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
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10 Comments on "Instant Companies"
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Too few manufacturers will take the trouble to bypass the retailer and go directly to the consumers. Their specialty is manufacturing. They have enough problems with that. Retailers have other things to worry about.
Let’s face it: Business 2.0 has been chock full of “get rich quick” schemes since its inception. This one is just as naive as the thousands that have preceded it.
As a working journalist and Walter Mitty-style entrepreneur/dreamer for the past 35 years (shudder), I’d just say that if the author of the Business 2.0 article had the system down so well, and it really worked that way, he would be doing something other than writing articles for magazines.
Down boys, down. Yes, I agree we do have to consider the source here, but just because the Business 2.0 author doesn’t know what he’s talking about, doesn’t make him wrong. Taking exaggeration and over-simplification into account, new design and manufacturing processes coupled with internet-speed PR and marketing are undoubtedly affecting speed- and ease-to-market. And that’s going to undoubtedly exacerbate the new product proliferation problem for retailers. If you’re at the receiving end of this pipeline, you may have to start exerting some backwards pressure.
I completely agree with Don’s take on the article. As a consultant to suppliers, it irritated the heck out of me. The part about conducting a Google search by entering your product and “China” in order to open up a world of manufacturing opportunities was actually hilarious. The article also left out one other little step, once your “hype machine” is in full gear, what do you do when no one wants to buy it anyway and/or you’re incapable of taking in an order and shipping it?
“Ah, but a man’s reach should exceed his grasp,” as Robert Browning might have characterized this matter, “Or what’s a heaven for?” Well, a heaven can be considerable publicity and a paid article in a popular magazine, even of its thoroughbred horse-of-an-idea never leaps forward from the starting gate.
Dreams, like schemes, oft are more profitable in their presentation than in their implementation.
The process may not be as advertised, but that doesn’t mean there isn’t an opportunity for retailers to differentiate through a process that brings innovative products to customers more quickly. Even if those innovative products took many months rather than weeks to go from concept to reality, they’re still new to your shoppers.
An easy way to test the appetite of shoppers for new products is to offer them exclusively online at first. This model is a very cost effective way to use your online store to test the potential of new products. Offering new products online first also makes your online store a destination site. It’s where the latest, greatest can be found.
The products that become wildly popular online can then be moved into your stores to the delight of even more shoppers. Letting shoppers use their wallet to vote on the new products you carry is good for shoppers and good for your business.