The E-commerce Leader

[00:00:00] Jason: So doing a full industry analysis, if you’re interested in a specific niche, just get a big landscape, have somebody on Fiverr do a full like industry landscape research project for you, and you’ll learn so much about your competitors and all that.
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[00:01:21] Jason: You end up becoming a portfolio manager of products. And if you have a portfolio of products and you launch a second brand or buy a different company or whatever, then you end up becoming a portfolio manager of brands that have products, and there will be these outcomes at every, every one of these outcomes will be occurring inside your business.
[00:01:40] If you have enough, and that’s just the reality of it. And w we work with people and I found myself in this situation as well, where you have a star product and your, oh my goodness, this is like the thing. But the first thing that comes into your mind is how do I defend myself against this not being the thing I need a second product?
[00:01:59] I need to, I need to like become defense, defensible a bit. And so the second product. Both on may or may not be a star. Maybe you have a star and then your second product is a dog. And, but then you’re like, oh, bummer, kill that one. Or maybe your second product is a dog, but you say, you know what, I’m still making some money.
[00:02:19] It still adds up to help my profit and loss statement. And it maybe helps me have a bigger team or whatever, or maybe your second product is a cash cow. And then you’ve got a star and a cash cow and you’re like, oh man, Yeah. I’ve got some real strength now in my business. And so these are the things that you end up doing over time, as you get more mature into your products and management of brands.
[00:02:41] Okay. So the top right corner is the one where he really has an interesting challenge for us, and that is you’re in a high growth, market, but your, the. So it’s a fast growing market, but you’re the follower. This is such an interesting space to be in his, recommendation or advice is, obviously try to become a leader.
[00:03:05] I’m sure she is. Try your best to become the leader, or. Or he just has a question mark, like you, it’s very hard to know what to do if it’s a fast-growing industry and you’re the number two, in general, I think my thesis on this spot would be that you. Should just optimize for both growth and profitability and not run your business as a, in a deficit.
[00:03:28] But, if you’re number two and it’s a high growth industry, you think of many industries that are like this, it’s just Coke. And Pepsi is a classic example. At some point in their prior, a hundred years, they were, it was a fast growing industry. Maybe it still is. I don’t know. No the numbers, Pepsi number two and coax number one.
[00:03:44] And so the question there for Pepsi is how best do they, operate? And, it’s certainly a wonderful position to be in, to be the second brand, because what happens in fast growing markets is no one knows about them. And then many people become exposed to it. This has happened to me.
[00:04:01] I’ve been on a rocket ride a few times in this, for example, in different ways. And, here’s my random example just for, for an example, expertise in Pinterest. Or, the educational guru space for Pinterest marketing. I started blogging about Pinterest in 2011.
[00:04:18] I literally got ranked by Google for all the key phrases are related to, marketing on Pinterest. It just, it, there was no one else there. So in. Industry that new industry. I was the market leader and it was a high growth industry. And, so I had a rocket ride. I got a book deal within two weeks from McGraw hill and had a great book.
[00:04:40] They overpaid us on the advance because they wanted it done quick and that, but then what happened over from 2011 to today? 11 years later, that industry. And my leadership position. As soon as big time, people, big stars started talking about Pinterest marketing. I didn’t have the leadership position anymore.
[00:05:02] And then I was second and then I was third and then I was fourth. And now if you look at that industry, now, there are many. Coaches and programs and resources and books all about how to do marketing on Pinterest. And I’m not even in the conversation, it’s my thing is so old now.
[00:05:21] And my content is so old. I’m not a player in that space. And this is how that, that second or third slot spot works is where you see something happening and you either going to be the leader in that growth industry or not. Now, if I would have protected myself and only ever camped on marketing on Pinterest for the last 11 years, I would be the leader in, it would probably not be a high growth industry anymore, but it’d probably be a cat.
[00:05:47] But I didn’t do it. I just let it go. Cause I didn’t really want to be the. Educator, it was just one thing that I wrote, a book project to me. So anyway, Michael, what are your thoughts on the top right corner? The high growth market, but you’re not the leader. Any thoughts on that?
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[00:06:00] Michael: To your story, this is actually one of the last chapters in the book. I think it’s called the fading star. So you were that you had star positioning. And so it was a very fast growth market indeed. I’m sure. And you were definitely the definitive leader. So for a while, that was a star business.
[00:06:14] And, people talk about first mover advantage. And I think it’s very interesting to analyze that in the context of your story. I don’t think first mover advantage is so much what we need is start positioning. So in other words, you’re in a high growth market and you’re the leader. If you move first, that can be one way as you did, maybe some degree of luck in it as well.
[00:06:31] And some degree obviously I’m sure. Good stuff as well. And you knew what you were talking about, But how have you achieved that first mover advantage? It’s only really meaningful if you retain it. So we talked earlier about the fact that if your fidget spinner market, you could be the market leader at the market blows up or is banned by Germany, et cetera, then it’s all over.
[00:06:47] So that’s where the market fails on you. But this is an example of where the market grew very fast, but the leadership position failed and either which way means that the value sort of plummets really doesn’t it. So several important points, bear
[00:06:59] Jason: in mind, it is an important point. And the other piece of that is that some industry.
[00:07:03] And, some product types have a high durability in terms of the first mover advantage and others do not. So for example, in the book space or educational space, if you can maintain it for the long-term and it’s a new hot industry, there is a lot of durability, but sometimes in, in spaces, you’re only as good as the next.
[00:07:25] Successful product. In the movie industry, for example, the, Hollywood studios that they don’t, they can’t rest on their laurels. It’s only about the next new big launch. Now they end up with a beautiful back catalog, but, but it’s always about the next new thing. Other industries.
[00:07:42] You really can get stuck in. And so this is, this is an interesting piece. I have a tweak or adaptation to the star model that I want to broach, that as a subject with you here. And if we’re ready to do that, this is a nice segue, I think, into kind of my thesis that I think is a different approach to what the star model does you ready to hear my twist?
[00:08:02] Yeah. Okay. I was listening to this, the book to start principle. And of course the book is not new. I I don’t remember when it was published, but it’s not new. And the framework itself is old. As you mentioned in the intro from the. But it’s so relevant, but there was something that was off to me and I just kept thinking, I love what he’s saying, but there’s something that doesn’t apply to today’s e-commerce environment.
[00:08:25] And I just, I couldn’t really put my finger on it. And you and I were talking about this a week or two ago, and I was trying to say to you, there’s something that’s not right about this, that, and I just couldn’t articulate, but here’s my thesis. And I sorted it out. Imagine taking the star framework, which is this four box grid.
[00:08:42] And then, creating a framework that has 10 boxes or 12 boxes, and each one of those little boxes, then you put the star matrix into it, his framework. So his framework is in tin boxes. And so it looks like a big, huge, Scrabble board, I guess you could. And what I visually, what I mean that to, to present here is, the internet age has created fractured or segmented markets that are very powerful and very interesting for us to think through.
[00:09:13] And so take the star model and then just apply it for example, to amazon.com, Amazon U S market. And you say to yourself, am I, on Amazon in a hybrid? Segment or set of skews on Amazon, Amazon am I the market leader, and that might be a true reality and you are a multimillionaire and your business is a seven or eight figure business because of that reality.
[00:09:38] But on eBay, you might be as. And on Craigslist or Etsy or walmart.com or McCarter Libra, or, amazon.jp, the Japan, Amazon market, you might be zeroes. And so the sec , or, fracturing of the, the internet space is what’s captivating to me because what it means is. His model is too simplistic for today’s scenario, but it still gives great instruction.
[00:10:07] So for example, if I’m number one on Amazon and I’ll use my own book for an example, if you look at Instagram power book, I think yesterday, as I looked at it, it was number 38 or something like that in social media marketing on Amazon bookstore. Okay. So there it is. It’s number 38 and for Instagram.
[00:10:28] Topic in general and within social media, it’s in, it’s a number one or two. If you look at the other books, I’m very familiar. So for Instagram marketing in that niche on Amazon, I know where I fall in the star matrix, but what about Barnes noble.com or the Barnes and noble bookstores themselves?
[00:10:48] What about other markets? Like the, German speaking market, in Europe or the, in Brazil, the Portuguese market or, Farsi in the middle east, my books have been translated to those. So there you have it, that, while I might be thinking through the framework from this one position, as a brand owner, as a business owner, I have to think of my myself.
[00:11:09] A whole set of positions across a landscape of marketplaces because there is no single market leader anymore in the digital world, in my view, unless you nail Amazon and then you go and nail eBay, and then you go a nail, walmart.com and then you go and nail direct to consumer on Shopify. And when you nail all of those things, you can say, we are the industry leader for our product.
[00:11:33] And if you don’t, then you are highly susceptible to somebody saying, we’re the leader. Shoe cleaner on eBay. Number one, we’re the leading kitchen knife on etsy.com and they’re right there. They’re correct. And you’re not. And so that to me is this interesting, current thinking current space in which the star principle can live itself out.
[00:11:56] But it’s a very segmented or fractured marketplace. Online. And I think that just as a world changing difference between 30, 40 years ago, when they came up with this framework, whether it was just one consumer market, maybe there was even regionalization back then and, and that kind of thing.
[00:12:09] So
[00:12:10] Michael: that was going to say, I think first of all, you make an extremely important point and I think, I don’t think there’s necessarily a conflict. The thing is the. It doesn’t really matter. Whatever helps us is good. So I would say that the star principle is simple enough to be something you’ve got to break down for yourself.
[00:12:26] Anyway, it’s too simplistic to just go out the door and just make a buying decision on a business or a product line. Isn’t it. It’s very big picture principle. Anyway, I would argue, but also the segmentation piece. I think if you stand back and look at it from maybe the 70,000 foot view, the internet is a very different distribution model.
[00:12:43] The psychology of how people interact with it is different than the segmentation of markets. Say amazon.com versus eBay versus Barnes and noble.com. If your products appear in all, that’s not a great example. Walmart.com. They’re all American consumers nationally. That’s one form of segmentation between different internet marketplaces, for example, but then as you say, especially in American you’re American, I’m not, I don’t know, but America is very regional countries, a huge it’s a continent size.
[00:13:08] So I guess that there are regional markets that traditionally existed before the internet. And let’s not forget before Amazon really nailed into, national distribution in a very quick, amazing timeframe. The sheer size of it when you’re doing with e-commerce and physical products, as opposed to digital was still a very much a thing.
[00:13:24] I would say that the important piece that I take from everything you’ve said, and the star principle is really simply that it’s market specific. So you could be dominant in Amazon, Germany, or Germany as a whole. Maybe that’s more of a pre-internet thinking maybe now it’s Amazon Germany or Japan, and completely not even existing in, in America.
[00:13:42] And by the way, to be fair, that’s been around for ages. There’ve been pop stars that have made millions selling in UK and Europe that have never been heard in, in. It’s actually hard to crack. There are products that I’ve got this person that I mentioned that’s got to about a $30 million revenue has, does never sold an American father.
[00:13:59] They did try America. They felt it wasn’t for them in the way they were doing at that point. And they’re selling in UK and Europe only quotes and quotes. So I think you’re right. It’s about dominating a specific market with a specific, in any specific kind of category of products. And you’re absolutely right about that being the key point.
[00:14:17] I think it’s completely relevant to be everywhere if you can’t be the winner everywhere, as you said. Yeah,
[00:14:22] Jason: totally. I, as I was thinking about this, I got a few resources just poked around. There’s a good book order. I don’t know the details, but I’m just looking at an article. And they talk about strategies operating in a sec or a fractured market.
[00:14:36] And, and I like this, I’ll put it in the show notes. And there’s a little like five step plan, first conduct, a full industry analysis. And that’s like logical, but most of us probably don’t do a lot. Like we just look at Keepa or whatever, and we think, oh, okay, this is the scenario on Amazon, but you have no idea what the scenarios are outside of Amazon with that data.
[00:14:57] So doing a full industry analysis, if you’re interested in a specific niche, I think is a great starting point. Just get a big landscape, have somebody on Fiverr do a full like industry landscape research project for you, and you’ll learn so much about your competitors and all that. So that’s one thing.
[00:15:14] The second step in their model is identify the cause of fragmented. No, this is interesting to your point. It could be geographic. It could be marketplace, like to my point earlier. It could, there could be other reasons though, and you want to understand those? The third idea is examine the causes of fragmentation one by one and determine if.
[00:15:32] They can be overcome, if you can be number one on Amazon, can you also then be number one on walmart.com? And can you overcome the, th the challenges for thing is if it can be overcome, is it best defensible or is it defendable, once become the market leader and then the fifth step is, if it can’t be overcome, what do you do?
[00:15:51] What are the best alternatives for before. And that’s an interesting framework. So I think this is the position we leave ourselves in, which is taking his model and asking ourselves the question based on what I’m doing right now with my product, whatever it is, physical, digital, a service, it doesn’t matter what it is in my product exists in a lay of the land.
[00:16:12] And where am I in relation to the competitors and the growth, speed and velocity of the market size of the market. And then how do I, behave? And that’s why I really love the model. It’s so practical for each of us, regardless of the size or, quality of our business. It just, it applies to everybody who’s trying to sell online.
[00:16:31] So Michael, you wanna wrap it up for us? Final thoughts?
[00:16:33] Michael: Yeah. I like that. There’s is it by Porter? The, as the forces of strategy, guys that write those things you just came up with.
[00:16:41] Jason: Yeah, it’s a book called competitive strategy by, I don’t know if it’s Michael go, but it’s a yeah.
[00:16:46] 19.
[00:16:47] Michael: I really like that. What’s interesting is that, I think that’s just as valid as anything that’s written in the last, more internet era. I think the full industry analysis to your point is excellent because most of us don’t do that on Amazon, the dangerous that you’re really trying to build a brand over the medium term, the fact that you can dominate on Amazon.
[00:17:03] May ignore the fact that you’ve got some giant competitive breathing, dying on that case, beautifully funded and incredibly strong brand who could just easily put products on Amazon. And that’s one thing that people need to scan for. I think, really the identifying the cause of fragmentation and so forth.
[00:17:17] That’s really fascinating. So I liked that a lot. I think in general, I would say, How can I put this general principles can be either something you overly fall in love with. And I have a tendency to do that. If you love strategy thinking or just dismiss is not very practical. I think the artists to use them as a lens, through which to look at your business as part of a process of making, a really thorough assessments.
[00:17:39] Number one, as you said, where you’re at number two, and I guess this is like the, is it the gold rush questions? Where do you want to get and how are you going to get there? So as part of that kind of process, they can be valuable lesson lenses to look through just like the 80, 20 analysis. I would never send somebody do an 80 20 analysis and then go and have a cigarette and relax while everything takes care of itself.
[00:17:59] Nor would I say the same about the star principle, but I would say, yeah, it can give them. Valuable insights, sometimes quite upsetting insights. If you’ve got 300 skews and most of them are dogs and should be sold, that’s not an easy thing to swallow. That’s the sunk cost fallacy, but I do think the clarity and simplicity of it actually can cut through a lot of noise in your own head and in your own business
[00:18:18] Jason: as well.
[00:18:19] Yeah, the goal, I can see my, rhino, my video camera behind me. The goal by Eliyahu Goldratt was the book you were referencing and his three questions. Prompt is what to change to, and how to make the change. And it’s so macro, it’s not relevant to anything in life, but it’s awesome. Yeah, so I think you’re right.
[00:18:36] That totally applies to, to this. Okay. Great conversation, man. How should we end this? I would just end with a simple call to action, and that is if you like this. And you happen to listen on Spotify. Would you give us some five star ratings or your highest and best review, whichever number that might be?
[00:18:52] It is a five-star system and they newly inserted that into the, the Spotify tool set. I believe. I didn’t see it before. About a month ago. I’d love your highest and best review on Spotify. And that would be really helpful to show is blowing up. I was just looking at the stats, yesterday, we’re growing really quickly.
[00:19:08] And it’s just an honor to see everybody jumping in, both in the call-in, app and also just on Spotify, which is what I generally look at for stats. And it’s just an honor to be able to serve a growing community of. E-commerce sellers that are changing the world with our products and making a difference, and, serving customers well.
[00:19:27] So thank you everybody for letting us serve you with these shows and what the content Michael, as always. It’s an honor. Great conversations. Thanks man.
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