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Strategies for a discontinuous future.





Consulting & advisory, research notes, in the press, about bubblegen,
next wednesdays.





Monday, October 13, 2003
 


the Journal has an extremely interesting article about a new strategy in the Replication Wars - the waiting list (sub may be required - sorry!). Apparently, more and more firms are limiting the supply of their products. This strategy has trickled way down the status chain, and now even Banana Republic is using it.

Is exclusivity (or reverse quantity competition if you want) an effective strategy against replication? Well, what it does is to create a bigger gap in value (and thus reputation) between the authentic and the replica than if the authentic was produced to demand. In this sense, it is an effective strategy - for the guys at the top. Here's why:

The problem isn't the risk of losing customers because of underproduction (as the Journal claims) - the problem with this strategy is that it's going to change the dynamics of buzz, by creating an arms race of exclusivity trickling down the status chain.

The person at the bottom - ie, the guy that waits two months for a pair of Banana Republic jeans no one thinks are cool anyways - is going to look and feel pretty dumb. What's his best response? Stop buying Banana Republic, and shift up the status chain, where his marginal cost doesn't increase so much, because he only pays a little bit more in money, and an equivalent amount in time, but his marginal benefit is much greater - he's now waiting for Diesel jeans, which have a bigger 'coolness' payoff.

So this is going to reinforce the players with the most exclusivity, at the cost of the players with the least - a kind of subsidy, if you like.

What the Banana Republics of the world should be doing is what Zara and H&M are doing: replicating and recombining the innovations from higher up the status chain. Of course, they won't do it - because their management doesn't really understand the competitive dynamics of the market, or consumer needs in the fashion marketplace.

Still, a decent strategy in the short term - just because it changes the rules of the game.

speaking of fashion, here's a link to my new favorite jeans. these are no joke.

-- umair // 5:20 AM //


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