Avoiding the 'No-profit' Zone

Dear Reader,

I'm reading a book at the moment - an older one which I bought some time ago. I kind of 'glanced' at it when I first bought it, but as is usual with these things, I then usually go back and have another look (often about 6 years later). So, this one is called "The Profit Zone: How Strategic Business Design Will Lead You To Tomorrow's Profits" by a guy called Adrian Slywotzky. And although it focuses more on 'big' companies (such as Intel, Microsoft and Disney, amongst others), there are some good 'lessons' for everyone in here...including eBayers! Anyway - in the section on 'Intel', the author looks at how Intel has risen to become the World's #1 chip-maker. It starts decades ago...in fact, interestingly enough, back in the late 70's, Intel didn't make processors for PC's (like it does now) - it focused on making 'DRAM'...that's memory for PCs. What happened? Well, because of the (DRAM) market's huge growth, tons of competitors (mostly Japanese) jumped along for the ride. Eventually, that meant profits got watered down for everyone. Intel was faced with a problem: continue making sub-par profits in 'DRAM', or consider its alternatives. It decided to focus on processors instead - which, at the time, was a HUGE change for them. After all, they were memory-makers! Or so they thought. The rest is history, of course...There's some good lessons in this 'story'...some of which I've gone over in previous emails. But there's one bit I'd like to focus on today - that of the 'no profit zone'. It occurs on eBay too, as you may have noticed. Take the market for high-end electronics or such like...what happens is simple: Every Tom, Dick and David jump in and start cutting price. Since there's no DIFFERENCE between the products (essentially commodities), the area eventually becomes a 'no-profit-zone'. Along comes a new eBayer (hopefully not you) - AKA 'Hamburger Meat' - thinks this is a 'good market' since there are plenty of sellers in their making sales, and gets their proverbial head handed to them. ("There we go, Sir - here's your head!" New eBayer: "OK, thanks" - hold on, how am I talking when you've just handed me back my own head?) Not good. Not good at all.

So, OK, what's the solution? Well, just like Intel, you need to keep your 'hawk-eye' open for markets which are what I call...'OFF THE BEATEN TRACK'. Markets where you can DIFFERENTIATE products (so you can get more pricing power) and where few 'big boys' are going to 'muscle in' and start throwing their damn weight around. (The heavy buggers). In our electronics example, that may mean going for a 'sub-niche' within this market - one where few other sellers are operating. It may mean providing an 'information product' for the niche. It may mean providing an 'add-on' product for the market that few other people are selling. It may mean introducing an entirely new and unique product which no-one else is selling, but which you know is selling well on another eBay country site. The biggest returns will go to those who think a bit more 'outside the box'...but in markets which are 'hot'. Just like Intel did really. And now look at them!

Until Next Time - Kommando over and out...

Best Regards,
Oliver Goehler
'Auction Kommando'