Category: Thoughts

Channel Cannibalization

I get that channel strategy is difficult for businesses. If you sell only wholesale, like the ethical-and-stylish shoe company Novacas, you lose out on a direct relationship with your customers. Still, it’s a popular strategy especially for smaller companies that need the publicity and marketing stockists can do, and/or don’t have the size to run its own retail operation.

If you sell only direct, you’re doing all the work of both building your product, and also running the retail business. American Apparel, for example, used to sell only wholesale, but eventually opened its own retail line as well. But they now have to deal with running an entire retail operation, with all that real estate, all those leases, all that payroll, all the liability that comes with running a high-turnover, image-focused company.

And if you sell wholesale and direct to customers, you compete with your stockists. This was a major concern for Novell when I worked there: Many of their customers bought direct from Novell. Others bought from independent systems vendors or consulting companies. Novell was in the awkward position of trying to balance running a consulting team that sold its software to customers, a sales team that sold its software to customers, and then partnership teams that competed with those two teams to sell the consulting and software indirectly to similar customers. Lots of companies, especially big companies, wind up in that situation, for very good reasons. Most of your customers will fit clearly into one of the appropriate channels… but there are cases where the channels compete with each other instead of with your actual rival companies.

And then there’s Nike, which seems to have dozens of overlapping but incomplete channels for everything, so that no one place has access to their entire product line, not even their official direct stores. You can buy Nikes at any online or offline athletic goods store, or any shoe-selling website, or Nike.com or their official Niketown retail locations.

But you can’t get all the shoes at any of those places. Zappos sells more than 500 different Nike shoes, but that’s far fewer than the number of models Nike makes. If you want the unusual exclusive ones, you have to go to an unusual exclusive store, like BDGA in Boston. Not too surprising.

What’s somewhat more surprising is that even Nike.com carries a pretty limited selection of Nike shoes! Click “Sports” at the top of that page: There are 10 sports they offer gear for, including the very general “Training.” Everyone knows Nike makes shoes for more than 10 sports.

If you want, say, the Romaelos 2 weightlifting shoe, which is a pretty specialized shoe but not THAT weird, you’d have to go to their retail channels – the specialized powerlifting shops like Eastbay and Again Faster, or the more general shops like regular old FootLocker.

I assume there’s a very specific set of reasons that they use to determine which channels will get a given product. Obviously, the Kanye West collab will be limited release, because the whole point is that it’s hard to get. Obviously, a plain Nike Free running shoe will be wide release, because it’s for everyone who puts one foot in front of another. But what’s the justification for not selling all your specialized-sport shoes on your official website?

Signs I am Pushing 40

  • Have incurred a genuine dumbass weekend-warrior sports injury (Rhomboid strain. Class of injury: Not painful so much as really, really annoying)
  • Excited about having new gutters.
  • Big plans this weekend include “go shopping for shrubs.”
  • Planning on purchasing some house numbers so that my address is more legible on the outside of my house. In case someone has to find it in an emergency.
  • Read entire brochure about life insurance.

You know what surprises me about San Francisco?

There are so many problems that can be solved by money, and so much money, and yet the problems have not been solved.

I got to thinking about this after yet another MBTA breakdown last night, waiting on a freezing outdoor platform for an hour while two different trains forgot how to operate, and trolling the knee-jerk “screw transit” crowd on Twitter. Like you do. I warned people that the T was underfunded, and like clockwork someone came out and announced that no, it was just unions and waste. There’s plenty of money in the budget! They’re just paying pensions and stuff.

//platform.twitter.com/widgets.js

But here’s the thing: The pension mistakes of the 1970s cannot now be clawed back. What are you going to do to make sure that the trains themselves, now decades past their expected lifespan, are capable of running at all, much less running on time? Have you considered just spending a billion dollars on a new set of trains? I mean, it’s a ton of money, but it’s just money. It exists if the willpower exists. Yeah, sure, it would mean a gas tax increase. You know what’s expensive for drivers? Being stuck in traffic. You know what cuts down on that? Reliable transit. It’s politically difficult because people don’t believe it helps them. But there’s a ton of money out there that can be allocated to solving problems that can be solved by money.

And in San Francisco, the great big pool of money is even bigger and the problems are even more money-related. People are fighting about the bus Google runs for its employees. For crying out loud, Google could buy some goodwill here and just run a free or low-cost bus service for the general public. Or help establish a consortium that companies pay into and which then allows any employee to ride for free? (You could charge $5 or $10 to the general public to make it more palatable). The Route 128 business group does that in Boston and it’s totally uncontroversial. Just a series of shuttles from transit stops to office parks that are not otherwise served. If you call it the Bay Area Commuter Network and abbreviate it BACN you’d even have all the hipsters and knee-jerk ironists on board.

Or Google could buy a few county commissioners – I’m sure they’re available for SOME kind of price – and start persuading everyone to upzone everything from San Jose to Marin. It’d go a long way to alleviating the housing crunch and take the pressure off the roads and pressure for the bus system and so on. It’s an eminently solvable problem. All you need to do, frankly, is throw some damn money at it.

In which Aaron gets dragged into conservative media

After links from both Matt Yglesias and Andrew Sullivan, I left the confines of my usual filter bubble and read a piece in (lord help me) the National Review, about poverty in Kentucky, and commentary on it in The American Conservative.

And if I’m looking for thoughtful writing with which I disagree, those are reasonable places to find it. More so than, say, RedState, which I won’t even link to.

The article overall is worth reading and wrestling with, and it brings up problems in both right- and left-wing solutions to the serious problems of rural poverty.

Still, none of the blogs I’ve read on the article, and none of the (often thoughtful, generally well-moderated) comment threads, noted this throwaway line:

Kentucky is No. 19 in the ranking of states by teen pregnancy rates, but it is No. 8 when it comes to teen birth rates, according to the Guttmacher Institute, its young women being somewhat less savage than most of their counterparts across the country.

I’m sorry, did you just call the women of the more prosperous portions of the nation savages? Because they are willing and able to control their fertility in a variety of ways?

Poverty indeed.

Elsewhere

I’ve been reviewing a number of books over at Bookdwarf.com. Most recently I talked up my friend Patrick’s impressions of BMW-enthusiast mechanical guide/memoir Memoirs of a Hack Mechanic and Margaret Atwood’s MaddAddam. Somewhat earlier, I read about the nexus of sugar, slaves, and industrialization in Sweetness and Power and was fascinated by a revealing take on ocean shipping in 90 Percent of Everything.

Arbitrage Opportunity Alert

Ta-Nehisi Coates points out that the editors and writers from the National Review (no, i won’t link to it) think that young black men are likely to be criminals. This sounds like an opportunity for middle-aged white women to rob them blind. THEY WILL NEVER SUSPECT A THING. IT’S THE PERFECT CRIME.

Wait, is this basically the plot of The Bling Ring? In which case, never mind.

Anil Dash is pretty clever

Anil Dash has a list of 10 internet laws that seem pretty accurate.

They all have exceptions, of course. Like Rule 8: When a company or industry is facing changes to its business due to technology, it will argue against the need for change based on the moral importance of its work, rather than trying to understand the social underpinnings.

Sometimes technological disruption is perfectly legit, and sometimes it’s actually undermining good things. And sometimes it’s both: Unlicensed amateur taxi drivers are not a great idea, but taxi commissions are also corrupt and unhelpful…

I’m not sure where that leads. But the list is definitely a good lens for thinking about business and marketing these days (and probably in the past as well, in most cases).

Marketing’s enthusiast problem

When you think motorcycle rider, you might think of a dentist on a big Harley cruising around on the weekends. But your average motorcyclists live in India or Southeast Asia and have a 250cc or smaller motorbike as the primary transportation for their household. The American motorcycle market consists almost entirely of enthusiasts, and they’re visible. But manufacturers, if they want to sell anything in volume, need to keep the meat of the market in their sights.

Automakers have a similar enthusiast problem: Their most dedicated fans are not, in fact, their best customers. And focusing on their most enthusiastic customers can lead them into serious trouble.

Honda, for a while, wanted to be the cool car company. So they made some cool cars, and they courted the aftermarket tuner crowd. The next thing you know, their brand was tainted by things like this:

Your typical driver is not a car enthusiast. Your typical driver has an appliance that takes them places. Jalopnik and the other car media may hate beige, but the enthusiasts are merely the most vocal segment of the market. If the average driver buys a car magazine, it’s the Consumer Reports car issue. And they only buy that when they’re in the market for a new car.

When you look for the enthusiast problem, you see it everywhere. Home electronics, video games, PCs, you name it. The enthusiast audience thinks it’s the real audience. In many cases, the industry leaders are enthusiasts themselves – that’s why they went into the industry, after all. But that means they often fail to understand that their audience doesn’t love their products the same way they do.

The average college student is not a 19-year-old fraternity brother. The average video-game player is not playing FPS games on a console and drinking Mountain Dew. The average car-buyer is not looking for an engaging drive. The average PC buyer is not actually chasing clock speed.

Obviously, you need to know your customers. And when you think you really understand them, you’re probably wrong.