Is Retail Hindering Product Innovation?

As I work with tech startup companies to create and manufacture their new hardware products, one of the frequent challenges is the difficulty in meeting their sales expectations. All of the excitement and anticipation during the development and manufacturing phases invariably collide with the harsh reality of the marketplace. “Build it and they will come” rarely works and disappointment invariably follows.

In fact, the design and manufacturing of the product, no matter how complex, is often easier and less costly than creating large sales. And it’s become even more difficult with the changing retail landscape.

There are numerous reasons for this disappointment, starting with the expectation that a company’s new product will be as compelling to others as it is to them. Being so close to their product for so long, they assume others will instantly appreciate all of its benefits. That rarely happens. The word needs to get out; the new product’s value needs to be explained, compared and justified. The buying process is not instant and takes considerable time.

For a new consumer product to succeed, it needs to reach a wide and receptive audience. While it begins with a strong PR campaign and online reviews, that’s rarely enough to sustain sales. Ultimately, the product needs to get in front of customers so they can see it, touch it, and experience it.

It used to be much easier to do that than it is today, with a large number of retail stores and the substantial customer traffic roaming the aisles, looking for something new. In my case, I used to visit electronics stores a few times a month but rarely do so anymore.

It’s become less appealing and more difficult for product companies to get into retail. With the shrinking number of stores and falling profits, there’s less shelf space to display new products. Lower profits mean less capable sales people and fewer sales.

In many instances, retailers no longer buy a product but, in reality, take it on consignment. They don’t tell you that, but that’s usually the way it works out. They’ll send the product back if it doesn’t sell and will often delay payments for 90 or 120 days. Some retailers are well known for shorting the returns to eke out some more profit.

Even if a company gets their products onto the shelves, there’s no guarantee of success. The company needs to create demand to pull the products through. It’s all about sell-through, not sell in.

With the retail channel becoming so difficult, many companies need to sell their product on their own website, Amazon, or through Kickstarter or Indiegogo, supplemented by online advertising. Amazon has become the go-to replacement for major retailers, at least at the onset. It’s easy to get a product onto Amazon and the initial user feedback in reviews can often help jumpstart sales. Amazon also provides useful sell-through data and offers an assortment of marketing services. But in my experience, rarely can Amazon or any online merchant match a strong retail presence. Retail presence catches eyeballs and creates awareness, unlike Amazon, which first requires that you be alerted to the product’s existence.

One company I worked with thought they were doing well on Amazon until their product was featured on an end cap display at Target. In one weekend they sold more than they had in six months on Amazon. Getting a product into a chain with 1500 stores and selling just 2 items a week per store amounts to 180,000 units a year.

While Kickstarter and Indiegogo were originally established to fund the development of new products, increasingly these sites are being used simply to pre-sell products and get paid in advance. That reduces the cash flow demands of building hardware, contrasted with the demands of the slow paying retail channel but it doesn’t necessarily translate into sales beyond the initial buyers.

So this is the challenge: It’s becoming easier than ever to build new products, yet it’s becoming more difficult to sell large volumes, as retailers are shrinking. In fact, the retail channel is becoming the major hindrance to a product’s success and a deterrent to product innovation.

Published by

Phil Baker

Phil Baker is a product development expert, author, and journalist covering consumer technology. He is the co-author with Neil Young of the forthcoming book, “To Feel the Music,” and the author of “From Concept to Consumer.” He’s a former columnist for the San Diego Transcript, and founder of Techsperts, Inc. You can follow him at www.bakerontech.com.

1,256 thoughts on “Is Retail Hindering Product Innovation?”

  1. I wouldn’t say retail is a deterrent, probably more of a litmus test: any good product with competent PR can find a motivated, specialized audience on the ‘net. Moving up from that, retail requires distribution chops (get contracts, motivate & train the salespersons) and mass appeal from both a truly useful product and a good brand image.

    For example, Huawei’s success in Europe is grounded in good product and smart branding (they’re blanketing tech sites with ads and loaners, even loaners for sites’ readers to write about, which is risky but pays off for a little-know brand), but also supported by a quite heavy retail push, with lots of retailer training, sales incentives, and promotions. I’m thinking they’re even beating Samsung at their own game. That push is a different skill set, which may be why tech-driven companies are taken aback at having to get their hands dirty in the bazaar, and not intrinsically good at it ?

    1. Totally agree. Sales and marketing (and brand as you so fondly speak of) have been significantly underrated by many tech pundits. So much so in fact, that they are totally shocked that software products won’t sell without such efforts, and blame the App Store for requiring significant marketing outside of the store itself.

      In a similar note, Phil Schiller I think is tremendously underrated. It is interesting to note that while Google and Microsoft have their Scott Forstalls, their Craig Federighis and even their Jony Ives come out on their keynotes, I don’t think they really have a consistent marketing guy on stage.

      1. “Sales and marketing (and brand as you so fondly speak of) have been significantly underrated by many tech pundits”

        Not just underrated, but derided and disparaged.

        Joe

    2. Hang on, everything you say about Huawei is the same as your complaints about Apple and since you insist Apple will fail once the 100s of millions of customers realise they are being coned, isn’t Huawei on the same path of extinction as Apple?

      1. ??? What are you on ?

        1- I’ve never said Apple is doing anything similar to what I’m saying Huawei is.
        2- They actually aren’t
        3- even if they were, I’m at no point saying it’s good or evil, just stating what Huawei is doing w/o any kind of personal judgment
        4- What I dislike about Apple is entirely different

        So… Next ! A better quality of troll, at least, please ?

  2. But in my experience, rarely can Amazon or any online merchant match a strong retail presence. Retail presence catches eyeballs and creates awareness, unlike Amazon, which first requires that you be alerted to the product’s existence.

    This is a very strong statement considering that a lot of tech commentary suggest the death of brick & mortar retail. I think you make a very good argument, and from my experience, I totally agree. Still, it would be very insightful if you could elaborate on this in maybe a later piece.

    1. The death of brick and mortar is highly exaggerated.

      Online shopping succeeds because retail is inconvenient – you must travel to the store, navigate through the store to find what you want, and then purchase it. Store layouts invented before the internet to make it hard to get in and out quickly — basically trapping you in the store in the hope that the longer you stay the more likely you will be to make an impulse purchase — don’t help matters. Neither does a corporate accountancy response to price competition that cuts staff and seeks low wage employees with no expertise, resulting in stores where you cannot get good advice because the employees know less about what they sell than you can find out for yourself by googling a few reviews.

      But retail survives because online shopping is dissatisfying. You can’t touch or try out before buying*. You can’t chat with the clerk. You can’t satisfy your primal need to rub shoulders with other human beings if the checkout line involves clicking “next” instead of standing in a
      queue.

      The reason you keep seeing talk in the technosphere of brick and mortar being doomed, a dinosaur facing extinction, and other such hogwash, is that tech heads tend to be nerds, socially inept, proud to be high scorers on the autism spectrum, phobic about interacting with other people. Or they tend to be elitist jerks, or both. They regard having to interact with a clerk, rubbing shoulders, etc, with horror, either because they regard all social contact with strangers with the same dread as someone with asperger’s syndrome, or because they hate the thought of mingling with the hoi-polloi. Either way, their views on the balance between the convenience of online ordering versus the satisfaction of retail shopping are not to be trusted.

      * explaining this got too long, see my next comment.

      1. Explaining the importance of touch requires a bit of background.

        Educators talk about students with touch dominance, where they need to manipulate things with their hands to really understand the concepts being taught. Market researchers talk about people who prioritize sensual experiences, who agree with questions like “after a hard day, a long hot bath helps me
        relax,” or “i really need to hold something in my hands before I know that I want to buy it.” And there are specific marketing tricks designed to appeal to and seduce people who score
        highly on those kinds of questions.

        It’s been a long time since my spouse wrote a slew of reports for her market research employer on how to sell specific kinds of cars to specific kinds of people, so I don’t recall the numbers exactly, but the segment that scored high on touch orientation was a significant minority, something like 10%. And for that
        population, online shopping will never feel satisfying.

        Furthermore, it’s not like the other 90% of the world never enjoys a hot bath. These traits are shared to some degree by everyone. And to that degree, online shopping will never be as satisfying for us as in person shopping is. Switching over completely over to online shopping leaves those touch-based desires frustrated. And every time you buy something online
        only to discover that it disappoints in person, it’s another nudge in favour of buying in person next time.

        Clearly touch is more important to some market segments than to others. Online buying of clothing and shoes and other wearable items, for instance, is pretty much a nonstarter except for the most standardized items, where if you know your size you know it will fit you. Online food shopping has never taken off — there’s been an online grocery store here in Toronto for well over a decade, but it’s still very much marketed as a substitute for the real thing for those who don’t have time to shop in a real store. And the infrastructrure is actually set up so that what you’re doing when you order from grocerygateway.com is hiring someone to walk through a standard supermarket with your shopping list, and then have those items delivered to your door — you pay a premium to cover the time of the shopper, plus a delivery fee on top.

        But even for markets where you would think touch was insignificant, like book buying, there are lots of people who prefer paper books to ebooks because they like the feel of holding a “real” book in their hands. And not all real books feel the same. Online, you can’t tell if what you’re buying is cheaply printed on newsprint, which feels cheap in the hand and looks cheap to the eyes, or done on solid paper with modern digital techniques that feels good and looks crisp. Which is why despite 20 years of trying, Amazon still only commands a fraction of the book buying market.

    2. Actually I was thinking the same thing. Lately the only thing I’ve heard from retail stores is that ecommerce is killing them.

      Sushant @ infotag.in

  3. Wow. I’m still trying to understand the implications of the author’s conclusion that “retail is a deterrent to innovation”. There is a an uncertainty about what he really means by “retail” since it was implied that brick & mortar vs online might be part of the issue. If he was indicating that the difficulty in achieving sales success impedes developing all kinds of great new gadgets – well duh!!