The Old Chestnut - Again

[David Bovill]

On 26 Nov 2005, at 21:14, Dan Shafer wrote:

> As someone who has been playing in the software universe for far,  
> far too long, I can tell you that:
>
> (a) your basic idea is attractive and workable
> (b) it is an economic disaster for the publisher
>
> Why? Because of something called SKUs. That stands for "Stock  
> Keeping Unit" and it's the number by which wholesalers,  
> distributors and retailers identify a specific product uniquely for  
> inventory tracking and sales monitoring purposes. There is a  
> fundamental business principle that says the more SKUs you try to  
> put into the channel of distribution, the greater will be the  
> resistance to your entire line. Large companies can overcome that  
> resistance. Small companies are hard-pressed to do so.

This is very true - with one qualification:

If the price of adding an extra item (and maintaining it) to your  
inventory falls below a certain threshold the economics get  
substantially reversed. Amazon is a case-study here. Most publishers  
make 80% or more of their money from the big sellers making virtually  
all of the rest of their inventory useless in terms of a hard bottom- 
line. This goes for music and video too.

However recent analysis of Amazon sales has shown that they manage to  
generate a substantial part of their profits from the bottom end of  
their stock (in terms of sales) - from memory some 30%. This is  
because of the very low cost to them of adding (and maintaining) new  
SKU's to their inventory - this combined with their reseller  
programme greatly facilitated by the REST based web services which  
allow just about anybody to offer selections of Amazon books for sale  
on their own custom sites.

No-one has managed to do this with software components yet. My view  
is that due to the technology and community involved in the  
Revolution environment - RunRev are uniquely placed to pull such a  
trick off. Whether anyone agrees with me on that is another question.