“We never get expensive trips anymore,” lamented the IT journalist, “every year we used to get a trip to Las Vegas, London or Singapore.”
The decline of journalist freebies is one symptom of the world of declining margins. In the case of the IT industry, most vendors have seen their profits shaved and the days of flying the press around the world to product launches and parties is an unaffordable luxury.
A recent Time story, When Whenzhou Sneezes, illustrates the problem on a broader scale.
In Wenzhou, a provincial Chinese city, factory owners found their margins were being squeezed and they could make better money in property speculation, which of course rarely ends well.
For the IT industry, we saw the rise of “crapware”, where computer manufacturers started added trial programs that slowed their systems and detracted from the customer’s experience.
That’s madness but Micheal Dell, the founder of Dell Computer, pointed out adding this rubbish allows them to sell computers $50 cheaper.
Assuming margins will always be fat, and then fighting market trends when those profits start to erode, are two serious management mistakes that are being repeated across industries and by entire nations.
Right now the world is changing and there are few sectors that have been profitable for the last twenty years that won’t be affected in the post-consumer society.
It might be worthwhile considering where your margins are and how they are changing, then resisting the temptation to do silly things. Although cutting back on journo junkets might not be a bad idea.
Had a call from someone yesterday who is looking at starting a new retail business. With a history of managing in this space he shows great promise but it was his passion that was infectious. Happily he has good thinking to back up his passion.
He realises that better margins come from providing services that others don’t and being different and approaching the business of selling – from the viewpoint of the buyer.
Oh if only our established retailers could ‘get’ this. I predict that those who survive, will be the ones that do.