Are you in a race to the bottom? What happens if you win?

By Morf Morford
Tacoma Daily Index

You don’t need a degree in business, or even be in business to recognise that business rules, models and expectations are nothing like what they used to be. Perhaps this has always been true, but it is certainly more true now than ever before – there is no standing still in this market.

In the “old” days (which might mean last year), business was straight forward – a seller had a product and a buyer had a need.

For the most part, it didn’t even matter what the product or service was, every item had its price and every product had its market.

The cost of doing business and the production costs dictated the final retail cost for the customer. It was a very simple, basic reliable mathematical formula. Vendors, competitors and customers knew these basic rules and were willing to play the game accordingly.

No more.

Now, lots of “products,” at least in the traditional sense of the direct user paying the full cost, are “free.” Facebook, Google, Skype and any email program cost the user nothing – or at least nothing tangible or measurable.

Another development is the subscription service. Various businesses have this as their model. See a movie lately? If you like the big screen and go to movies more than once a month or so, you might want to join one of the movies subscription services.

I’ve used Movie Pass (https://www.moviepass.com/) for several months. The idea is simple – whether it will make money is whole other issue (1*), especially in light of multiple changes over the last couple months.

With Movie Pass you were able to see a different movie every day for a set monthly fee – they have changed their pricing structure, so you can now see three movies per month for $9.95 – it used to be about twenty or more movies a month essentially for free.

The price floats around a bit, but usually hovers around $100 for a year. That means if you see more than one movie a month, you are getting a great deal.

But “getting a great deal” is what most of us, as buyers and consumers are learning to expect from every possible market.

And we expect our “good deal” to get even better – and it usually does. Here’s a free food offer from a Movie Pass competitor – https://lifehacker.com/moviepass-competitor-is-now-offering-25-in-free-food-w-1827555750?.

We expect our music to be free as well as our videos and communications and almost anything else we can think of.

There’s a couple of old sayings that apply to business and life in general – “You get what you pay for” and “There is no such thing as a free lunch.”

You could argue that these sayings have always been true – but I would say that in our current economy, thanks to our prevailing assumption that everything, from data to global video conferencing or local transit (2*) should be free, they are more true than ever now.

To put it bluntly, nothing comes free and somebody, somewhere, pays.

As much as I like free music, videos and yes, even free transit, I know that this is, at best, a precarious balance.

Statistics suggest that when customers complain, business owners and managers ought to get excited about it. The complaining customer represents a huge opportunity for more business.  –  Zig Ziglar

Would anyone argue that the (mostly “free”) music since, say 2005 is “better” than music from previous not-free decades?

My college age students almost always prefer either older music or music outside of the mainstream.

Some artists, on principle, avoid contracts with online music services like Pandora and Spotify and prefer to have their music on physical media – even vinyl.

I use both of those music services,  but I miss the experience of owning – and yes, even shopping for, music.

Something is lost when serious music fans lose the direct, hands-on experience of thumbing through racks of CDs or LPs (3*) – and hearing music recommendations from strangers is one of the greatest ways to encounter new and interesting music.

Some stores are picking up on this market trend.

Big box stores may have what you need, but the independent shops on 6th Avenue and Pacific Avenue (and a few other areas) are known for that unexpected treasure you really want. Photo: Morf Morford

Big box stores may have what you need, but the independent shops on 6th Avenue and Pacific Avenue (and a few other areas) are known for that unexpected treasure you really want. Photo: Morf Morford

If you think about it, when people drink coffee, the coffee is often not the primary purpose – the center of the experience is usually social. The same with food, and to a large degree with music. Music, food, coffee and even shopping are, most of the time, social experiences.

Some stores, like Nordstrom, never joined the race to the bottom and never entered the discount scene – unless you want to count the Nordstrom Rack where you can get clearance items at great prices (though you will have limited options.

My overview of the market tells me that we may have reached “peak” discount – especially when it comes to big box stores.

I am seeing a new appreciation for knowledgeable staff and good service – and a growth in the number of us willing to pay for it.

Look at the burgeoning popularity of farmers markets. Most people, whether they buy anything or not, like the energy and the experience of the market – locally grown food or hand made products are a bonus.

Besides seeking a product, from clothes to groceries to music, most of us are seeking an experience, maybe even a memory.

I am thankful for all of those who said NO to me. It’s because of them I’m doing it myself.  -  Albert Einstein 

If you can present yourself, or your product, as a welcoming experience, offering capable service and worthwhile products, I can (almost) guarantee success.

This would be good to keep in mind as any entrepreneurs consider their next business venture.

 

(1*)   Amazon, after all, lost money for years, before it turned a profit. And even now, according to some, seems more interested in changing the retail landscape than in making money – https://www.thestreet.com/opinion/amazon-is-losing-money-from-retail-operations-14571703.

(2*)   Many municipalities around the world, from Europe to Asia to South America are experimenting with free (to users) mass transit – https://freepublictransport.info/city/ – and yes, Tacoma in on the list. Paris is considering making their entire city-wide system free – https://www.citylab.com/transportation/2018/05/paris-ponders-an-audacious-idea-free-transit-for-all/560522/.

(3*)   My observation of the vinyl revival is that even young music fans seek out a more tangible, fully-orbed experience than the near-clinical, anonymous feel of digital music.