Some weeks ago I wrote about the many disadvantages of physical retail and why we should abandon it immediately if we could (which we cannot yet for socioeconomic reasons). One thing I did not mention in that post but which most likely will play a crucial role in changes to come for retail is the rise of product manufacturing based on specific demand. One could also call it the switch from push to pull manufacturing.
Until now, most products were produced by companies that could not be sure whether all or even a high percentage of units would be sold. Instead, guess work, predictive market research and individual opinions decided about volumes. Then placements in stores combined with different marketing activities were used to create demand and generate sales. The existing products were “pushed” into the people’s field of attention in the hope that people would buy.
But with the Internet and its possibility to establish a direct communication channel to future customers, particularly through crowdfunding, there is a new way to create products: First you ask the customers if they want something, then you take their money and manufacture it. You do not push something that already exists in large quantities onto people. Instead you as a manufacturer wait for them to tell you whether demand is big enough to justify the costly production process. Pull instead of push.
The fact that a rather established, well-funded hardware maker like Pebble chose Kickstarter for its sales campaign quickly became a topic of discussion, partly because the crowdfunding company has denied being a store in the past, instead seeing itself as a “new way for creators and audiences to work together to make things”.
But semantics aside, what happened yesterday is an important event along the way to pull manufacturing as a mass phenomenon. While others should decide about whether Kickstarter or similar platforms are the ideal place for product launches by (comparatively) established companies, the big picture is important here:
A hardware maker that started 3 years ago on Kickstarter but that has sold more than 1 million smartwatches since then and thus today could go the traditional way to produce and fund its newest gadget, decides to again let consumers pull the product and to fund the manufacturing by collecting upfront money from those who desire the watch.
We are far from a future in which all or most consumer products will be funded and produced in that manner. But the most recent Pebble campaign really shows that the idea of crowdfunding can be applied not only to highly experimental gadgets with unproven markets, produced on a small-scale, but even for bigger-scale product launches. The event also proves again that many customers are fine paying for a product that they will receive only in a couple of months.
So criticism about Pebble’s reliance on Kickstarter aside (which I do not see as a problem), the product manufacturing and retail strategy chosen by the Californian startup is another sign of the massive changes coming to the supply chain and world of retail.
It probably won’t take too long until Amazon and other big retailers will launch their own crowdfunding services (if they don’t try to acquire existing ones) for companies that want to avoid shelling out money for the creation of something that nobody actually will buy. Everybody will be better off that way.