Can You Spot the Need? And the Fastlane Opportunity?

Image: Bloomberg News

So I get the Barrons magazine (print version) sent to me every week and was reading an article about Francesca’s Holdings — a specialty retail boutique store.

Here is the article…

http://online.barrons.com/article/SB50001424053111903835404577348202146910304.html?mod=BOL_qtoverview_barlatest

Are you wearing Fastlane goggles?  The article exposes a great Fastlane need (and opportunity) that any Fastlaner sporting the goggles should be able to see…

How many of you can spot the need buried in the article?

This is a perfect example about how Fastlane businesses are born … not “do what you love” or “following passion” — but needs and solutions that others demand.

The NECST run down…

  • The “Need” is defined in the article (Can you find it?)
  • Entry is the complicated solution to solve the problem. (Which admittedly isn’t easy – the solution would probably take several years to solve – this makes the opportunity Fastlane. “Money-chasers” ignore the industry and the opportunity because they are too busy chasing easy money, easy solutions, and drive-through success.   “It’s too hard!” is the opportunity.
  • Control is the complicated process by which the problem is solved. (Distribution is a tough racket, with big entry barriers; just look at Amazon)  Yes, it won’t be easy!
  • Scale is by virtue that everyone in the business would not only use it, but they would love it.
  • Time would be the last to be solved – after solution is created and adopted by the industry. (Again, several years.)

This is just one of the many examples of Fastlane opportunities that are ripe for further investigation.  I’m amazed (over at TheFastlaneForum.com) at how many people say “how can I spot needs?” —  I SEE SEVERAL EVERY DAY.

Can you see this one?

 

 

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  • 20803

    Consignment is KING!

  • Juanle

    Opening a distribution company that does consignment?

    •  Bingo.

      • Jan ?wist

        Isn’t opening distribution company that does drop-shipping better choice? 

        For retailer it’s better because it doesn’t have to buy anything, for distribution company it’s better because if they sell something in worst case it will return in days from customer.With consignment You will receive cash, invest it in more inventory and suddenly if retailers would like to return Your stuff – You’re screwed, cause You have money in inventory and no cash left.

        Seems to be risky business so correct me if I’m wrong.

  • 20803

    Drop-shipping is QUEEN!

    • INVENTORY is JACK!  =)

    • Well, drop-shipping might be good, but if You will read Zappos story, You’ll find that it has some flaws:
      – You can’t control customer service
      – You can’t control packaging
      – You can’t have so much choice, because many vendors just don’t do drop-shipping.

      Of course, for starters, it might be good idea, but I don’t know if on further go it will still be good.

  • The need being filled is a company able to react almost instantaneously to new fashion trends while still maintaining margins. When (and only when) you fill a need, you can charge (and sustain) premium prices. In meeting this need it’s finding new ways to do business to maintain its margins. Filling the need came first, finding “how” is the difficult part that pushed new innovation in a highly competitive industry.

    •  This is the need being met (by Francesca) – I am asking if you can find the unmet need (problem) exposed in the article.

      • Aren’t You talking about consignment practice being stopped?

        Hell, MJ, I hope You will blast us with correct answer since no one seems to get it. Maybe it’s time to read again Your book…

        • Jan ?wist

          Sorry, just noticed the answer upper in the comment. Sorry bout that.

  • this to bring competitors in that industry the requires product in a similar fashion as kjk and stony did for francesca’s?

  • I produced an independent film and our distributor had relationships with Walmart and Target. The big chains were willing to buy our film – fantastic – except they would only accept it if they could return everything for a full refund. They didn’t call it consignment, as I think they were going to buy them upfront and pay us but they had it in the contract that they could return 100% of them and get full money back. So it was essentially consignment. So these deals might already be out there.

    The bottom line was that we just couldn’t pull the trigger on the deal. They wanted to order tens of thousands of DVDs which we were skeptical that they could sell and then we would have been stuck paying to have them produced but having no place to sell them.

    So that’s my big question with reading about this company. I get it that it would be an opportunity, but there really is no margin for error. If you create some bad products that don’t sell you’ll sink. Reading this article there seemed like a cloud over the whole thing.  Tying the retailer to the supplier as this company has done might makes the retailer look good (so the stock price goes up) but if the suppliers go down so will this retailer because at the end of the day their bottom lines are connected.

    • But what if you are just the bridge between the manufacturer and the retailer?  Meaning, the manufacturer (say, Joe Blow’s Fashions) consigns to the consignment distributor which consigns to the retailer.  When the retailer returns stuff to say “This stuff isn’t selling” the distributor just turns around and returns it to the manufacturer.  Ironically, this is how the publishing industry is set up … books that don’t sell at the retail level are returned to the distributor which will be returned to the publisher. 

      •  A great no money down deal! It’s like selling stuffs on ebay first, get the money from customer and buy the product from the manufacturer.

        Many times, manufacturer do not know how to market their products, if you can convince them to consign their products to you, you can put their products at retailers which have great locations (traffic) so the products can sell fast.

      • Hclann

        This is the way electronic disti’s work and they are billion dollar businesses. They have full return privileges with their manufacturers. Also if they have to sell lower to meet a competitors price, the manufacturer gives them a credit. They have product managers whose full time job is working to get these credits. This system is advantageous to the manufacturer because they can make large product runs without retooling which is costly and then ship the product to their distributors where it sits on the shelf. All distribution and inventory management costs are absorbed by the disti, who tries to maintain a 20 point margin. The manufacturers only deal directly with the largest of customers with guaranteed volumes.

  • very insightful post, MJ. thanks for sharing!

  • Anonymous

    As a retailer, gross margin %’s are a very important factor in judging vendors. Every vendor has to hold their weight by providing you with the margins you need. Vendors that allow product returns/exchanges (essentially consignment except with money tied up) help your margins by reducing the amount of inventory you have to mark down. However, margins are only part of the equation.
     
    Ultimately, net dollars are what matters. I will take vendors whose products I can sell way more of at slightly lower margins all day because the net $$ is going to be much higher.
     
    My biggest vendor does not accept returns/exchanges, which I hate, but the gross margin I get on them is still more than acceptable and their products do really well in my store. If they accepted returns/exchanges, I might be able to get an extra 5 to 10% in margins for their products. I would love to have that extra %, but not at the cost of stocking product that doesn’t sell as well.

  • Jason C. Waite

    Mj,

    Is this a fastlaner answer? … An online consignment shop? Facilitates consignment between vendors and retailers? 

    Jason C. Waite

    • Jason C. Waite

       I’d create some kind of business model where I’d have no inventory. Just the facilitator. Would drive traffic to the site by teaching vendors and retailers how to seek each other other. To monetize that traffic would be interesting. Maybe have an annual gathering convention, and sell some products on the backend. … Maybe even earn some referral commissions off the deals that come together? … Dunno… This is a hard one.

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