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The Profit Of The Path Less Traveled
That approach, however, is the polar opposite of what needs to be done. No one needs help finding a best-selling book or envisioning the closest retailer that will sell them a truck. No, the power of specialized search engines is in finding things that are out there but hard to find. Recently, for example, my family tasked me with finding a judge’s gavel. A week before that, it was a hanger for an autumn wreath. I just know there are places within 10 minutes of our home that sell both items, but I have no idea who they are. And such search engines routinely fail at these tasks.
This is a lesson Wal-Mart taught to the rest of retail when it launched many of its first stores in a rural communities, places no national chain would go and where those national chains knew there was no money to be made. (Historical note: Those chains were wrong. Wal-Mart was right.)
Anticipate resistance: Yes, of course, it is much harder to create systems that are designed to satisfy relatively rare requests. But that’s where the power is. It’s how you create a need that—for a while—only you can satisfy.
This is a recurring problem with retailers, which seem to need to be dragged into creating the kind of value-add that delivers true and lasting loyalty. Consider the recent problems suffered by Microsoft as it tried to get retailers to trial some of the more daring (OK, intrusive) aspects of its Tag barcode system.
A handful of chains tried Tag, but none wanted to experiment with anything outside the safe area where everyone else was. The value, though, is in experimenting with functionality no one else has. You want to watch your rivals in your rear-view mirror? Then you can’t parallel them.
Offer functionality—and sizes, colors, flavors and models—that your rivals have, and you’ve pushed yourself into a lowest price death spiral. But add to that mix the less-traveled variants, and you become the favorite store of the few. And those few will buy more and bring their friends.
It’s not an easy model to argue for, but it didn’t seem to work that poorly for Wal-Mart.
-Marc
November 4th, 2010 at 9:01 am
Agreed that “chasing the long tail” [of the graph-no pun intended] leads to profits. It’s like developing internet applications, where opportunity lies in the long tail where customization, exception, personalization and relevance all are optimized to the user.