The Next Wave in Trends
Some of the hottest trends are in distribution, art, entertainment and education. This article is about the distribution trend.
One of the hottest trends is in the distribution of products and services. This trend has been ballooning since the 1980’s. Distribution has shifted some of the largest wealth in history and keeps doing so.
It began with cities having a booming downtown market where small and large businesses competed with each other for the consumer’s dollar. This was in the day of single-income families and the other spouse could shop for consumables.
But the cities grew into suburbs and a massive Baby Boomer generation entered the workforce. To compensate for the two-income earners and population growth outside of the downtown area began the growth of the malls. These were giant shopping centers developed in the suburban communities that would facilitate the shopping needs. And the mall was incredibly successful.
But by the late 80’s another distribution change hit. This was the warehousing explosion that shifted some of the largest wealth in history. The Costco’s, Wal-Mart’s, Circuit City’s, the big wholesale buy in bulk, stack it deep and sell it cheep concept came out and companies stopped sending their products through the normal retail chains.
People still don’t understand the changes that took place with the warehousing explosion. Compared to the industrial revolution which we all study in high school, the warehousing explosion swamps the 100 year old economic impact.
As just an example, everyone knows Microsoft. They did just over $40 billion dollars last year. People don’t realize that Wal-Mart did $40 billion. And they really don’t realize that Wal-Mart did $40 billion dollars in the late 80’s. Wal-Mart did more than $240 billion last year. That is why when Sam Walton died, his five heirs were and still are on the top ten richest people in the world.
This is the shift in goods and services. A company who produces or manufactures products (even as good as Microsoft’s) cannot hope to keep up with a company which distributes millions of items and taking just a few pennies from each item. The money is in finding and keeping consumers.
Companies like working with Wal-Mart because of the power they have. Yes, Wal-Mart will cut rate their margin as much as possible, but the volume they generate is incredible. Wal-Mart keeps customers because they offer the cheapest price on many items. And that was the whole concept behind the warehousing explosion.
But coming into the 1990’s you saw another explosive change in distribution. As companies were discounting and selling through these warehousing giants, they realized they could keep their higher margins though catalogues and sell directly to the customer. No longer would the consumer need to leave the house if they didn’t want to.
So if you follow the trend, large groups of consumers would shop downtown, then they moved to malls in the suburbs, giant warehousing companies offering cheep bulk products came next, followed by catalogue companies offering in home service for millions of customers. So now that the new millennium has hit you probably already know what the next giant distribution trend is… the Internet.
So big Internet groups popped up and you didn’t have to be a techie, or understand computers very well. There were Internet groups who attracted lots of consumers and people wanted to be in front of those faces.
Let’s take some college students working on a free email system they called Hotmail. It was a system where everyone wanted email and were too cheep to pay for it. So by people referring people, lots of people began getting hotmail accounts. I still use mine.
Bill Gates found out about Hotmail and paid the now graduated owners $420 million for the company. Now, Bill Gates makes money every time someone logs on to Hotmail because of the ads generated there go before millions of viewers each day.
But that was what people were paying for subscribers in the 90s.
Google is nothing more than over 200,000,000 queries every day or 2.7 billion a month. That means they can create some very good income streams from those millions of viewers. They do so well that these two dudes, who are about 30 years-old, are worth somewhere between $17 billion and $50 billion depending on stock price. That is outrageous. They get paid for the millions of people who just preview their site.
If you look at Youtube.com and Myspace.com which were purchased for over a billion dollars each makes you wonder if driving traffic isn’t the best idea ever invented for the Internet.
So the question now, as it has always been is… how do we gain people/ viewers so we can cash in on what companies are paying for?
What we need to look at first to understand the distribution trend is to find out what drives distribution and follow the money.
In the middle of last century, when cars were a few hundred bucks and people shopped downtown, the manufacturing of a product was fairly commensurate with the price. The cost to manufacture a product was about half what the retail price ended up being. So, if a product cost $50, then it would retail around $100. That means there was about $50 in wholesaler, retailer, marketing expenses and advertising.
Today, because of improved manufacturing methods and outsourcing, the production costs have gone down for most items proportionately. Thus today, a product that costs $20 will retail around $100. That is because the cost of marketing and advertising has gone up dramatically. And with the new methods of distribution like Cost-Co and catalogues they reduce the costs from wholesalers and retailers, yet the prices only go down a little bit to make up for a struggling ability to market products.
Thus a shoe that cost Nike $3 to make is going to retail around $140.
But companies are beginning to look at their practices. Nike pays Tiger Woods $100,000,000 a year to wear exclusively Nike. But does Nike actually get a return on their investment by fans buying Nike shoes, shirts etc., exclusively because Woods wears the clothes?
I can’t answer that, but the newest form of endorsement is paying for performance. Companies are sick of being burned on sports figures or bands who end up ruining their lives and making the company look bad. How do you think Hertz felt when O.J. Simpson went berserk? You don’t see many Pepsi commercials for Brittney Spears lately have you?
But paying for performance is a new manner of doing business marketing. Companies have realized that instead of paying Woods or Lebron James hundreds of millions of dollars, they are paying ordinary people who refer other people to their company, product or service. These people are like freelance representatives. They go out and drive the traffic and get paid on the volume. It’s that simple. And when they are able to cut all the marketing costs down to pure sales volume, then you don’t need to drive much traffic to make a good living.
The other way other than referral, is to build a subscriber base of people that these companies want to have access to. Companies today are paying hundred of millions of dollars to people with subscriber bases just like Google where they know a percentage of the people will see their name, much like a commercial. They know some of those will immediately go and shop for the item advertised.
That is manufacturer sales without middlemen, warehousing or sales reps. The Internet is allowing the gradual reduction of marketing expenses, the major factor in costs today. That gives them good profit and the ability to pay more for Internet advertising.
Thus as Gap.com grows its online presence, their loyal customers will shop via the Internet as they’ve been switching to catalogues. This will make the Gap stores gradually redundant. Thus all the expenses for maintaining buildings, mall fees, employees and advertising will become greatly reduced as they maintain a steady list of continual buyers. And as major companies make the switch, this will continue to make effective marketing and the need for private marketers for their products, services and Internet sites that much more important.
If any person can develop a subscriber list of people: say receiving CD reviews, then the music industry will be interested in your list. If someone grabs subscribers of people looking for housing, you have a long list of people: realtors, mortgage brokers, and title companies will be interested in advertising – not to mention desperate home owners.
The grand subscriber list would be a group of people who are already buying products or services from you. If you sell home siding, window shops will be interested in your list. If you sell electronic or automotive parts, you will have servicemen of all sorts wanting to receive your customer as a client for their repair or construction services. The mother load would be if you sell and deliver groceries to the neighborhood, then all types of services could be associated with your ritual purchasers: clothes, high-end cookware, candles, neighborhood services and restaurants etc.
So now we get to the issue of how we develop these lists of people or subscribers and end up marketing to them. The creativity and hard work is up to you. But after a little bit of time brainstorming I have come up with a few ideas.
Who delivers to people all over your city? I have not figured how to make money off the postman or UPS guy, but next best thing is pizza delivery. Ask them to deliver a flyer with every pizza delivered. Let’s say you pay them ten cents per pizza. (I don’t know actual costs you will have to figure them out yourself for your own area). If fictitiously, the pizza company delivers 100 pizza’s in a night, they made $10 each night without any additional cost. So, scavenge the neighborhood businesses to see if any want to advertise to specifically the local neighborhood. It’s only 10 cents per flyer or just under $300 a month.
With a one page two-sided flyer, you can generate four to ten business ads. Subtract printing costs and a general accountant manager, you could make between $600 and $2,000 a month for every pizza place you service. That is profit without you working one more ounce of energy in the project.
Let’s look at car dealers. They have hundreds of people coming into their lot. How about producing a small booklet with a few of the hot car models the particular dealer sells. It would include car statistics and warranty information. Leave price to the sales managers. With the booklet you can have insurance companies, auto lenders, local mechanics, service stations and various neighborhood business ads like a pizza store.
These would definitely be considered an asset by the dealership, and you can have them print any specific information about their dealership they would like including who the salesman they spoke to was and ending negotiated price. The local businesses could be pitching in plenty of ad revenue that you could provide the dealer the brochures for free and eliminate any future competition. You would have to tweak the price a bit higher as booklets would have to be high quality and appealing.
Yet, as things run more and more off the Internet, one of the easiest ways is to find a solid network marketing business with high quality products and begin marketing for yourself on the net as well as your warm market of friends and family. Most network marketing products will pay out much of the difference between manufacturing costs and retail profit to the marketers. A successfully built business can create residual income and duplicate your efforts wonderfully.
This is building a business in a smaller scale than Amazon.com but can help you get your feet wet developing a business that will prosper in the future distribution era. From there, branch off and increase your goals and plans. Never stop learning and forever reach for your goals.
I hope these ideas have helped you understand some of what is going on and how to profit from the trends coming into place.