nothing new, anywhere.  When you want a house remodelled, there is the general contractor, and subcontractors.  Of course.

Many of the factories involved in these fragmented supply chains were small, family-owned entities operating without government approval. As they worked together, they realized they could do more than just supply parts that ended up in name-brand hardware. They could create rival products on their own, and reach customers who were too poor to buy a Nokia phone or Apple iPod, said Lindtner.

Here we go again.  There is something wrong with Chinese people.  They work without government approval.  Better to have 90 million boys in USA living in their mom's basements awaiting government approval than anyone actually take any initiative.  Not only that, Chinese people cooperate and create synergies. And with this new found skills, they can create rival products.

You mean like the Japanese who created better cameras than the Germans, and better cars than the Americans, and better fabrics than the British?  Yes, the Chinese will get there too, but we will never see it coming if we presume there is something inherently wrong with people who are Chinese.

If people are too poor to buy Apple or Nokia, then they were never Nokia or Apple customers.  Just what problem is this article addressing?  Hard to say, except another iteration of the scientistic racism and rent-seeking that is essential to capitalism and its devotees.

They banded together, at times sharing the recipes for specific electronic devices on online message boards. Thus began the shanzhai phenomenon, a word that literally means “mountain fortress,” but came to stand for products that skirt existing intellectual property laws. Phones and consumer electronics with names like “aPod” and “Nokla” flooded the market in the late ’00s.

Banded together = Bandits! Yes, every time you turned around, you saw someone on an aPod or Nokla, which flooded the world markets  In fact you probably have a half dozen of each in a drawer somewhere.  Not.

The shanzhai era in consumer electronics gradually faded as incomes rose and brand-name smartphones became more affordable. But it enforced a culture of knowledge-sharing among manufacturers, wherein no single product design is sacred. Lindtner compares the culture of Shenzhen’s manufacturing ecosystem to the open-source movement among software developers. Much like how programmers will freely share code for others to improve upon, Shenzhen manufacturers now see hardware and product design as something that can be borrowed freely and altered. Success in business comes down to speed and execution, not necessarily originality.

No!  You mean free markets actually work, when allowed to?  You mean products start out expensive and over time the prices drop to the point virtually everyone can have access to that goods and services with their own money?  Imagine that.  People worked so hard they put themselves out of business, and are now working on higher-order goods?

“It’s understood that re-iterating or copying is part of the culture, and whoever is better and faster is going to make the deal,” said Lindtner.

You mean good management is important?  That is scary, given USA managements has atrophied to the abysmal.

Nowadays, China’s copycat phenomenon extends well beyond multinational corporations like Gucci or Nokia—startups are affected too. Thanks to the internet, factories and designers looking for the next hit product can easily turn to Kickstarter, Amazon, or Taobao to see what gadgets are hot.

Kickstarter cannot tell you what is hot.  Kickstarter can tell you how much money an idea hs attracted, but there is zero correlation, to date, between funding and success.   The only thing Kickstarter can guarantee is one heck of tax bill on "income" in the for of funds raised on Kickstarter, that few if any "kickstarter success stories" see coming.

As to Amazon and Taobao, it shows you what might be hot and then you can try to sell for less, by means of the profoundly expensive method of online advertising.

Why is it none of the scientistic racists who denigrate free markets ever notice factories must design, finance, produce, market and deliver the goods.  It is not as though they do no work for their money.  They just go after market no one else wants.

They message each other instantly using WeChat, China’s dominant chat app, or Alibaba’s chat software, which makes sourcing and assembly line planning even easier than in the pre-smartphone days.

Well, two things here.  If the Chinese ever get around to cooperating to this degree, then the rest of the world is sunk.  The fact is the reality on the ground is dog eat dog and largely counterproductive efforts. itn is amazing that so much good comes out of Shenzhen in spite of the reality on the ground.  Next, computerization may have simplified some processes, but it has done nothing to make what comes off the lines any better.  Best design still wins.

“Back in the ’80s people were talking about ‘just-in time’ manufacturing” as something to aspire to, he said. “But now, the Chinese don’t even know any other way.”

Well, back in the 70s, and 60s, and 50s...  in fact going back to the Garden of Eden.  Small business has always operated on this basis.  Nothing new or different in Shenzhen.

This whole next section is just weird.  It recognizes reality but refuses to accept it.

Businesses can take certain legal precautions to reduce the risk of getting copied. A first, crucial step, according to Song Zhu, who litigates IP disputes between US and Chinese firms at California-based law firm Ruyak Cherian LLP, is to apply for utility and design patents for a product that’s valid in the US, China, and anywhere else one hopes to sell.
Entrepreneurs should also sign “NNN agreements” with potential Chinese partners before revealing any intellectual property. This contract prevents partner factories from using the intellectual property themselves after first view (“non-use”), sharing it with others (“non-disclosure”), or inking a partnership and then selling extra units on their own (“non-circumvention”).
But even with these protections, there’s no guarantee that you can stop someone from copycatting your product. Zhu said that the problem lies not in China’s courts, but enforcing rulings. Winning a case against one factory is relatively easy. But suing every factory and winning is expensive and time consuming.

Like Islam, the Chinese have not forgotten the culturally superior regime of free markets.  So we start with the unremarkable advice from a lawyer: hire a lawyer.  Over 40 years in this business I have never consulted a lawyer on business, since lawyers know nothing about business.  They simply charge fees for maintaining some fantasy.  Also, why would any sane person, working for a living, want to keep secret an idea he is trying to sell?  Why wouldn't we want subcontractors involved (show it to others) if that is most efficient?  Why would we not want extra units made if a factory see more market than we do, since it is never a problem getting paid for that market too.  As government workers, lawyers assiduously solve problems that do not exist.  And charge for the service.  Not here they say all of the legal help is pointless in a free market, yet they recommend legal help.

“There are probably hundreds of small factories who might see a product on the internet and think ‘Hey I can do this,” said Zhu. “How are you going to shut down all of them? How can you even find out where they are? And the money you spend suing them is more than you can get out of the lawsuit.”

Why would anyone want to shut down any of them?  They are making things you do want to make,
selling them to people to whom you do not want to sell.  The factories must design, finance, produce, market and deliver the goods.  It is not as though they do no work for their money.  Why is the USA so destructive toward people who want to work, helping others?

This is now the position Sherman finds himself in with Stikbox. While he hasn’t pursued legal action yet, he said he spends 20% of his time tracking down copycat factories through China’s giant e-commerce sites. It sometimes takes him up to five days to figure out one factory’s location.

This is classic.  People who have zero reason for thinking an idea is theirs, knowing nothing can effectively be done to enforce their desire for a rent-seeking sinecure, nonetheless wasting time in pursuit of the sinceure.  In this way, one can waste time being a victim, and being a victim is HUGE in USA today.

The spread of copycat manufacturing isn’t just creating headaches for hardware companies and startups. It’s challenging traditional notions of intellectual property—specifically, what type of ideas are valuable, and what type of ideas are not.

Whoa.  Forty years in this business, never got a headache from the "copycats."  There is nothing "traditional" about Intellectual property, it is just a recent innovation in the annals in violent thuggery.  And there never has been , nor ever will be, a challenge to what kind of ideas are valuable, and what are not.  It is really quite simple:  what sells?  And guess what, we can also guage precisely how valuable it is...  by its sales, and profits!  Imagine that!  It is distressing no one associated with this article is aware of that.

Decades ago, a company or entrepreneur might come up with an idea and then spend years securing the patents, completing the design, devising a manufacturing plan, and bringing it to market. Enforceable contracts with partners helped ensure these ideas wouldn’t leak to competitors—but so did the high cost of starting a factory, sourcing components, and managing assembly lines.

Well, yes and no.  That goes on today.... not "only decades ago."  Plus, since 1789, there have been some 7 million patents issued in USA.  Any patent attorney can tell you this:  of those 7 million patents, almost nothing patented ever turns into a product.  Of the extremely rare instance where a patented item actually turns into a product, almost none are ever profitable.  Of the trace amounts of 'success" eery one of those would have been a success anyway, IPR or no.  Any patent attorney can tell you this, but do you think they will?

Moving the world’s manufacturing center to China makes the latter hurdles nearly disappear. Factories are set up in makeshift buildings. Cheap labor is abundant. Sourcing components is easy because of online marketplaces like Alibaba. As a result, smart ideas that are easy to turn into physical products become commoditized quickly.

Nonsense.  Finding reliable suppliers on alibaba is near impossible.  Alibaba is a firehose of wastewater when you want a sip of clear water.  Rarely do the best suppliers allow themselves to be listed on alibaba, world center for scams.  Finding the best supplier has not changed in 40 years, or 4000 years.  And product life cycle of winning products has not changed.    The internet has only created far more litter out there.

Businesses are now forced to come to terms with this new reality. It’s not enough to create a product with a groundbreaking design or features, like a smartphone case that turns into a selfie stick. Companies dealing in the creation of physical goods now must make products that are impossible to copy exactly from the get go, by focusing on a special feature they can protect, or creating a coveted brand name consumers will pay more for.

What nonsense!  There is no new reality to which anyone is forced to come to terms.  Delusional: a smartphone case that turns into a selfie-stick is groundbreaking.  From a delusional base, a solution to a problem that does not exist.  Instead of creating products for customers, the criteria becomes create products that are hard to copy:

“If you have a simple product that has some market demand, you will get copied,” said Benjamin Joffe, who works with hardware startups that are manufacturing in China at HAX, a venture capital fund. “The question is more, what do you actually have that’s defensible?”

No it's not.  The question is do you have customers, not "how can I get a rent-seeking sinecure?"

Companies can defend themselves from copying by investing in software that complements physical hardware, and then guarding it. Apple, for example, does this with the iPhone, which carries the proprietary iOS operating system that’s unavailable on other phones. Or they can invest in well-crafted branding and marketing. 

More nonsense.  Companies defend themselves by serving the customers they want, and not bothering with anyone serving customers they do not want.  For example...  Apple.

Hong Kong-based startup Native Union, for example, created an earpiece for smartphones that looks like an old-fashioned, crescent-shaped landline phone receiver.

I first saw that in the 1990s, and 100 times since.  (As you go through the images, notice these were done for flip phones, all the way back to old Motorola brick phones.) So the example this writers uses is one of a "start-up" with an ancient idea. (The writer could not take .043 seconds to google search this fact?) This is common, come up with a completely unoriginal idea, and then complain others stole it from you. Based on this, the advice is...

Founder Igor Duc later changed the company’s direction and began making a totally different product—smartphone cases made out of Italian marble that sell for $80 each. They’re more difficult to make than the average consumer electronic device, which prevents copycats from surfacing.

So design based on a problem that does not exist, not based on customer demand.  I wonder if he has asked anyone if they will pay $80 for a smartphone case that is very heavy, will crack easily, and will inhibit reception?  I would recommend he does just that, but according to the universe in which these and very many people live, the criteria for market success is difficulty to copy, not customer demand. 

Joffe, the venture capital investor, argues that some companies might even benefit from copycatting, as it can bring more awareness to the product itself. “If you have more customers buying the fake product then it creates more awareness for the real product, and it becomes an aspirational thing. At some point they might be able to afford the real thing.”

Yes, Karl Lagerfeld calls knock-offs of his Chanel designs free advertising. This too is nothing new.  It's just people who got JDs or MBAs have never learned anything about business.  But eventually they too learn how it is done, how it has always been done.

“There are other selfie stick cases but we are the only ones that have been copied. So it shows that our product is worth being copied,” he said. “The quote that comes to mind is, ‘Imitation is the sincerest form of flattery.’”

Again, as if this is his idea to begin with, as if even if it was, any of his ideas have a place in the real world, as if his selfie stick is the only one copied (how the hell would he know?), and as if copying proves market.  This article is exemplary as to what we've lost with the introduction of ex nihilo credit, two generations who have no idea how to do business.

Yet Sherman estimates that he has lost “hundreds of thousands” of dollars in potential revenue due to copycats. Imitation isn’t just a sincere form of flattery, it’s an expensive one as well.

You can't lose what you never had.  But he should lose, along with those associated with this article, the delusional world they have constructed, in which they are tormented by problems that do not exist.

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Inventions: Safety Last

Not sure why they entitle this a "fail" compilation video, it is Russian farmers coming up with innovations.  Some are not new, almost all seem very dangerous…  but the irrigation device for moving water up hill is splendid… Can you spot why the water moves up hill?  Not so obvious.

New products are unique, poorly constructed, costly given the result, and poor performers.  But iteration makes perfect.


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Cal Poly SLO Live, In Person Import Start-up Boot Camp Oct 29, 2016

You should register soon for the all-day start-up intensive at Cal Poly SLO.  The seminar is filling up fast. You can get going in international trade in a one day live, in-person intensive held at Cal Poly SLO, which is exactly midway between San Francisco and Los Angeles, so it serves both communities as well as the Central Coast.  Make a weekend of it in beautiful San Luis Obispo.

Here are the registration details...



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October 15 San Francisco Import Export Start Up Boot Camp

Join us in San Mateo, California Saturday, October 15, 2016, from 9am to 5 pm for a all-day, in person, intensive boot camp import export start-up seminar.

Here is the link to the registration and information,  and feel free to email me directly anytime regarding the seminar.  My email is on the upper right under "Have a question for John? Ask him here..."

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Next New Concept Testing V Food Export Seminar

New Hope has trademarked (ungh!) the tern "Next" (really?!) They offer a "Concept Test" to tell you if your B2B initiative will be successful "before you invest."  This is not possible I think, but they are giving 20% off through October.  Maybe because it is not possible.

It's not possible for three reasons: 

A. A study can never predict the future.  Coca Cola spent one billion dollars circa 1985 introducing new Coke, only to have the most famous fail in marketing history.  Show me statistically significant proof of the "Concept Test" and "Success."  I say it cannot be there.

B. The study is invalid to begin with, since the population surveyed is consumers, and the customers for B2B are businesses.  What consumers say, and what they will do with their money, are two different things.  The businesses to whom they should address their surveys will say "Who knows? Gotta test it."  I am sure the reason they do not survey B2B customers is any such survey would be impertinent to the sales process.

C. To be successful, you must do the work.  This is so self-evident, in the thirty plus years I have been lecturing on the side I have never said "I will make you successful."  I say only, "here is what I learned, here are the steps."  The steps are valid and reliable. Whether or not someone takes the steps is not up to me. I can only offer email support to those who are taking the steps and may have questions or need more coaching.   

I have never made anyone successful, at best I can save entrepreneurs time and money getting to their goals.  Indeed, you can get to your goals with virtually no money and little time, if the steps are followed.   If anyone says they can do more, I'd like to see how.  (And if their claim is false, I can quickly see how too!)

I guess I have two advantages:  I don't teach for a living, so I don't need to oversell this; and my entire career is trade for a living, so I know what you actually have to do to get customers.

The only way to know what a market thinks is go to your customers, B2B, and ask for an order.  If no order, then you have practical feedback upon which you can act.  You spend your time and money on adjusting based on what professional buyers say, not consumer surveys.

At some point in the game you must face a customer, even if you have paid your Next Concept Test fees.  There is no reason why the first thing you do cannot be face a customer.  Indeed, there are easy tactics to get in front of buyers before you put a dime into your idea.

You have to turn over a lot of information before you find out what they charge for the New Hope Next Concept Test, so I have no idea.  I bet is more than the $89 I charge for a seminar to find customers, that goes to customers first.  And I just need an email and a billing address, email for the course, billing address to bill you after the course.

Yes, my seminar is about exporting food and beverage, either as a principal or an agent, but the tools tactics and attitudes work anywhere, anytime.  Even domestically.  Indeed, in one part of the seminar you will compare domestic to overseas potential.  Check out assessing domestic potential based on current sales.

My seminar is online and open to anyone on planet earth, and indeed, I get people from all over.  I lead the live, online seminar. Your next opportunity to attend is:

Tuesdays, 6-7pm Pacific Time, Oct 11-Nov 1, 2016.

And you can register now and I'll bill you later, after the course begins.

http://www.johnspiers.com/Export_Agriculture/Register%21.html

Get in front of customers first.  Then adjust as necessary.

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Online Exporting Food Seminar

You want to make your own money?  You ready to be self-employed? You have no money, contacts, experience, and not much time?   How do you get from where you are to where you act on practical results - finding suppliers and customers.

Using what resources you presently have, in this seminar held online for one hour per week, for four weeks, you will be taken through four steps: establishing rationale for buyers and sellers to work with you, create your LCL MOQ FOB offer and no-nonsense competitive website (forget everything you know about websites), find and approach buyers directly with your offer to sell, and then act on practical results.

Forget everything you know about exporting, you can break all the "rules": you'll go for the smallest order rational, not the largest possible; you'll leave all of the "localization" problems on your customer; you'll get prepaid.

You will learn the tools, tactics and attitude to trade professionally and work with the top freight forwarders on the technical issues.

The course will run Tuesdays, 6-7pm Pacific Time, Oct 11-Nov 1, 2016.

This seminar is like no other, and has been hosted by industry associations and leading schools.  The feedback is stellar. Learn the tools tactics and attitudes with food that can be applied to any product form anywhere to anywhere worldwide.

Go into the Fall with a new skill.

Sign up now, no need to pay now, you will be billed to pay at your leisure.  This is a special unannounced session, so go directly to the enrollment page and scroll down to the enroll now/pay later form.

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"I Can See So Many Opportunities"

The genesis of self-employment (more accurately, customer-employment) is to suffer, that is experience passion. You experience a problem (suffer) in a field you love, and find joy in working on the solution. The finding joy is the part everyone else leaves out, and it is the crucial element in a successful start-up, the joy if it.

So many people fail at start-up for the simple reason is they never learned that there can be joy behind suffering.  Add to that the banker's lie that "it takes money to make money" and "entrepreneurship is about risk taking"  and people are off track immediately.

Joy in solving a problem trumps the competition.

When the solution works for you it is valid, but is it reliable, will it work for others?  Often not, without some tweaking, or in other words, redesign.

All products and services are solutions to problems.

There are no solutions that cannot be improved upon.

It does not take much to achieve the requisite "new" required to launch.  As a practical matter you only need enough orders to cover the suppliers minimum production run.  With samples you achieve your first warranted order, then based on customer feedback (practical information you may act on) you continuously redesign.

A common error is to imagine one must seize all possible market as soon as possible.  This leads people to borrow money to "ramp-up" and lawyer-up with IPR to protect the market, create barriers to entry. This is delusional, since the market is being created as you design, and redesign.  Any idea of market outside of that for which you presently hold orders is imaginary, delusional, and people find there is not enough revenue from the frisson of market they imagined to cover the costs of servicing the debts  they incurred protecting their imaginary market.  A dead give-away someone is delusional is if they initiate contact with a lawyer at any point.  If someone mentions "lawyer" quickly ask if he initiated contact with the lawyer, if so, know he is delusional.

The market is created in an organic process of iteration, feedback, iteration, feedback, ad infinitem in joy.  There is no forecasting where the product will go.  When Jobs started Apple Computer there was no such thing as a phone salesman, and stereo salespeople were one step above used car dealers.  Jobs died the number one phone and stereo salesman ever.  There was no forecasting that.

The work is a relentless, borne in joy, effort at presentation, feedback, correction, iteration.  At no point in the process does an entrepreneur ever take risks.  Each iteration is gauged to achieve only enough increase in demand to shorten the time intervals between placing minimum order requirements.  At the start-up, small and medium enterprise level,  entrepreneurs never seek "economies of scale" only increase of frequency of minimum order transactions.  This is the path to thriving.

One commenter declared he saw so many opportunities right now.  Really?  I cannot see a single one.  But I do know there is a process, valid and reliable, for discovering markets that right now remain unserved.  I do know the work is rewarding, and there is more work than your being can encompass, or put another way, enough work to exercise every fiber of you mind, heart and soul. I do not think opportunities can be seen in advance, it is more one insinuates oneself into a market by providing a superior value in needful things by design.

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Mall Surprise

It's been a few years since I went to a mall, and I visited a tier 2 mall Saturday.  It had a Nordstrom, Macy's JCPenney and a Sears.  I was looking for "wife-beater" undershirts (what are they called otherwise?) and I was happy with the Macy's house brand, Alfani, from a few years ago.  They were extra long compared to others around. Nonetheless I checked out the other stores for academic purposes.  First this:

Sears is suffering from the steepest decline in operating performance since 2006 among its rivals, according to a new report from research firm Green Street Advisors. Based on the firm's operating performance index, which measures same-store sales growth by gross margin percentage, Sears has seen a decline of more than 50 percent, compared with about 10 percent for Nordstrom and Macy's.

Well, that says a 50% reduction in "sales growth by gross margin percentage." Why do they use such narrow complicated metrics?  Sears top line sales have been dropping for years.  Everything else is massively complicated financial engineering.  Sears is a dinosaur with a brain too small to adjust to the environmental changes facing it. Visiting the store it was was clear they are in distress.  The inventory was sparse, it looked like Sears figured how to source from North Korea, and I don't think I saw an employee anywhere.  I moved on to JCPenney.

Here again the pickin's were slim, and a big sign told me "the line forms here."  Well, I came looking for undershirts, not lines, so that was off-putting, and I think they'd be lucky to have a line.   On a Saturday afternoon they did not. Not much on offer, looks like they skipped bringing in new inventory.

So finally to Macy's where I found the undershirts, same price as a few years ago.  Macy's looked ok, although the style was uninspired, and near impossible to tell adult from children's clothes.  Also, there were discount bins with goods clearly left over from the Christmas season (Ugly Christmas Ties, as a gag gift item.)  In May? The clerk offered me a 20% discount if I acquired a Macy's credit card on the spot.  No thanks, that costs too much.

Since I am disinclined to spend time at malls, I did not check out Nordstrom, I left having acquired my shirts.

Come to find the Macy's shirts are at least 15% shorter now than the last time I bought.  Fie!  Like everywhere else, quality nor quantity is being cut to maintain price.  We are becoming so third world.  That Macy's brand just lost me as a customer.  But who cares, Macy's exists to trap people with usury, which keeps their stores open, for now.

(Update: So after a week of wearing these shirts and cleaning and wearing, if find the whole shirt is a size smaller, not just a shorter tail.  What is being marked large today is what was medium a few years ago.  The problem is the same, just a difference in tactic.)

A smaller but consistently profitable fruit packer once told me the key to success was pack to grade and consistent quality.  You'd think that would be the standard, but it is not.  Many packers try to cheat on this, and offer lower price.  A brand get associated with quality.

If I am right, and Alfani was the best value in 100% cotton undershirts, then if someone was into that product area, they could easily put their brand on the same thing from the same factory in (is it Pakistan?) and then maintain the standards no matter what. Maybe the weave could be a bit denser. Of course never sell to Sears, Macy's, etc (they would not buy from you anyway).  Sell to specialty small retailers, which will be reviving now that these dinosaurs are dying.

At a bus stop I was conversing with an American of African ancestry, which means the odds were better than even he was an ex-con.  He complimented my jacket, and noted how his ghetto inspired outfit was perfect, not an element out of place and everything first rate quality.  He said he was a musician on his way to a gig, which he usually did for free, hoping for break.  I suggested with his care for sartorial perfection he might open a menswear store.  We discussed that a bit.

Gumps got started selling mirrors to saloons in San Francisco during the gold rush.  Big Business.  Mirrors were necessary to get more light into spaces before electricity, and frontier bar fights often yielded broken mirrors.  Seattle's post war premier women's fashion house, John Doyle Bishop, got his start dressing hookers in Alaska, and went legit in Seattle when the war ended.  Every saint has a past, every sinner has a future.

A key to this is rents dropping.  Sears smartly spun off their real estate holdings and sold them at top dollar.  Well, a smart guy in the center did so, selling off the REITs to guess who, school pensions.

The damage is done during the boom years.  The bust is just where it is decided who pays for the damage.  If you have property, paycheck or pension, you are a sitting duck.  Right now, pensioners are being hammered, suffering daily, and not a peep.  Maybe people are making noise, which explains Bernie and the Donald.

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Pick A Show, Any Show

For your start-up, a time deadline is a great motivator.  For a business, customers are the most important thing, and design (getting the product or service right) is the hardest thing.  A trade show puts you in the middle of the competition, and fires up your motivation, imagination and builds confidence as you realize "I can do this".  Not to mention the people you meet.

Pick a world class city, that is easy to get to and easy to work in.  I choose Hong Kong.  Sure, China is the 800 pound gorilla at Hong Kong shows, but for that same reason traders from Chile, Botswana, Jordan, Germany, Singapore, Mexico are all there too.  You can "go spartan" in Hong Kong and be clean, safe and healthy, or you can find rooms as expensive as anything in London or Tokyo.    Hong Kong's unique system allows for all at once.

Then there is the endlessly fascinating parts of Hong Kong, for example, competing private companies issue the currency.  You'll have several hundred Hong Kong dollars in your wallet, and several different designs, since they come from different private companies.  That in itself is work a long study.

All the big acts on World Tour stop in Hong Kong, last week Madonna had a couple of shows. Imagine the story of seeing Madonna in Hong Kong while you were there.  Or Yo-yo Ma or whoever your favorite happens to be. And then the Museums!

Hong Kong has an amazing selection of shows put on by many organizations.  I've long admired (going on 40 years now) the professionalism of the Hong Kong Trade Development Council and the shows they put on.  Wine, fashion, jewelry, film, housewares, you name it.

So pick a show, note the dates, start organizing a trip around a visit.

http://www.hktdc.com/info/trade-events/EX/en/Exhibitions.htm

Some people like a guided tour to such a new thing, and I offer that here.

But Hong Kong is so accessible, professional, safe and so on, you can do it on your own if you like.  Either way, discover Hong Kong soon!

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Microsoft Windows 9.5

What do Computers and Air Conditioning Units have in Common?

The both work fine until you open Windows.

How come Microsoift skipped V 9 of Windows, and is going to v 10?

Because there was already a Windows 95, and can you imagine the confusion and problems with a Windows, V 9.5?  This would be a typical microsoft mistake, a company that has been a net deficit in the world of computers since its inception.

The fact that microsoft avoided causing a problem is now, very new, and perhaps since Gates and Blamer are no where to be seen, the company might actually provide some net value...

For the last few decades, Microsoft would sit down and build a new version of Windows every three years or so. This new version would start shipping on new PCs, but by and large, consumers didn’t run out and buy the new version to upgrade their computers. They simply got the new Windows when they got a new computer. With Windows 10, Microsoft isn’t even getting cash from those who do want to buy the latest and greatest version. Following the furor over Windows 8 and it’s tablet-centric design, Microsoft has announced Windows 10 will be a free update for one year from release.

About time they began to operate responsibly.

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Are Trade Shows Relevant?

Of course, they are critical to success, but people have lost the art of working one...  this articles gets a bit at it, but then the comments really pay off -

1. if you expect to do business at a trade show, then book sales meetings in advance.  Don't expect the show to be a success based on traffic.

2. Confiscate all communication devices from staff while on the floor.

3. Sell properly - "approach, qualification, agreement on need, " etc.  If you have not determined within ten seconds whether you are speaking to someone who is ready willing and able to buy, then you are wasting your time at the trade show.

4. Small booths are the most interesting (because they have new product.)

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How To Manage Unexpected Demand in Specialty

You have two options at the specialty level to manage unexpected demand:

1. Raise prices.

2. Put delivery out further.

Apple has chosen #2 for its smartWatches.

Apple Watch pre-orders cause backlog until summerApple Inc started accepting pre-orders online for its new smartwatches on Friday and demand was so high that the orders were backlogged until the summer.

No, Apple's decisions caused the backlog, not the pre-orders.  Apple might have raised prices to the point demand dropped sufficiently to match production.

The Apple Watch is Tim Cook's first new major product, and the company's first foray into the personal luxury goods market. It's also Apple's first new product line in five years, and its first since the death of co-founder Steve Jobs, who helped create many of Apple's most iconic products, including the iMac computer, iPod media player, iPhone smartphone and iPad tablet. Investors are expected to be looking to how well the Apple Watch does as a sign of whether Cook and his team are still as innovative without Jobs' influence over product design.

No, Tim Cook is making Apple small, as in pusillanimous.  It shows in his product.

 Prices then go up to $1,049 and $1,099. The high-end version, called the Apple Watch Edition and made from 18-karat solid gold, will range in price from $10,000 to $17,000

No, 18 karat is 75% gold, not solid gold.  100% is unusable in everyday products.  Personally, I like 75% gold, 22.5%, copper, 2.5% silver, AKA rose gold.

But back to the point.  In specialty, you never expand production much.  If 1 and 2 above do not do the trick, then kill the item, and do a version of the original.  This is how Ty Warner made a billion selling Beanie Babies.

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Traceability Vs Clean Label

We must never let a government make definitions, for they render them incomprehensible.

Market researchers tell us that consumers are seeking ‘natural’ products more than ever – and ingredient suppliers have responded by providing ways to ‘clean up’ product labels – but what do these terms really mean?

Since the word organic has become meaningless, and people care, now the idea is "clean labels" which work to be specifics to what the given food has gone through.  Well, take that desire to its apotheosis, traceabilty.  The QR code what takes the consumers smart phone to a page that not only has a quick video on the entire process of the food in question, but further affirms that particular unit that the customer scanned is legitimately from the source.

In all specialty products "provenance" is key.  With traceability you can build loyalty with provenance. Right now companies offering traceability systems are charging too much to do too much.  When someone comes up with the right offer, I will highlight them here.

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Stop Worrying About Price

One of the big inhibitors to people pursuing a successful business is their discouragement when they see their prices will have to be relatively high.  Another big inhibitor is fear someone will steal their idea.  De minimus!

Yes, price is one of the Four P's, product price place promotion.  But just one, and not the most important.  At the specialty level, product, that is, its design, is most important.  Price is least.  Price only has a secondary issue or what volume at what price point.  iPhones would still sell profitably at $2000 or at $500, only the quantity sold would change.

Even when selling the exact same thing, price is not that big of a deal, then place and promotion matters.  For example, here is a famous crisp bread that sells for $4.49 as a stock item in an upscale grocery store.  Not two miles away, it sells for $3.89 as a stock item at Safeway, some 60 cents less.  but wait wait...  Safeway often puts it on sale.... another buck forty off, for a total of two bucks less.  And there is more, a manufacturers coupon is on the price ledge, for another buck off: total $1.49.  I save $3 off a $4.49 item by stopping by 2 miles away.

You know nothing, let your customers decide if the price you need charge is right.  All you need is enough customers at a profitable price to cover the supplier minimum, in a workable amount of time.  If so, you are on your way.

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It Does Not Take Much Design to Compete On Design

I've had tailors from Hong Kong visit Ms. Yang's boutique and express amazement at her entrepreneurial acumen.

Her self-named store on Fourth Avenue in downtown Seattle, which sells her evening and bridal designs, opened in 2000. Since then, Yang's designs have earned her a successful business and recognition. She has been named Best Couture Dress Designer by Seattle Bride Magazine for twelve consecutive years and was awarded Nellie Cashman's Women Business Owner of the Year award.
Although Seattle is not known as a fashion mecca, Yang decided to start her fashion career in the city where she grew up and lives with her family.

Her "offer" is surprisingly simple, and I won't spill the beans, but the lesson is eternal: it does not take much to achieve "unique" and compete on design, not price.

Don't overthink your offer, and test it as soon as possible with customers.

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China Online Sales Reported at 10% of All Sales

But it is slowing down, and that figure is both B2B and C2C.

Using data from Chinese market research firm iResearch, China internet business news site China Internet Watch reported that total transactions from China’s online shopping market reached 628.76 billion yuan (US$101.58 billion). This includes a combination of business-to-consumer (B2C) and consumer-to-consumer (C2C) transactions. This is the first time online shopping has crossed the 10 percent threshold of total transactions, and the rate is expected to rise in the coming years.

So a internet business pure play is to still miss 90% of your Chinese customers.

Watch Costco, they are getting hundreds of millions in free metadata from Taobao.  Watch what that data tells them to do.


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World Trade In Services

The world of domestic service is rough trade, and here is an example of among others, a lawyer going into private law to do good while doing well.  And, of course, they are based in Hong Kong.

Now, a lawyer and ethics professor, an accountant, and a newly minted MBA grad hope to disrupt this system. Their start-up, Fair Employment Agency (FEA), is a Hong Kong-based company that places domestic workers without forcing them to pay placement fees. FEA is registered as a charity, but the founders’ goal is to turn the company’s placement operations into a sustainable business, allowing it to expand through Southeast Asia, then perhaps the Middle East and beyond.

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Phonebloks - Modular Smart Phones

Now this is interesting.  I recommend it to as many people as possible.  I am a fan of Apple computer, but I've noticed their offerings are getting less customizable, and more complicated.  They cost too much to do too much.  I used to buy an Apple about every ten years, now after five years, the things get resistance from the web.   (If no video below, go here...)

https://www.youtube.com/watch?v=oDAw7vW7H0c





Sure, absolutely, do this for phones.  But for computers to.  They charge too much to do too much.

But don't let google or apple dominate this.  Make it crowdsource, and someone, someday, make Linux work for people other than computer science phds.  Here is at least one alternative.

It would be great to move away from the mass producers. Now this is cool...  I'd love to see this happen, and go further, take it to computers...

I don't want a smart phone, I still use a flip phone...

and the things could be designed to recycle easier, after the ten year wear-out period....  peel off the gold, separate silicon, extract the rare earth metals....  instead of just dump...

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