March 27, 2023

World Going in Three Different Directions

People grumble about dollar stores ... but those stores are the logical extension of the Walmart/Target models. If Walmart found a way to structure the Price/COGS relationship to their advantage, it makes logical sense that somebody else would find a way to use the Price/COGS relationship against both grocery stores and Walmart.

How about you? Your business?

Retail and e-commerce move in three different directions.

  1. Lowest Possible Price (dollar stores, Walmart, Amazon).
  2. Highest Possible Gross Margin Differential (fashion / experiences).
  3. The Undifferentiated Middle (most of us).

You are going to tell me you cannot run a business at the lowest possible price.

You are going to tell me you cannot run a business that is fashion-centric with great experiences.

This means you are going to have challenges. It doesn't mean you cannot be successful, but you are constantly pressured by (1) and (2) above, on opposite ends of the spectrum. It's like a rubber band that you pull on each end until it breaks in the middle.

Tomorrow we'll look at a profit-and-loss statement at a customer level, showing what "the undifferentiated middle" looks like.

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