Why You Don’t Want To Be Market Pioneer In The Digital Age
Topics: Business Opportunities, China, Ecommerce, General Business, Internet Marketing, Retailing
In my last post, I talked about how it is not the right time to get into ecommerce in China. And a lot of people asked me, “As an entrepreneur, aren’t you supposed to solve those problems?”
Yes, entrepreneurs are supposed to solve problems. But not if the cost is too big.
Here’s why you don’t want to be a market pioneer in the digital age:
1. Exponentially higher development cost - in the industrial age, where productions rely on machineries and physical infracstructures, the development cost of market followers are not that much lower than the pioneer. The reason is developing and producing a machinery requires component and parts which cost money. For example, if it costs $10M to produce the first automatic cleaning machine, it will still cost $3-4M to reproduce it.
However, in the digital age, when what businesses need are more information technology, online services, and software programs, there is an exponentially higher cost of development for the market pioneer. For example, while if it costs $10M to custom made a software, the cost to reproduct it? Almost zero.
2. Less customer loyalty - in the digital age, when one store to another just barely a click away, it is becoming harder to build up customer loyalty. That means even if you company’s market share is 30% this year, it may very well be much less than that next year. Because of this lack of customer loyalty, the benefit of being the first one to enter a marketplace has significantly reduced.
Combining higher initial risk and lower potential reward, I hope you see why you no longer want to be a market pioneer in the digital age.
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