Page 9 - The Bootstrapper Bible

ChangeThis 1 DISTRIBUTION. How is it that Random House publishes so many best-selling books, or Warner Music so many hit records? Distribution is at the heart of how most businesses that sell to consumers succeed. In a nutshell, if you canʼt get it in the store, it wonʼt sell. Companies with a lot of different products can afford to hire a lot of salespeople. They can spread their advertising across numerous products and they can offer retailers an efficient way to fill their stores with goods. Traditional retailers want the companies that sell them products to take risks. They want guarantees that the products will sell. They want national advertising to drive consumers into the store. They insist on co-op money, in which the manufacturer pays them to advertise the product locally. Thatʼs why Kelloggʼs cereals are consistently at the top of the market share list. Lots of small- er companies can make a better cereal, and they can certainly sell it for less. But Kelloggʼs is willing to pay a bribe (called a “shelving allowance”) to get plenty of space at the super- market. Kelloggʼs airs commercials during Saturday morning TV shows. And Kelloggʼs has hundreds of sales reps wandering the aisles of grocery stores around the country. Kelloggʼs wins the market share battle in mass-market cereals because it succeeds at the last and most important step: getting the product in front of the consumer. 2 ACCESS TO CAPITAL. The big guys can borrow money. Lots of it. Itʼs no big deal for a car company to raise $200 million to pay for a new line of cars. In industries where the expenses for machinery, tooling, research and development, and marketing are high, big companies with cheap money often prevail. Microsoft, for example, took six or more years to turn Windows from a lame excuse of a product into the market-busting operating system it is now. Year after year after year, it lost | iss. 6.01 | i | U | X | + | h 9/103 f