What If Retail Is Wrong?

By Doug Stephens

Our entire concept of retail is predicated on one very simple series of paradigms; manufacturers make things, that are parceled out in smaller lots to retailers who then sell them (be it online or offline) to consumers who accept the manufacturer’s product and the retailer’s price and terms with no questions asked. The premise of retail further assumes that a retailer, by their very existence, presents a distinct advantage to a manufacturer, in that they provide an efficient means of distribution and market penetration.  Simply, retail offers manufacturers and brands orderly access to otherwise chaotic and disparate consumer markets.  And this construct of retail worked just fine for the last couple thousand years or so.

But what if this entire model were to be gradually challenged? What if consumers could begin effectively self-organizing, combining their respective buying power and tendering their buying intent out to the market at large for manufacturers and retailers to vie for it?  What if retailers and manufactures were put in a position where they (not the consumer) would be made to agree to a satisfactory set of price and service conditions – established by consumers?

In practical terms, imagine 5,000 consumers, all of whom want to buy a particular Cannon DSLR camera, find one another through online networks and organize their buying power into one massive purchase order for a specific model, that could potentially constitute more Cannon cameras than a large national retail chain might sell in a year.  What retailer or manufacturer, wouldn’t take a serious look at competing for that P.O.?

As for paying for the order, any number of social payment systems could be easily  employed.   And as far as shipping these units first to a central point and then to each buyer, this too could be tendered out to the most competitive freight carrier to win the business.

“If we can self-organize to take down a dictatorship, surely we can use the same social tools to buy a few dishwashers!”

In essence, consumers would be creating their own supply chain – one that suits them and not purely manufacturers or retailers.  The entire model of retail would have shifted from being a supply-based model, where goods themselves are scarce (essentially the way the market was from 400 B.C. until the 1970’s) to a model where the market is proliferated with goods but where it’s demand that’s hard to identify and capture – the way the market has been developing since about 1980?  It’s a concept that author Doc Searls focuses on in his book The Intention Economy, where he describes a post-industrial economy where consumers  – not brands and retailers – set the price and terms for the things they want and wait for businesses to come to the table.  An economy where the demand for products, and not their supply, is what holds the balance of power.

While I grant you that we’re a long way from the market Doc Searls and I are describing, we’ve already seen some nascent business models pointed in this direction. In 2011 for example, location based service Loopt launched U-Deals – a sort of inverted Groupon where members create their own deals and invite friends and family to take part. If the deal reaches the required minimum number of people, Loopt then takes it directly to the local business to see if they’ll accept it.

I’m inclined to believe that these small, local deals (pizzas and pedicures) are only the tip of an iceberg that will eventually see consumers self-organizing around major purchases such as appliances, cars and even new homes.

We Will Because We Can

I say this because we are barely on the cusp three very important economic and social trends that could potentially cause a reimagining of our entire concept of how we buy things.

The first is social networking.  Sure, Grandma has a Facebook page and it may seem old hat by now but consider that online social networks have only been in the mainstream for less than a decade.  As consumers we’re only scratching the surface their potential as a means of connection and collaboration and the tools themselves are getting better and more robust each year.  It’s only a matter of time before we begin extending the utility of these tools to connect our consumer needs in a more significant and purposeful way and to organize our collective buying power.  Groupon was the start but we are quickly learning we don’t need Groupon or anyone else to organize us when we have these powerful new tools to do it ourselves.

The second is access to data.  Facebook’s “graph search” is a fresh example of the growing ability to seek out points of personal connection and correlation with others through willingly shared data.  In a few keystrokes I can now find out which of my friends fancies a particular place, product or experience.  As networks grow and people become even more interconnected, our power to glean these insights will grow with it. We will also use such networks not only to broadcast what we like or prefer but also what we’re seeking or searching for – a new car, washing machine or vacation.  The corollary is that as we see more and more meaningful benefits and advantages of sharing such data with our network, we’ll share more, thus creating more potential connecting points.

Lastly, direct to consumer distribution:  Once considered the “third-rail of retail” where if you touch it you die, manufacturers are now quite unapologetically circumventing retail distribution, either through online sales or physical retail and going straight to consumers. The seal is broken so to speak, so what’s to stop Nike from selling a single order of 10,000 LeBron James shoes direct to consumers, who have organized themselves for a direct buy?  Not much.  And what about getting those orders to consumers?  Well, if Amazon can do it, why couldn’t Nike also?

The fact is, we now live in a world where sourcing and supplying things is the easy part.  It’s finding demand for them that’s tough.  So, shouldn’t the price and terms surrounding a purchase begin with the demand?  In a world of ubiquitous products, shouldn’t it be the buyer that calls the shots?

I’m certainly not suggesting for a second that the retail landscape we know today will disappear.  Shopping fulfills an esthetic and social need in human culture that supersedes the mere acquisition of things.  It’s not unreasonable however, to assume that the dynamics of how we buy will vary and change, given the unprecedented technologies, data and networks at our disposal.

Perhaps the most compelling question of all is, if everything about how we communicate, connect and consume is changing radically, how can a business model formed thousands of years ago remain unchallenged?  I’m willing to bet it can’t.

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