Selling in the 2010 decade

I just ran into a businessman I know. I asked how things were for him as business had been quiet. He said they are flat out. Heading to their biggest month ever in 7 years!

I said, "Great" and then asked why he thought he was having a turnaround? He gave a sad smile and said, "Price."

The business is selling lots of units but making no profit at all. The price is set so low that even a full-margin deal is loosing a bit of money by the time the product is fully delivered and the customer has been served in the way they expect. I asked what could they do and he just shook his head. He said it wasn't just him but everyone else he knew in that industry.

Someone somewhere in the chain is making money but that isn't at the storefront so change is inevitable and a lot of people will be in pain. His parting words were; "The world is changing and if you aren't on top of change then then you are finished."

So what do I think is happening?

We know that businesses have come to rely on a lot of outsourcing to poorer countries to lower wage costs. We know that staff are starting to be switched from full-time to part-time positions. We know that the remaining full-time staff are often handling 2-3 jobs instead of one. We know that consumers are demanding The Best product at The Best price. We know that the Web has changed the information balance to give consumers more power. We know that the global Financial Crisis has shaken that whole cocktail about.

I think the future of selling lies in the manufacturers taking a lot more control over the retail sale. Manufacturers who currently pass products through several layers of distribution to the customer will remove those costly and often conflicting layers. Products can be sold straight from the factory to consumers. This even allows the consumer to personalize their product. Removing the layers of distribution and control has several advantages:

Lower Selling Cost - each layer adds cost (everyone deserves to profit from their labors). Consumers expect great products at low prices and 2-3 layers of handling adds vast cost to the final retail price. If a $15,000 retail product contains $5,000 in distributor costs then the manufacturer could sell direct through their own storefront for $11,000 whilst maintaining or even growing margin. Increased market share would also result.
Greater Brand Experience Control - each layer of distribution adds it's own needs and desires into the sales process which can dilute or even destroy the real product. Manufacturers, distributors and retailers often have what appear to be opposing needs (or desires). Removing the layers means that decisions made at the factory about marketing and sales processes will translate more directly.

Of course there some areas of concern too:

Manufacturers have to learn how to sell. In theory every product should be built to fit the market (the essence of marketing) but often products are built to suit the manufacturer and then someone else is engaged to work out how to sell it. With that layer removed companies will need to convert from process thinking to sales thinking.
Strong leadership that is followed from the generals down to the lowliest indian are required. This leadership must be dynamic and positive so everyone wants to follow. Tyranny and mediocrity in the structure will break the chain with nasty consequences.

There are very attractive gains to be made by companies who understand the opportunities and how to manage the required changes effectively.

Examples: Dell sell direct and have prospered as a result. Apple are establishing their own stores to pass on the whole Apple experience as intended without re-interpretation

Transitioning to a "selling culture"

Transitioning to a selling culture is far easier than it initially seems. We are all born to sell. We engage in sales whenever we put on nice clothes to impress a client, employer or even potential husband or wife. Selling is biologically hardwired into us. It is only culture that convinces us otherwise.

Make sure that everything that your business does is to solve the problems of customers in the market. Understand that marketing is learning what the market wants and selling is getting your product into the hands of the people. Manufacturing is just something that happens in-between to keep the circle round.

Don't build a boring corporate website and expect the retailer to sell for you. Sell your product from your website with real passion so that people walk into shops asking for your product by name. When someone walks into a store asking for product x by then that creates a strong pull. If you really require a distributor (really check on this) then he will be far more inclined to carry and sell what he knows people want instead of what you say people want. He has been shown the money.

Addendum - workforce

Workforces are changing too. 2009 saw many people either retrenched or put into part-time versions of their existing jobs. Remaining full-time staff were often expected to shoulder work from 2-3 other people's tasks. Employers are loath to take full-time employees back on in case they get 'caught with them'. This means that many staff are stressed from either too much work or too little wok (income). Employers have also realized that they can survive with the diminished workforces and are unwilling to take up the wage costs again.

These factors will I believe see workforces move from full-time to contract and consultant employees. In many cases these people won't even be employees but independent consultants and sub-contractors - guns-for-hire. There are some advantages:

Reduced Fixed Labor Costs - workers can be added and subtracted to suit seasonal market conditions. If you don't have any work on in January then you simply let everyone go home.
Direct Labor Hire - each worker is more directly responsible for their own productivity. Wages can be more directly linked to skills and productivity. Good workers will be able to command a premium which will increase the value of genuine skills and reliability.
Better Productivity - each task can be handled by specialist staff instead of having one person who is average at many tasks.

Negatives could be ugly if mismanaged as labor involves people very personally:

Reduced loyalty (and productivity) - if casual workers are seen as tools to be picked up and dropped at whim. Staff with part-time or consulting jobs will be far more likely to change employers so it will be vital to keep employees engaged, motivated and in-love with the company.
Rise in militant unionism - if treated poorly workers will again turn to unions to agitate on their behalf. All too often this gives unions power that they use to ends that don't actually serve workers in the long-term. Positive work conditions will avoid this.
Shrinking economies - if most employees earn less money then there is less money to spend in the economy. It is only a matter of time before that impacts on all companies resulting in a shrinking economy. Just be sure that any cost-cutting is for the long-term good and not just this quarter's stock report.