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By Thomas Baekdal - January 2014

Go Direct, Lower Your Prices, Earn More

Here is an interesting story which also explains many things about the power of ecommerce.

Back in May 2013, a Scandinavian supermarket purchased two big fashion brands, in order to boost their fashion merchandise offerings. And they will arrive at the supermarkets over the next couple of days.

Everything about these brands are the same as before. It's made by the same designers. It's made of the same material, at the same quality, and by the same manufacturers. ....but the price is 25-50% lower.

Wow...

So how is this possible, you ask? Well, it's simple. Ordinary fashion brands have to go through several layers. You have the brands, who in turn sell to the shops, who in turn sell to you. Each one requiring their own margins. This supermarket is combining the brand and store into one.

I actually wrote about this concept in my Plus report about omni-channels:

If you are selling your products wholesale to your brick-and-mortar stores for $29 with a 50% margin, and your stores are then selling it retail for $89 to the end-customers, you are only making $14.5 per product.

So if you skipped the wholesale part, you could sell the same product directly to the end-customers for $49 and increase your profit by 140% to $34.5 per item sold.

This is essentially what this supermarket is doing. It's skipping one of the middlemen. But it's also what is happening in the digital world every day.

One of the reasons why everything is changing, and why old companies can't compete with the new, is simply because we skipping steps.

Bonus: Imagine what would happen if Amazon started buying and owning popular brands.

 
 
 

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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé

 

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