Do you remember Sidney Stratton? In the 1952 Ealing Studios comedy “The Man in the White Suit,” chemist Sidney Stratton, played by Alec Guiness, invents an indestructible dirtproof fabric. But instead of billing it as a superlight damping layer for skis, he foolishly tries to make it into clothing. The mill-owners and labor unions could see that the miracle fabric, made into pants and suits that would never need replacing, would spell the end of their profitable market. So, they hunted the inventor down like an animal.
I spent this morning watching a software demonstration that knocked my socks off. What I saw amounts to the end of protected market territories, for good.
Envision this. You own a sporting goods store in Salt Lake City. For a few bucks a day, you’ve contracted with a local radio station to put your e-commerce storefront on their website. The radio station promotes your e-store, so you get plenty of local traffic.
Your store is not simply an ad listing what’s on sale this week. It also allows customers to order items directly off the screen—up to 1,000 SKUs per storefront. And because it’s fully open to the search engines, your store is also accessible to folks surfing in from all over the world.
On Monday morning, you look at your receipts for the weekend and decide that a couple of mid-range skis aren’t moving fast enough. You go on-line, click over to your storefront editor, type in your username and password. With a few keystrokes, you reduce the price of the Varshon Dirtbagg from $299 to $249 and the Osterreicher Machschnell RS from $279 to $229.
You check back in the afternoon and, sure enough, orders have doubled for the reduced-price items. You print out the ship list and walk it down to the stockroom, then call UPS for a pick-up. The ship list shows that you’re sending product out to addresses in Park City, Deer Valley, Provo—and Aspen, Stowe and Taos. In fact, it appears that your new sale price is the lowest advertised in the U.S. today. By tomorrow, a shopowner in Reno will match it.
This software will eliminate the barrier to entry into e-commerce for millions of small businesses, including the 3,000 or so storefronts that sell snowsports hardgoods. Instead of paying a Webmaster $100 an hour to create and maintain your electronic storefront, all you’ll have to do is call the guy who sells you radio spots and write a check for $2,500. You can sell to the world the following day.
Obviously, this means that price wars are going to boil out of the local markets and become a national firestorm. It will knock most of the remaining margin out of hardgoods.
It’s a pretty scary scenario for ski shops and distributors. Fortunately, the industry has another year or two to prepare for it.
Wrong. The industry had until September 1, 1999 to prepare for it. That’s when this software package debuted in 100 markets nationwide. The company expects to serve 1,000 local markets by the close of the year 2000.
The hardgoods manufacturers are not going to be able to hunt down a Sidney Stratton. The creators of this software package are not accessible—they’re not even based in North America. They will have competition—within a year, any retail store ought to be able to pick and choose among multiple providers of e-commerce services, some of whom will give the software away for free in order to take a transaction fee on each sale. Can you envision Visa providing the package to every merchant with a phone line?
Let us now posit a market in which all skis, boots and bindings sell for 10 percent above net-net wholesale, because that’s where sanity stabilizes. Assume that the best of the specialty stores survive by charging hourly rates for service. Many shops find that they can survive only by cutting back to one or two brands, so that they can buy deeper and demand better support from their reps. Begins to look a bit like the retail auto business.
Let us also assume that many sporting goods chains withdraw entirely from this low-margin business. With only 1,500 storefronts left, smaller hardgoods brands discover that they have no shelf space left at all. If they want to stay in business, they’ll be forced to sell direct to the public, through their own e-commerce sites.
A new balance will emerge in the market.
But it may not include your business.
Figure this out, right now.
It began on September 1.
Seth Masia ([email protected]) plans to go skiing until the revolution is over.
