Bryan Caplan  

Your Foot in the Door and Your Stuff in the Store

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I've previously argued that you usually need extensive educational credentials just to get an interview for anything more than a low-status job. It strikes me that there is a similar problem if you have a new product and want to get "real" stores to carry it. For example, it took a long time for my book to get into brick-and-mortar stores, and I couldn't think of viable ways to change their minds. But imagine my situation if my book had been self-published! At least with Princeton as my publisher, I could ask them to push the book harder to Borders.

So imagine this hypothetical. Suppose you have a genuinely new and improved t.v. which would be profitable to manufacture if you had a serious order from Best Buy. What could you do to get Best Buy to start carrying it? How would you even get Best Buy's buyer to take your calls? Could statistical discrimination (most people like you are too useless even to talk to) keep a good idea off the market for good?

P.S. A reader alerted me to the unconventional strategy of "shopdropping":

Self-published authors sneak their works into the “new releases” section, while personal trainers put their business cards into weight-loss books, and aspiring professional photographers make homemade cards — their Web site address included, of course — and covertly plant them into stationery-store racks.

“Everyone else is pushing their product, so why shouldn’t we?” said Jeff Eyrich, a producer for several independent bands, who puts stacks of his bands’ CDs — marked “free” — on music racks at Starbucks whenever the cashiers look away.

Pretty sleazy, but it is a strategy. :-)


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COMMENTS (12 to date)
Dan Weber writes:

What could you do to get Best Buy to start carrying it?

Tell them how much more money they could make selling extended warranties on a brand new product?

Helder writes:

Bryan,

millions of sales reps have to deal with that issue every single day and they (we) do it. That is no the problem. The real issue is how do you find the "connector" who has the skills and talent to link buyer, product and seller (creator).

P.S. Usually creators are not good connectors

Grant writes:

Businesses have to use some sort of heuristic to valuate potential business leads. Best Buy does use prediction markets, though...

I think your wrong when you say people "usually need extensive educational credentials just to get an interview". As someone who has been doing some hiring (or trying to), I couldn't care less about educational credentials. The problem of course is that references aren't reliable, and so many are afraid of getting sued they won't tell the truth about a past employee. Its just really hard to judge the worth of potential employees without large amounts of statistical discrimination.

But then I'm looking for web developers, which I guess is a different market than most people are in. I'd rather hire someone who has spent ~2 years contributing to an open-source project, and has the code to prove it, than someone who spent 5 years getting an engineering degree.

jsalvati writes:

Couldn't you offer best buy a submission fee $300ish? Seems like companies could solve this problem rather easily. http://goodmorningeconomics.wordpress.com/2008/04/10/statistical-descrimination-in-retailing-factor-markets/

Trevor writes:

Think about your book analogy, at what point in your process were you talking to Borders? Certainly not before you had a book in hand and a firm commitment from the publisher to make more.

If you want to talk to Best Buy, as a brand new OEM you'll likely need to assume the risk and build at least a few thousand units of inventory first. They probably also will want a peek at your marketing plan, at least to know that you've made suitable national media buys. Getting them to take your call won't be a problem, the VC firm that invested the $20 million+ in startup capital will likely have the appropriate contacts.

Or, you could obtain patents and auction them to Sony, Samsung, Pioneer, whatever.

Here's a free business idea:

Create a service where stores can auction off store shelf space. The store would make money off the auction, and then all revenue would go to the company making the product. This would allow a whole class of small innovators to get products in stores and see how they sell.

Kevin Dick writes:

Bryan, you've just described the problem faced by almost every serious entrepreneur. Certainly, all the technology-related startups I'm familiar with that wanted to sell to large enterprises faced this issue.

It turns out, there are sales/business development people that specialize in selling under precisely these conditions. They focus on getting you the first few dozen "evangelical" sales.

They are generally very industry specific, specializing in a pretty narrow segment. They use a combination of an extensive professional network within this segment, almost pathological ability to take rejection, and plain old chutzpah.

The professional network means people are marginally more willing to listen to them, the ability to take rejection allows them to make an incredible number of overtures, and the chutzpah increases their chance of getting noticed. They are also usually skilled "closers".

Over a reasonable time frame, their chances of getting a couple successes are dramatically higher than a normal person's. I can't do this myself, but I've seen it done many times. Even then, their success rate is still probably less than 50%. In return for taking this risk, they typically get compensated much better than a sales person that comes in once the product is established.

arthas writes:

Purchasers from Best Buy are flooded with products of manufacturers which claim to do miracles. They need more than a claim such as past performance or signals to buy the manufacturer's claim. As Best Buy has limited shelf space, only products which offer some extra value than their exisiting assortment are carried.
One signal which u can send is to have a good product review, either at industry convention or recommendation of industry experts.
The second is working with an established distributor. For eg, when u ve book with princeton publishing stamp, the purchasing department of a retailer is going to have a good look.
Third is a test / trial offer to best buy. If u can find an arrangement with which u can sell finished products in one shop as a trial, u can perhaps convince those guys. the commitment shown by your capital investment in can perhaps give a signal as well . Perhaps u r better off dealing with a neighbourhood retailer which deals in the same line of products as best buy.

One issue here is entry barrier associated with economies of sale. its not the question of signalling. neither its a question of better product. if u ve inferior product but a superior ad budget, mrktg department, & distribution channel, u can still outsell the competing superiour product. if u r already selling to best buy x product, u can easily add up y product.

most probably if u dont ve a serious backer, either a VC fund or established brand or somebody else, your product will never see an existence. Just look at pharmaceuticals, all the biotech funds sell to established brands instead of selling them directly. these guys are better off working with pharmaceuticals than trying to sell the product by themselves

Snark writes:

You might consider consignment and/or Scan Based Trading (SBT) if you can't make yourself sleaze.

SheetWise writes:

It's really quite simple.

You want to get your new product into Best Buy? First go after the CEO. Find out who his personal attorney is, go visit that attorney and retain him for $50K to represent you and your new product. Then ask him to introduce you. Everybody listens to their attorneys.

That's why they can afford those big towers.

mjh writes:

I always assumed that part of the purpose of venture capital was that it enabled companies to operate at a loss long enough for the product/service to be vetted by the market. The ones that survive get sold by BestBuy.

Examples: TiVo, Sling

Of course, since you're passing off a huge portion of the risk to the VC firms, you must also pass off a huge portion of the reward. Successful products that follow this model end up sending a large portion of their ownership to the VC firm.

Is this wrong?

jurisnaturalist writes:

isn't it interesting that wal-mart has a method for testing and introducing new products, and so often captures rents from early introduction?

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