Our consumer economy is being transformed. From an “accumulation nation” of consumers clinging to our possessions until the end of their useful life or beyond, we’re becoming an “auction culture,” where one constantly trades up to newer, better products, or just resells them on the open market when utility wanes.
Sound unrealistic? It’s not. Just consider eBay, whose more than 150 million worldwide registered users transact more than $40 billion worth of business annually. And the secondary market is rapidly expanding with the emergence of thousands of “dropshops”—businesses like AuctionDrop, iSold It, and NuMarkets, which sell items for you on eBay and other online exchanges. Some established retailers, such as Circuit City, already see the trend and are setting up facilities of their own to profit from the trade-in of their products.
The new business models threaten to impact traditional distribution channels. In the secondary market, there’s no way to control customer behavior—and that will have serious implications for sales strategies and the entire supply chain.
Just as in the early days of the Internet, business leaders have choices: They can either embrace or reject the auction-culture paradigm. But those who fight it will do so at their own peril.
The automobile market was an early adopter of auction culture practices with certified pre-owned programs. Now we’re seeing similar strategies with other products. Callaway Golf, for example, has gotten ahead of the curve by developing a pre-owned program for its golf-club line that puts it squarely in control of the flow of its products in the secondary market.
CIOs will soon be called upon to support their marketing executives with reverse logistics systems as well as forecasting tools that can leverage the massive online transaction data that’s rapidly becoming available. Business will be able to spot trends in near-real time by accessing and analyzing deep point-of-sale data. Imagine what the secondary market data can tell you about pricing, production, and competition in the primary market. How much will an iPod or a cell phone depreciate as months go by? What’s the hottest-selling color or model this month? And while trading may be done online, the data it generates can be used to predict what’s happening offline as well.
Get ready; the transformation is under way. The new consumer culture will have broad implications for everyone. Those who understand and prepare for it will be rewarded.