This morning, I was standing at one of the windows in my office, sipping a cup of horribly sweet tea, looking at the rain and not thinking. I have realized that my best thoughts pop up when I am not thinking! (Try explaining that!) Through the rain – I could see a “Paperwallah” wearing a cheap black raincoat (branded DNA) desperately trying to ensure that copies of TOI (so much for the free raincoat!) were kept away from the precipitation. I looked at the raincoat…and thought about what all would have gone into procuring that raincoat for the thousands of paperwallahs in Mumbai. Some guy in DNA marketing would have contacted some supplier of giveaways – who would have connected to some stockist of raincoats – who would have talked to his supplier in Karjat – who would then give the order to some company in Pune – who would then get it made by a sweatshop in Tirupur… you get the drift. Imagine this:
DNA (Demand) – Middlemen (1,2,3,n) – Sweatshop(Supply)
How many degrees of separation are there between demand and supply? And each separation point adds to the price…and loss of control for the buyer. Internet spelled doom for the Middlemen…with platforms bringing buyers and sellers together…with the only middleman being the platform. Thus e-commerce was born… but the other day I bought a Nokia Bluetooth handset from Indiatimes Shopping – who were not the direct seller. The seller was some guy on Lamington road, who procured it from some importer in Chennai. God knows where they got it from… because the product I got was faulty – and no one claimed responsibility for it. Indiatimes pushed it to Lamington road who is yet to hear from Chennai. Who loses? The buyer and the manufacturer. I don’t think I will ever buy a Nokia headset again. The Supply Chain automatically stretches to fill in any available space…and there are millions of businesses and individuals who have made a killing from just being able to connect supply and demand.
Where can things be improved? Dell did it on the supply side by their now famous online sales model. There is a problem with that approach as Dell realized recently… online sales are not good for impulsive buys. You walk into a showroom and you see a beautiful machine you don’t need…but you fall in love with the demo and buy it anyway. Dell missed that opportunity and today has started selling products through the usual channels also. Also middlemen add that bit of “marketing” that is so critical to selling products – something direct online sales find hard to replicate.
Now I suggest a different way – nothing new, has been done by various people already, but not really been replicated massively. Move the marketing and sales to the demand side. Avon – and your peer recommendation models work like this. Now imagine – the world of bloggers, taking on the marketing and sales of a product. Eg. Nokia contacts me – I put up on my blog “Product of the day – Nokia handset BH400” – at a special manufacturer price which is 20% less than markup price at indiatimes or the Mobile Store. Now why would I do that? Because Nokia gives me a free piece to test and review…. and…to add a bit of zest in the proceedings, Nokia tells me that I get further 5% off for every successful transaction that goes through from my blog. This solves the marketing problem…because (for the sake of my hypothesis) I am a respected reviewer and my community believes in me – and because I get 5% off on every transaction – I will atleast give a decent review. Will I become a sleazy middleman then? No…because my personal reputation (like for any blogger) is important. A bad product will be reviewed as it is… My blog gets 100 hits a day…and more bloggers like me can reach a potential marketplace of millions.
The big companies have twiddled with various concepts of peer-to-peer marketing – but end up creating just another supply chain. My argument is that it doesn’t have to be a supply chain but a supply “grid” if you will. That is the marketplace of the future… and I am sure that some guy reading this will find a business idea to create a “middleman” organization who would enable this. 😉
And all this because of that DNA raincoat. All those MBAs out there (and the non-MBAs) are welcome to comment and critique…