November 28, 2021

The House

The House. In gambling, it's the facility that makes all of the money. They set the rules, and if you choose to play by their rules you'll ultimately lose.

In e-commerce, the house is Amazon, eBay, Etsy, Walmart, Shopify, Google, Facebook, just about anybody who you pay a tax to in order to have access to customers.

In late-stage catalog marketing, you pay a tax to the USPS, to your paper rep, to your printer, to your boutique agency, to the consultant broadcasting on LinkedIn with demands that you keep mailing catalogs even though the house doesn't have enough paper to allow you to play the game you've always played.

Think about how retail is changing ... the folks who were "the house" (malls / landlords) lost a lot of power in the past decade. After lousy malls are razed, the good locations are going to earn a lot of power over the next five years.

Your business has three elements that determine how profitable your merchandising efforts are.
  1. Organic Sales ... customer buys from you without the aid of marketing because the customer loves you.
  2. Relationship Sales ... customer buys from you because of relationship marketing efforts including catalogs, email marketing, loyalty programs, and events.
  3. Transactional Sales ... customer buys from you because the customer has a need at a point in time and third parties connect the customer to you.

"The house" earns the rake from 2/3 above. Most of your profit should come from (1).

You make much of your profit on "1" above.

Where possible, you want to avoid 2/3 and focus on "1". I know, I know, that's really hard to do. But the alternative is to listen to the house. Their advice could help you, but will likely help them more.

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