July 03, 2011

Dear Catalog CEOs: Market Share

Dear Catalog CEOs:

Let me ask you a question ... and I ask this because you pummel me with this issue all of the time (as do the experts out on Twitter):

Which of these two businesses would you rather own?
  1. A $30,000,000 annual net sales business that generates $3,000,000 of annual profit?
  2. A $50,000,000 annual net sales business that generates $2,000,000 of annual profit?
On Twitter, folks overwhelmingly support the $50,000,000 business that generates $2,000,000 of annual profit.  They tell me that it is critically important to capture "market share", they tell me that if you aren't taking market share from competitors, you're dead.

I'm not a fan of market share arguments ... they represent MBA-style theory reserved for the battle between Google and Facebook or Wal-Mart and Target or McDonalds and Burger King.

When you own 0.03% of the market, stealing market share is irrelevant.

Instead of stealing market share, think what you could do with a million additional dollars of profit each year?