disintermediation part 3: universal spiff

Retail stores are struggling because it's cheaper and better to buy things on the web. I see it in the store, but I wonder if what I'm seeing is highly rated, and I know I can get it cheaper online. Yet manufacturers still need to get goods into customers' hands to encourage them to buy them. Some companies have tried manufacturer stores, but they are hampered by not undercutting other stores (my local Sony Style store closed a year ago).

I worked in tech support at a company, and if someone in support was able to convince a customer that they needed a product (often a paid upgrade to the new version that addressed the problem) , the employee would transfer the phone call to sales and get a small commission on the sale. This is called a "spiff": A bonus or other remuneration, given for ... promoting the goods of a particular manufacturer.. The problem is if the customer later on bought the product because of that person's assistance, there was no way the employee could get compensated. I've also gone out on sales calls where my technical knowledge sealed the deal, yet the sales person got the commission.

My thesis is companies have a certain promotional budget for the sale of an item, and they should be willing to hand it over on ANY sale. They already do this on click-through ads for web sites, but they should extend this to the world of people.

It would work somewhat like this:
Enter the e-mail address of the person who led you to buy this product: _____

So whether someone demonstrated the laptop at the Sony lifestyle store, or someone showed it to you at a convention, or you saw a book at a bookstore but guiltily purchased it online instead, or your mechanic told you to buy some accessory, or you read a rave review about something on a blog, you can credit the person who led to your purchase.

This would encourage and liberate millions of people to sell things, and it would break down the artificial division between salespeople selling a product and the many people whose efforts can lead to a sale. It would provide a financial model for company "stores" and marketing events that just demonstrate items yet often spur sales.

Companies wouldn't allow any e-mail address, they would have a known list of approved promoters: all their employees, partners, people on certain web sites. The system has vast potential for "abuse", where someone who had nothing to do with the sale would offer to split the spiff with the buyer. But these all lead to increased sales!

disintermediation part 2: Amazon should be/buy UPS

I used to compare items for price using MySimon and Froogle, but now I just go to Amazon and pay whatever. However, there are still companies competing on price. You can buy LCD TVs from obscure companies in Nebraska that sound like they are operating out of someone's garage, some dot com sites are still trying to preserve the buying circles (get 15 friends to buy the same product and it's 5% less), and of course there are various auction methods.

It's all a waste. A third party coming between the manufacture and me can do no more than jack up the price. My thesis is simple: the lowest possible price of an item is the price at which the manufacture is willing to put it on the loading dock, plus shipping to your door. Everything else is overhead.

You may respond "But shipping 50,000 widgets to Walmart is a lot cheaper than shipping widgets to 50,000 addresses." Sure, but Walmart has its overhead. They have to uncreate 50,000 items and put them on the shelves of big stores, then wait for them to sell.

No manufacturer wants the hassle of shipping to 50,000 customers. But manufacturers don't really want the hassle of shipping even to 100 stores either. The whole process of getting goods to you is called logistics:

Logistics involves the integration of information, transportation, inventory, warehousing, material-handling, and packaging, and occasionally security.

Many manufacturers already outsource this. What's stupid is the manufacturer pays for one logistics chain that gets widgets from it to the store, then the store pays for another chain that gets the widgets to customers' houses.

You could argue that manufacturers need stores to aggregate individual purchases into bulk orders; they can't run their assembly line in response to individual orders dribbling in, but they can intelligently respond to a 50,000 item order from a store. But bulk orders just hide inefficiency and mistakes. Some of a big order winds up on sale or dumped in discounters and outlet stores, which jacks up costs for the store. You could claim that stores should know their customers' tastes better than the manufacturer, e.g. the Super Bowl is coming up but economic conditions are poor so cheap 720p TVs will do well while 1080p will languish; but that's part of the problem: manufacturers need this information as much as stores do! A manufacturer whose customers are big stores knows less than a manufacturer whose customers are the actual users.

For years I've believed the obvious answer is for Amazon (market cap $ 52 bn, revenue $22 bn) to buy or become UPS (market cap $58 bn, revenue $ 45 bn). This results in one chain from the loading dock to the customer! Returning to my thesis, the manufacturer tells UPS/Amazon what price it's willing to put it on the loading dock, and Amazon/UPS puts it in the customer's hands. The manufacturer and Amazon/UPS can work out whether to manufacture 50,000 at once or do smaller runs, it all ends up in one supply chain. And Amazon/UPS has all the customer knowledge and programming smarts to offer sales approaches that reduce prices like bulk-buying circles, limited-time promotions, auctions, reverse auctions, overstock, etc. but in conjunction with the manufacturer.

Anyone know Jeff Bezos' e-mail address?

disintermediation part 1: ordering direct

I have a backpack from the Gap. It is utter garbage that's falling apart. So what exactly is the Gap adding when it has a Chinese factory sew its label on their part 53AF47Y?

Just let me order the best product direct from its manufacturer.

This applies whether I want a custom one-off or just their generic part. As I wrote responding to a Gizmodo post about custom manufacturing:

I want the best worker in the factory cranking out quality $10 clothes to make me custom stuff after hours for five times the price (which will still be less than what some US store charges me for their worthless label). That just requires some bilingual entrepreneur to set up a web storefront to take my order and hook me up direct with the manufacturer.

This is a huge potential market. It cuts out the non-existent added value of some dumbass US brand supposedly getting me better quality goods while in reality they're just twisting their suppliers' arms to reduce costs.

Sadly for the USA, this innovation is more likely to come from a Chinese bilingual near the factory rather than someone living in America.

Meanwhile every American brand that only spends on marketing while ordering up generic crap (clothes, luggage, etc.) from overseas factories DESERVES TO DIE. The actual factory can be the brand, and can offer custom work through these entrepreneurs. The moment Happy Dong Manufacturing gets a great rating from Consumer Reports and you can order its widget on eBay, a lot of USA specialty stores will really suffer.