constanze, thanks for the interesting historical footnote. Certainly the FUD involved in considering a new way of doing things when nobody really knows how to do it well should not be surprising. Maybe we are even seeing some of that in this here thread even though by now I wouldn’t call it all that new.
Great Antibob, I don’t understand your point about cost of ships. I always thought that container shipping is a commoditized service. Reputedly nowadays shipping volumes declined and so there are plenty of ships available. Of course, fuel costs may have risen to offset that. When you ask what is the difference between model I am describing and what Walmart, one salient difference is that there is no more “stocking” at local Walmart. Customers come to the distribution center and pick up what they ordered (awhile ago). The packages are assembled in China and shipped already assembled (at least, that’s the most basic form - if customs prevents this, perhaps there will be elaborations to accommodate the customs better) kenobi 65, how do you know what is Walmart business model right now? Did you read it in their brochure? Do you mean “model as officially proclaimed in PR materials” or “model as sincerely believed by its execs” or perhaps “model as what is actually happening in reality”? Because all these may be different models. Models sincerely held by the leadership don’t always translate into reality, viz. Bush and Obama for the details.
I’ve worked for two companies which are major suppliers to Wal-Mart. I’ve worked for Wal-Mart’s advertising agency (and, for some months, worked on the account). It’s not just what they say in PR; it really is “what is actually happening in reality”. Is that good enough for your skeptical mind?
Just where would this “distribution center” be? You’re not shipping it all the way to the customer? So, not only will I likely have to wait weeks from the time I order it, until the time I receive it, but I still have to go somewhere to pick it up (and that “somewhere” may not be terribly convenient to me)? Man, you’re going to have to promise to save me a fortune to make this a more attractive option than just buying it today at Wal-Mart.
my skeptical mind will not be satisfied until it gets a spreadsheet of prices of goods at the factory gate in SE China (sold in bulk) and then compares it to prices of same goods in my local Walmart. Even then I might still be wondering about manufacturing and business practices of the Chinese company (i.e. maybe price could be lower and quality higher if only the management were to give a bit more damn than it’s wont to) - but at least I would be confident that the American retailer who gets the stuff from there to me is not wasting my money.
Your skepticism about the convenience aspect of this sort of shopping is understandable given the social class and salary class that you (probably) belong to. But, not everybody out there has a big salary. Some people out there do have more time than money. More and more of them with every passing day…
I think you’re gong to have to keep on wishing, then. That’s the sort of information which is just not going to be available to the general public.
I also think you’re incredibly unrealistic that you can get both (a) lower prices and (b) higher quality, simultaneously, “if only the management were to give a bit more damn than it’s wont to”. For one thing, simultaneously lowering prices and improving quality in a product is extremely challenging, if not impossible – in general, companies seek to lower their prices while maintaining the same quality.
Not sure what you’re referring to there, other than perhaps the aging U.S. population.
I think that, at the very best, you’d find that there’s a very narrow niche in demand for this sort of service – a fairly limited number of people would be interested in it (due to the length of time it would take to get their goods, and potentially the inconvenience of having to go to the “distribution center” you just described), and only for a limited sub-set of those products which they currently buy at a store like Wal-Mart (no food, for example).
At that point, you’ve not, in any significant way, competing with Wal-Mart, which both (a) caters to a very wide (i.e., non-niche) clientele, and (b) carries a very wide variety of products, encouraging their customers to shop for a wide variety of disparate items in a single shopping trip.
obviously this is not “competing with Walmart” but rather dealing with a niche. Some products would work this way, others would not. If anything, I mentioned it in the OP. And any such online discussion needs some handwaving - after all, our purpose here is to bring out and organize new information rather than wear down the opponent by forcing him to clarify the nitpicks. If we adopt a “why isn’t the answer yes” attitude, I think the discussion will be more productive than with a “why is the answer no” one.
In terms of customer base, I see around me declining disposable incomes, falling currency, rising taxes, increasing unemployment among 30-50 year olds and chronic underemployment or inability to find any work by 20+ year olds. I also read fairly similar things (not in every detail, but in broad outlines) about other countries, such as Russia and parts of Europe. If things are better on your planet, where do I buy a spaceship ticket?
Then, I’d say you’ve moved the goalposts from your OP, which specifically is titled, “why don’t we see the rise of China-based Amazon-type competitor to Walmart?”
I think the issue is that your original premise makes certain assumptions which don’t necessarily line up with facts. When other posters bring up those facts, you often don’t seem to be interested in understanding where your assumptions may be mistaken.
This isn’t the first thread you’ve started in which you propose a business idea based on your view of the world, and what seem to be your personal priorities in selecting a product or service. And, you seem to get frustrated when other posters answer your “why isn’t there this kind of service” questions with “this is why” answers.
I don’t disagree with you that unemployment and rising prices of products are a significant issue. I’m simply not convinced that your proposed solution meets those needs any better than what’s already out there. In this case, you seem to be convinced that there must be a significantly less expensive way to provide everyday goods to people than how Wal-Mart or Amazon does it. I’m just not convinced that (a) it would be substantially cheaper, or (b) enough people would see the inconveniences of your proposed solution to be worth the savings.
code_grey, consider this hypothetical:
A US company with $500million in gross sales direct to consumer can save, say, $4million in DC labor costs by moving the DC to China.
If the company had $400million in total costs, the $4million is 1% of costs. So they can drop their prices a little, but their customers will need to wait 3 weeks for product.
Do you see why that isn’t compelling?
If there was a business already established in China that was already making money distributing goods within China, and they decided to add the US as a shipping destination, then they could do that with little investment and little risk.
I won’t agree with this assessment of little investment and little risk because even if there were an established business in China, it would be selling local products which would not sell in the States. “Tiger Brand” deodorant and “Six Lakes” stove cleaner. Selling to the US would require a completely different inventory, which would be a significant investment and risk, especially if the aim is to offer a larger inventory than Wal-Mart.
Also the operations would all be in Chinese, necessitating incorporating a foreign language.
Anther major, major investment at high risk is leasing pickup centers in the States. How many do you lease? How far will consumers travel by car to save a few pennies per purchase? How many centers you have per city and how many cities do you start with? Each center costs money for the lease and it’s high risk.
This ties into the shipping. There are no shipping companies which provide the required shipping at a cost which would be competitive to what Wal-Mart enjoys, so you would have to subsidize the shipping until you could grow the scale of the business to levels which do not seem likely based the other constraints.
International shipping for individuals / small businesses is expensive, even shipping sea. The only way to reduce costs would be to ship huge quantities, which expose to what I see as a potentially fatal flaw (one of several) with this business model. It would require a significant level of transactions in order to reduce the costs low enough to make it possible, but it would require a huge investment in order to build up the necessary number of centers and have enough inventory.
Another fundamental problem is that you are trying to compete with low end products. Consumers will be reluctant to use this business model for high value products. This reduced your potential for profits.
Amazon Japan has been able to succeed because it has a local operation, selling a high percentage of local goods. Foreign products are sent to the local warehouse and then feed into their normal distribution method.
Dealing with Chinese companies can be tricky, and is beyond the ability of average consumers.
If the OP sees this as “nitpicking” then it’s perhaps a further indication of an unfamiliarity of business; where ideas for new proposals, and the assumptions they are based on, must be defended to the satisfaction of those investing.
Another flawed assumption is that purchasing price for the new business would be compatible to Wal-Mart’s with its annual US$258 billion (2009) turn over.
In short: No. Wal-Mart drives prices from its suppliers down because it is Wal-Mart and has the sales volume. Like the joke about the photographer stopping to put on running shoes when the bear starts charging because he only has to outrun his friend, Wal-Mart didn’t have to start off getting the same level of discount it not has, it only had to be cheaper than the surrounding stores. Now that it’s so cheap, it makes it extremely difficult to compete against, and here, too is the same problem with scale.
You would have to purchase or make commitments of purchasing tens of billions of dollars of products to gain discounts for a wide range of products, and even then you still wouldn’t be competitive with Wal-Mart.
You would need a completely different model for shipping than exists now, and I’m not sure it would be possible, given the constraints of OP. Shipping by Chinese post takes too long. There are no current commercial services which offer sea shipment for small packages at cheap rates, you would have to build a service yourself.
Shipping companies contract with customs brokers who charge on per shipment basis. This is the reason why shipments to individual homes won’t work, because the cost per shipment would wipe out any theoretical savings. You would have to group massive numbers of orders into a single “shipment” in order to reduce this cost, and it may not be possible to reduce it enough to be competitive to Walmart.
I thought his point was quite clear: ships cost a bunch, so it’s difficult to scale up the volume of orders. It’s one thing for the manufacturer in China to pack x container boxes according to a pre-agreed contract with Walmart. It’s quite another thing for your new proposed company to pack 10 containers this month when people are trying things out, and 1 000 containers next month, if they become a sucess*
This was also one of the lessons of the early internet business time: When every small business - one of the examples was an olive farmer in Italy - suddenly was convinced to put up a webpage about his business (often done by younger, tech-savy relatives), everybody in the whole world saw their page, and orders started pouring in volumes these small businesses were in no way prepared for. If you only have x trees and therefore 600 bottles of olive oil per year, of which you sell 400 bottles to specialized vendors anyway, but suddenly 10 000 orders come in, you end up disappointing a lot of customers. It’s also difficult to go from a one-person owner business to employing one person for answering emails, printing out forms and doing the accounting, one person for packing and mailing products, setting up way of payments … a lot of small business don’t scale up well.
Even the bigger shops like amazon had to struggle when going from start-up size to really big size, which required building and using new databases and software, because one type could handle 10 0000 customers, but not 10 mil. data.
At least here in Germany, and therefore, I assume, in the cheaper US stores, too, they have outsourced stocking. Insted of cashiers stocking the shelves in quieter times, cashiers are called in on an as-need basis (sometimes only for two hours) depending on how busy, and a seperate, cheaper company, does the restocking during certain hours.
The ALDI model is even cheaper: ALDI started back in the 70s with a revolutionar model of cutting all costs , going where other stores thought customers wouldn’t accept this. One of their aspects is that when a whole pallet of products comes in, they aren’t put onto any shelves. Instead, the cartons are piled on the floor and cut open, finish. The customers can take what they want, after all. (Another aspect was a drastic reduction of inventory: they have only about 1 200 to 1 300 products at all, compared to a normal supermarket this size, that has 7 000 products from different companies).
And ALDI noticed the same thing I mentioned above of focus groups: the Turks (our immigrants) and the poor people shop there, the students also. For some time, it became a secret trend to buy ALDI (since their fake house brands always get good grades at consumer tests and it was some reverse-snobbery of the middle-class to shop there). But large parts of people will still shop at higher-class supermarkets.
You also seem to be unaware of the advantage of shelves full of wares that supermarkets employ on purpose. Besides the obvious “bug me” ware (the sweet stuff at the cashiers intended to get bored children to bug their parents) and cigs and similar things at the cashiers for impulse buy, psychologists spend hours devising which products go where to make people buy more than they intended to do. And it works. Unless you write a shopping list before hand and stick to it (which very few people actually do) most will buy more.
A web shop doesn’t offer this opportunity, though some clever software tries to, suggesting if you bought product A, you might want also B (if you bought a razor, you might want shaving cream and disposable blades). But that’s still not the same as touching and looking at a product, deciding that’s not right, and looking at the 5 other models from the same company, and the models from the 4 competitors. (After doing a preselection based on consumer tests, if we are talking about savy consumers wanting to save money).
That requires a lot more structure in China than just putting 10 000 packages of product X into one container for Walmart. How big do you think the packaging and distribution center for catalogue companies or amazon is? Even with robots and automatisation, there are still many people employed there. The Chinese company would have to build all that up from the ground.
A lot of poor people can’t afford computers or internet. And most smart poor people cut out unneccessary buys. If you read what some of our poor but smart Dopers do to get buy with unemployment, Walmart doesn’t even come up: they buy at thrift stores, Goodwill, flea markets. They sell stuff from better days at ebay to get money for rent, food and electricity, or they swap DVDs and books on the inernet.
If the biggest expense after rent and electricity etc. is food, then shipping from China for 3 weeks is not a good alternative.
Russia, yes, because the west allowed unrestrained capitalist vultures to take over the country and tear it apart, and under Putin things got more authoritarian, but not better for most people.
Europe still has what Yanks call socalist systems, though, although under US libertarian influence, things are getting worse. Still, we thankfully are not yet at US level of poverty and slashing of middle class.
This is rich. You don’t help your case at all by insulting those better informed posters who try to educate you that the world is much more complex than you imagine. If anybody is living on another planet, it’s you.
I think we’re in agreement that the growth is a major problem. The problem especially with this proposal is that it’s based on high-volume, low-markup business model, so its going to be hard to start off small and naturally grow.
I think there may also be a mistaken assumption that Chinese labor and warehouse space is dirt cheap, but that is no longer the case, especially in the area where this operation would need to be located.
Another “dealer killer” constraint from the OP is the requirement for Chinese management. Having dealt with many Chinese manufacturers, I just can’t see how this would be possible. Not that they aren’t intelligent people or good at what they do, they don’t have the experience in the US in order to make all the necessary decisions.
On second thoughts, since you are selling to individuals and not to the pick up warehouse, each person’s purchase will require separate a separate invoice so you would not able to reduce the cost of this part to be anywhere comparable to what Walmart gets. Again, this is an issue because you are trying to compete on the low end where every dollar counts.
Another problem with shipping is that shipping individual orders in separate boxes will increase the inefficiency and add to the bulk of the shipment. Since freight is charged by dimensional weight, this could easily add 20% to 30% or more. Even if it were possible to gain comparable shipping rates, you’re that same percent much more expensive.
even though by now I wouldn’t call it all that new.