By Bill Bittner, President, BWH Consulting
The Business 2.0 guide to The New Instant Companies describes how a product idea can be taken from conception through production and into promotion in three quick steps.
Step One: Design the Product.
By using the latest PC based design tools and then loading the design into Web-based manufacturing design tools, creators are able to go from thought to production designs in 60 days or even less. This allows fresh ideas to enter the market place up to the last minute.
Step Two: Find a producer.
Chinese companies anxious to manufacturer products have their capabilities well documented on the Internet. Often the manufacturer will have its own English-speaking liaison to facilitate the process. A five percent fee will get you an independent representative to locate a manufacturer.
Step Three: Promote the product.
The Internet is full of Web sites and blogs that will serve as entry points to various consumer demographics. The article describes increases in Web traffic (it doesn't indicate sales) from infinite (0 to 400 hits per day) to 500 percent (20 to 10,000 hits per day) as the result of getting a product mentioned. In some cases, this also leads to presentations in more traditional advertising, such as magazines or TV.
This new paradigm for manufactured goods impacts retailers two ways.
The obvious is in sales lost to the Internet. If people buy online, they don't need to visit the store.
The other aspect is increased risk associated with new products. If the product is easily produced and quickly available, how much market testing is necessary by the manufacturer? If a manufacturer does decide to use the retail channel, how can retailers be both accommodating and profitable?
Moderator's Comment: Are retailers prepared for the new world of manufacturing described in the Business 2.0 article? What more do they need to do and what is the likelihood they will be able to make the adjustments necessary to keep up?
I believe retailers, more than ever, must work to improve their speed to market and their recovery techniques for when the unexpected occurs. At the front end, slotting fees and other deterrents to entry must be reduced. There are legitimate reasons for some of these barriers because there are costs associated with adding a new product and not every one of them will be a hit. This must be weighed against missing an opportunity because the manufacturer decided to go directly to the consumer.
If we reduce the fees on the front end, maybe we can increase the fees on the back end for the failures. By encouraging manufacturers to participate more in the markdown of excess merchandise, we keep the doors open to new products but share the burden of risk with the manufacturer. Performance contracts that set aside some of the up front revenues to finance potential liquidation may be a way to create a shared consequence. - Bill Bittner - Moderator