Sunday, March 19, 2006
Retailing, iPods, and if Bill Says It's Bad, it's Probably a Great Idea
The Internet now drives 25% of all retail sales. Even if they don't buy through an electronic source, more than two out of three shoppers research products online. Given the strategic importance of this channel, it is mind-boggling that leading retailers like Target, Toys 'R' Us and TJX outsource e-commerce or do not sell online. In contrast, one-time Internet sales specialists like eBay and Amazon now mail millions of catalogs and are rumored to be mulling building stores.
The idea of an amazon.com store is probably dumb, but already stores supporting the eBay concept have been popping up nationwide without eBay's financial involvement. One of the concepts in retail management is the "wheel of retailing." It's good to keep that in mind, not just for the retail business, but also for communications media. The most important thing is that amazon.com and eBay are brands. Amazon is not a good executer of brand strategy: sure, everyone knows it as books, but the company has every intention of becoming the e-WalMart. Books still dominate its sales, yet it has many other categories that do not do as well, and won't in the long run. This kind of line extension has been historically quite deadly; amazon, for all of its sales volume, does not make much money (Trout & Ries write extensively about the "line extension trap" in their books Postioning and Marketing Warfare -- a summary is at http://marketing.mcdar.net/54412.php). eBay, on the other hand, is quite a strong, well-crafted brand. Its name has become the generic description of a marketplace of its own creation. Its profits show it much stronger branding strategy. It also tends to keep the brands it acquires as distinct businesses in the minds of its audiences (PayPal, Skype, etc.) rather than rename them "eBay Payments" or "eBay Phone."
The article: http://online.barrons.com/article/SB114263884236801832.html?mod=9_0031_b_this_weeks_magazine_main (requires subscription; e-mail me and i can forward a 7-day link)
The "wheel of retailing": http://www.marketingpower.com/mg-dictionary-view3430.php
I wish i could have found more about it online, but this short definition will have to suffice. What's the point? The marketplace is always reshaped by constant change of demographics, consumer tastes, technologies, and much more. Retailing is always changing to meet the new opportunities those create and destroy the techniques that no longer work. Think of it in terms of "creative destruction" as economist Joseph Schumpeter popularized http://en.wikipedia.org/wiki/Creative_destruction
How people use search: it's probably different from what you think
Bill Gates has trashed the $100 laptop idea as expounded by Nicholas Negroponte of MIT. Therefore, it must be a good idea.
iPods in college as "study aids"
The "iPod generation" will be important to watch. They will be more open to the concept of "e-books" or whatever they end up being called at the time, and will expect all kinds of downloadable media over high speed networks wherever and whenever they want it. I would expect that some publishers are anxious to try "licensing" of textbooks for example, where you can download multimedia course materials and have them expire at the end of a semester or pay a fee for "lifetime access." Publishers have wanted to kill the used book market for some time, and time-limited electronic formats may be one way that they will try.
Personal note: we've started making college visits with our son who is still ways from actually applying anywhere (though we know the old saw "the days are long and the years fly by" quite well). Every college we have visited "gives away" a "free" computer to all students, which they turn in at junior year for a new one. They can "keep" that second computer after they graduate. I'm amazed at how many people don't realize that's in the cost of tuition, but that's another matter. It's hard to believe that colleges won't be looking to leverage those IT assets more and more in the future. Whether or not the iPod thing catches on in other institutions may be determined how the iPod itself evolves into a powerful portable multimedia computer. If you don't think that's the path the iPod is on, then you're not paying attention.