5 Long-Term Moats of Defensibility in Retail
Can entrepreneurs still compete in this environment?
Yes, and there are 5 possible ways to do it. This is neither a checklist of things you will need to succeed as a new player in the market or a blueprint for defensibility. Your success in the long-term will be heavily based on the actual parity between you and the next closest competitor.
With new manufacturing hubs sprouting up around the world, we are given the perception that the product is becoming more commoditised. This is not entirely true.
There are still some moats of defensibility around the product. Do you have exclusive manufacturing rights? Are you uniquely qualified to design such a product? Do you have a secret that makes it difficult for another competitor to figure out? Does the quantum of utility that you offer matter to your target customers?
“But! We don’t have a software component in our product, we can’t compete!”
Well, does that matter to your customers?
If you are a luxury handbag company and you have returning customers because of the quality and design you offer, who cares if that handbag doesn’t measure their heart rate?
Compete on the dimensions that matter. With an insight that is unique to you.
There are two facets to this. Showing the product to the end customer and getting the product there.
If you are the 10958th lipstick seller on Amazon, you don’t have an advantage here. BUT, if you have a super unique partnership with malls owners that allows you to install AR lipstick stimulations in the women’s bathroom with a QR sticker on the mirror that allows them to “Buy Now”.
That would be cool.
It should be noted that every product requires a different brand strategy. I feel like I need to defend this moat of defensibility because it seems to be the hardest to quantify.
Here are two scenarios –
- You need information about something – ” You GOOGLE it”
- For Apple Fanatics: “My Macbook pro froze, that’s strange.”
In the first scenario, you didn’t even think about using another search engine. In the second, it didn’t occur to you that it was NORMAL for laptops.
Warning: Don't take this too far
If you are building up an aspirational story and building an identity around punk rock music, it would be pretty weird if you specialised in selling coloured markers.
The Network Effect
Enough has been written about this topic by the great guys over at https://medium.com/@nfx
A phenomenon wherein increased numbers of people or participants improve the value of a good or service.
Here is TLDR:
- Does every buyer/seller that uses your platform add value to the platform every time they buy/sell?
- Is the experience for the next buyer/seller enhanced by the people already there?
This is usually associated with cost.
- How big of a difference would be the unit cost of a product if you bought 10,000x more? Or,
- How big of a difference would be the unit cost of production if you made 10,000x more?
If you are within the high-touch luxury space, unfortunately, scale works against you. If everyone had a Gucci, it would lose something special.
If you have any questions or feedback, we would love to hear from you.