10/4/10

Preface: A Flat but Complicated World

First of all, I am so sorry for not being available to write the business blog for a while. So what have I being doing recently?

My PhD study in Marketing and International Business has started in August so I have been adjusted myself to get used to this challenging while intriguing student life. Very different from the learning in my MBA, which is quite practical for a business professional, the PhD learning is quite theoretical while beneficial for my future research. I am also glad for my choice of moving my concentration from supply chain management to international marketing and business. With my interest in international trading and global cultural, this transition provides me a broader platform to fulfill my career goal to comprehend international conflicts and to promote global conversation and fair trading.

As a Chinese origin, I of course will pay more attention to the growth of Chinese economy and its relationship with other nations. Recent frictions between Chinese and U.S. over Chinese currency appreciation and penalty tariffs against each other draw my attention. As an advocate of fair trading, I hate to see this kind of political game between nations which only hurt businesses and consumers as a result, especially between two important trading partners. However, there are too many misconceptions and misleading information regarding the root causes of job loss in American manufacturing, China obviously became an easy target to blame and be used as a scheme for political goals.

There are also much focus on the growth of China and many articles have discussed this new challenge to China. After decades of leapfrog growth, China is facing significant challenge to remain its double-digit annual GDP growth. A very recent HBR blog Will China’s Growth Slow Over the Next Decade by Liu Shengjun points out there are four dividends behind the growth miracle: population, reform, opening and resource. Facing the diminishing return of those dividends, Mr. Liu recommends the following consideration for China to create new dividends:

  • Eliminate discrimination against private enterprises.
  • Further reform state-operated enterprises
  • Promote innovation

Those recommendations are well analyzed and right to the point. However they may not be easy for the Chinese government to make such huge turnaround in the near future. Corruption at all levels of central and local governments will not allow such reform to be easy because many people in power will lose their advantage of authorization and grey income. To encourage innovation, China needs to first fight against the challenge or habit of plagiarism and copyright infringement, and establish a stronger IP protection law. Otherwise, the innovations by the enterprises are not able to be protected thus discouraging their investment in R&D. Overall, China needs a political reform in order to create those dividends. Right now, I do not see such push from the central government.

What will happen among nations and how will China and the U.S. can grow together? I do not know yet. We are now living in a flat but quite complicated world. I hope my future studies will soon bring me more knowledge to solve those puzzles regarding global trade issues and challenges. And of course, I wish to see my future research contributing to a “flatter world”.  I will keep everyone posted!

06/17/10

In International Market, Local Supply Chain Defines Pricing Strategy

In May, I took a trip to Shanghai, China, for a project to establish a partnership between a Chinese horticultural company and a Holland breeding company. It was a win-win collaboration for both, not only helping the Holland company to break into the Chinese market with minimal resource, but also upgrading the Chinese company with new product varieties without adding R&D investment. During the meeting, there was only one concern from the Holland company: the price for the new products in Chinese market were set lower than the Holland company expected. The Holland representative could not accept the recommendation from the Chinese company. After all, the same types of flowers are sold at a premium in other global markets!  In order to understand this pricing recommendation, we visited the horticulture supply chain in that region, from flower growers, to flower market, to flower retailers. After examining the entire supply chain, the representative agreed with the lower pricing strategy today for future long term growth.

Production – Flower growers

When the Holland representative saw the greenhouses in the region, he commented: What a low cost production!  The farmers enjoy the benefits from local natural geographic condition. All things being equal, such as the amount of fertilizer used for every square meter of land or type of greenhouse equipment invested, it costs the U.S. growers five times more than the Chinese growers in labor, not just because of cheaper labor in China. The underground water system in the Eastern China region provides the Chinese growers a natural watering system. Therefore there are much less labor required to water and grow the plants. On top of it, the government subsidizes the greenhouse facility investment, which lowers the production cost even more.

In the different areas of the same region, there are significant differences among greenhouse business models. We visited the greenhouses managed by the young generation of growers, who are connected using the internet and smartphone like an iPhone or Android phones. They are educated and ambitious.  They want to grow the best plants and dominate the market. Due to the economy of scale, they can not only achieve lower cost from higher production efficiency but also receive a volume discount for plants and farming materials. From them, I see the picture of tomorrow’s Chinese agricultural industry.

Farmers working in greenhouse, Photographer: Zachary Long

Lunch and Learn with young farmers, Photographer: Zachary Long

The traditional farming model co-exists with the modern farming management. Many individual farmers manage only two or three small greenhouses in their backyard. All farming work is done by the family members. Those individual families unite together to form an organization. The organizer of the group sells their harvest together and also combines their purchasing of raw materials to lower the purchasing cost. The organizer benefits from the commissions of sales.

Chinese boy sorts flowers

Chinese boy sorts flowers - Photographer: Zachary Long

With the advantages from Mother Earth and the effective business model in the local market, the production of flowers is efficient and lean, and thus minimizes the production cost.

High quality flowers fresh from the fields, Photographer: Zachary Long

Distribution – Flower Market

A visit to the local flower market explains why premium pricing will not work even though the growers grow high quality flowers. The local market consists of the first level wholesalers and the second level distributors. Wholesalers ship the flowers by truck from their fields to the market. Distributors will buy from several wholesalers for different varieties and then deliver them to retailers.

During the consolidation and distribution process, there are two major factors contributing to damage of flowers:

1)      Packaging. There is minimum packaging for the flowers.  In other global markets, the flowers are carefully packed in paper cartons or in buckets for best protection and petals expansion. In China, the growers only use a single layer of plastic cone to cover the petals.  This kind of packaging method does not provide much protection for flowers during transportation.

Typical packaging of flowers, Photographer: Zachary Long

2)      Shipping.  From the growers to the market and from the market to the retailers, the flowers are firmly stacked inside trucks or cardboard boxes without any space to breathe. In the same size of truck, the Chinese farmers can ship almost 20 times more than the U.S. farmers can.  I joked that the extreme loadability was such an effective way to minimize their supply chain “carbon footprint”!

Flowers stacked in a truck, Photographer: Zachary Long

Flowers packed in cardboard box for distribution, Photographer: Zachary Long

Creative way of transportation? Photographer: Zachary Long

The ruthless transportation minimizes the transportation cost for flowers, damages flowers during transportation, and causes a much lower price for flowers without perfect presentation.

Customers – Retailers

Retailers and the final sales of flowers determine the brutal transportation in some way.   The majority of customers of retailers are not individual consumers like you and me, but businesses! It may be a phenomenon only in China that businesses buy a lot of flower baskets for business openings or events. So, flowers are not sold for a long vase life but a very short exhibit life of a few hours. Under these kinds of circumstances, flower quality is really not a selling point unless those flowers are used for a wedding ceremony.  Unfortunately, unlike luxury products, such as a purse, flowers are not a product defining a consumer’s social status. Therefore, consumers pay less attention to flower quality so retailers will not push upstream distributors to improve flower quality by minimizing damage from transportation.

Flower basket for business event, Photographer: Zachary Long

Summary

For any global company breaking into a new market, it is extremely important to evaluate the local supply chain in its entirety from upstream to downstream. By understanding the local supply chain, the company can define its marketing and pricing strategy without disconnecting from the local market. The Holland company would price itself out of the market without understanding the entire process from growing to transportation. Through a complete investigation into each component of the supply chain for these flowers could we fully grasp the individual dynamics of the Chinese market.  Any international company needs to fully assess the specifics, find the local expert who understands the unique market characteristics in order to implement the correct marketing strategy. This article is a case of horticultural product going into a new market. However, the learnings from this case can apply to many other products and industries who are seeking opportunities in the international market.

Special Thanks to my husband and photographer Zachary Long who provided photographic coverage in China.

06/9/10

Business Buzz Podcast #1: Using Foursquare for Business

Our first Podcast about social media with Jodi Kiely is discussing two important perspectives about Foursquare: the viewpoint of the consumer and that of the business owner. For anyone who has questions about FourSquare, we hope our work will address your doubts about it and you will start seeing Foursquare in a new way.

Play Podcast

Cross-posted at Jodi Kiely Communications

Zac & Jodi recording the Podcast

[PODCAST SCRIPT]

JODI: Welcome to our audio discussion on social media and communications. My name is Jodi Katherine Kiely and I’m a freelance communications and public relations professional based out of Orlando, Florida.

ZAC: And I’m Zachary Long. Personally I’m a technology nerd but professionally I’m the Assistant Front Office Manager at the Orlando World Center Marriott where I set up our professional twitter account over two years ago and have recently begun using Foursquare for business for our hotel as well.

JODI: Zac and I have teamed up for this audio discussion after many emails, face-to-face meetings and hours of discussion about the use of social media applications in the business world with particular focus on the social media game foursquare.

Zac and I know a lot of people out there know what foursquare is, but we also realize there are many who are unfamiliar with it, so before we get into the meat of our conversation, we’ll just give a brief run-down of the game for any newbies out there listening.
ZAC: Foursquare, for those of you unfamiliar with it, is a social media game that allows users to “check in” to certain registered venues such as restaurants, stores and offices via their smart phones or online. As users check in to more and more venues, they accumulate virtual badges as a sort of reward. If someone checks into a place more times than any other foursquare user, they are crowned mayor of that venue. In most cases, the title is just for bragging rights, although more and more venues are offering benefits to their mayors – but we’ll get to that later.

JODI: Because foursquare is a social media game, it allows users to connect with other foursquare users as you compete for the most badges and mayorships. You can even be notified each time one of your friends checks into a place – a feature that is useful in the case that you are in the same area at the same time and want to meet up. So for example, if I were to visit, oh, let’s say the neighborhood Coldstone Creamery, I would start foursquare on my phone, find Coldstone’s listing which would pop up based on geolcation technology, and press the “check-in” button and then share my location and its address to my fellow foursquare users.

ZAC: So if you caught onto that, by simply checking in and announcing her visit to Coldstone to her foursquare friends, Jodi is also doing a little free advertising for the company. Let’s say one of her foursquare friends sees her message, is in the neighborhood and wants to connect. This could potentially translate into not one ice cream sale for Coldstone but two or more, depending on who is in the area when Jodi checks in.

JODI: If you’re still confused and have no idea what Zac and I are talking about at this point in the program, I encourage you to check out foursquare online at foursquare.com and to search for articles I have written about foursquare on my blog at JodiKiely.com, that’s J-O-D-I-K-I-E-L-Y (one word) dot com. Zac is also featured in one of my articles with great advice on using foursquare. This audio clip will always be around so feel free to come back to this after you have a better understanding about foursquare if you feel a bit lost.

Anyway, today Zac and I wanted to take our discussion about foursquare off paper and into your cars, homes, offices, iPods, speakers and headsets since we both have different views on the application, its uses and effectiveness.

While I need no convincing of the marketing power associated with foursquare, as a recreational user, I feel a bit disappointed in my foursquare experience. Zac, on the other hand, has benefited much more from foursquare having used it as a consumer in a greater capacity than I have and as a small business owner, which is what he is going to focus on today.

I’m going to let him take over right now in sharing his experiences using foursquare from a business standpoint, but stay tuned because I have some thoughts on the application from the standpoint of a consumer, along with some tips for any business users considering foursquare as a marketing tool.

So Zac, take it away!

ZAC: When foursquare finally launched here in Orlando back at the end of 2009, I set up a venue for the hotel immediately. At first it seemed like I was the only one who ever checked in there, I would look at the app or on the site and hope I would see someone else! As the months passed we began seeing more check-ins posted to twitter, and this is how we have truly been able to take advantage of foursquare. As part of our Social Media strategy at the hotel, we attempt to connect with guests over these new mediums and a check-in from foursquare that is posted to twitter gives us an immediate notification that someone is here at the hotel.

Now that foursquare has launched its new foursquare for business feature we were quick to sign up for that at the hotel as well. With this we have seen success in driving our internal scores through our first Special. We offer anyone that shows us our special screen on their phone 250 free Marriott Rewards points, no strings attached. This forces people to come to the Front Desk to get their reward, and thus gives our Front Desk clerks a reason to talk to the guest and thank them for being a Marriott Rewards member, which is a score we are rated on.

JODI: Like I said earlier, I myself need no convincing about the marketing potential foursquare offers users from a business standpoint, and I think Zac’s experience is just testimony as to how this can be an effective tool. But as a consumer, I’ve felt a bit disappointed about my foursquare stint, and I’m hoping my experience can serve as valuable customer intelligence for any businesses out there using foursquare or thinking about using foursquare. Having said that, I would certainly use my foursquare experience from a consumer standpoint when consulting any clients considering jumping into the game.

One thing I’d like to mention is that consumers have a bottom line too. Now those bottom lines can vary from having the ability to unlock as many badges as possible to becoming mayor of more venues than any of one’s friends. But for me, the game itself is not of importance.

My needs are simple: I want good tips on where to go, what to do, what to order and what to watch out for when checking into certain venues and, I want to save money and gain rewards beyond virtual badges that are of absolutely no value to me.

ZAC: So does that mean you don’t really care about your mayorship at Publix super market?

JODI: Not unless Publix starts giving me some love back for frequenting their store and publicizing it to my network, no, I could care less!

Now I realize foursquare is designed to meet these two needs through user reviews and the ever elusive foursquare deals some venues have been known to offer, but so far, my experience using foursquare has little to show for that.

This is probably a very localized issue – for example, foursquare users in New York City may be benefitting daily but here in Orlando, or at least parts of Orlando that I frequent, the city just hasn’t caught on to foursquare fever.

This is peculiar to note because I live in and frequent Orlando’s tourism area which is extremely service-oriented and just literally screams consumerism. You would think that out of all places in town, more people would be checking in and leaving tips about their experiences and that more places would be offering foursquare deals – but I just haven’t seen much of either yet. Once ina while I’ll hit a spot that generates a lot of tips, but sometimes there will be none at all, and it surprises me. Maybe I need to get out more, I don’t know!

But I guess my point is this: It’s one thing to be on foursquare as a business and reap all the marketing benefits, but it’s another to actually offer something of value to your customers who do use this application on a daily basis.

For example, if I’m walking through Pointe Orlando and pass by all these lovely restaurants, I’m not likely to go into any of these if there are no user reviews saying how great these places are. Likewise, if I pass a restaurant I haven’t been to before, unless I’m on a mission to eat and try something new, I’m probably going to just keep on walking – however – if you offer a free drink to any foursquare user (not just mayors by the way) who shows their foursquare check-in at the bar, I may not only come into your establishment to claim my free drink, but I’d probably bring a friend with me and we’d probably order some appetizers and make it a happy hour!

ZAC: I definitely agree and part of the problem is there is no widespread adoption of foursquare just yet. It took about 3 years for Twitter to really take off to the point it is now, that I see ads on CNN telling me to follow people. The other issue is that Foursquare uses by nature need to be using a Smart Phone, and tend to be the early adopters and more tech savvy to begin with. Jodi, maybe you just don’t live where all the cool kids are or just that tourists may not be in that demographic.

When we traveled to Washington DC and even Atlanta, larger cities than Orlando of course, we did notice a lot more usage of foursquare with users leaving tips and businesses offering specials. Walking down a street and pulling up the application in Midtown Atlanta for example, I had some tips for what taco to try at Tin Lizzy’s and a special from the place next door for free drinks for the mayor of Front Page News.

Walking around other populous areas like in DC, people are offering specials not just for mayors which would definitely drive repeat business. Bars or restaurants that offer discounts for 2nd or 3rd visits are a measureable way for businesses to drive repeat traffic while appealing to that demographic of smart phone users.

JODI: So would you have stopped by that establishment had they not offered a foursquare deal?

ZAC: Well obviously a foursquare deal alone wouldn’t change my mind if the place looked shady, but if I’m in an area and I get a “Trending Now” notification that multiple users are all checking into the same location I might want to at least peek in and see what is going on. The crowd mentality at work again! A foursquare special would influence me to check something out though, again because the whole system is relatively new so anyone using foursquare as a business has to be pretty cutting edge and in the know.

JODI: So yes, that would be a good example of a business effectively using foursquare to reach out to new or current customers. I love that!

Now, maybe I am doing something wrong on my end, but hear me out because I have a very good reason for my online behavior.

It has been suggested that because I don’t tweet my foursquare location on Twitter, I’m missing out on potential deals because businesses to track the mentions of their establishments on Twitter by foursquare users. But here’s my little problem with tweeting foursquare stuff on Twitter:

1)      I just consider such tweets spam. My Twitter followers don’t care, and I do have an online reputation I’d like to keep – that being that unless I’m at some place really cool, you’ll never see me tweet my foursquare location or activity on my Twitter stream. That’s just me and my idea of quality content.  Obviously not everyone agrees because I see people tweeting their foursquare stuff online all the time – and yes, it annoys me because frankly, I don’t care – but hey, maybe it’s just me, I don’t know. (that’s because you only check-in to Publix!) J

2)      I don’t necessarily want the whole world to know where I am at any given time. I just don’t like that. I don’t mind sharing it with those in my foursquare network – that’s one thing – but everyone else in Twitterville? I’m still not comfortable with that idea.

So I’m not sure if this is keeping me from really benefitting from foursquare or not, or if it’s just the nature of where I live, but there have been many times when I’ve considered quitting foursquare. The time it takes to check in and stuff, you know, I want to feel I’m getting something out of it, too. It just hasn’t happened yet – at least not here in the heart of Orlando’s tourism center which surprises me.

And I do want to add, that I do share, too. I feel I’m doing my part by leaving tips for other users and while some people share tips, I don’t find any as often as I’d like to.

I’m not sure yet if foursquare is worth it for me. I can see how it may be, how it could be, but right now, I’m still not sold on its relevance – as a consumer, that is.

ZAC: Privacy issues will always be a concern and one of the barriers to entry for something like foursquare to really take off and have a mass effect. As we saw with Facebook a short while ago, privacy is a real concern for users, and Facebook had to go back and switch its privacy controls to make them more user friendly and easier to not share everything with the world.

I see Foursquare continuing to develop as small groups of trusted friends, like facebook, not wide open and public like Twitter. Even with this model they can still be successful and relevant to everyone, as you mentioned about Tips, these are public and go towards creating a better ecosystem of user-generated content. The other issue is along the lines of what you are dealing with right now, in smaller cities or within groups of friends where not a lot of other users are on foursquare – what’s in it for you? The time investment to remember to check-in to a location just adds to that “one more thing to do” on your social media platter. However, as larger companies begin to get into the game – think the Starbucks Frappuccino promotion – I think the popularity and public acceptance will rise. Once users understand what to do or not to do, think PleaseRobMe.com, foursquare will become like Facebook when you ask someone “what do you mean you’re not on facebook yet?”

JODI: Anyway, we’ll see. I’ll keep using it for some time and oh – just a warning to anyone who listens to this – don’t take offense but if I don’t know you, I’m not accepting your foursquare friend request. It’s just my own personal decision and again, I’m not sure if it’s a decision affecting my less than impressive experience with foursquare or not, but it’s a decision I’m standing by for now at least.

What about you, Zac? Are you accepting friend requests from strangers?

ZAC: Nope, no strangers. I treat my foursquare friend list even more strict than my Facebook friend list where I do accept all requests. Knowing where someone I have no vested interest in is checking in has no benefit to me by being my friend. I will still see their tips and to-do’s that they leave around town, and if I’m checking into a venue I will still see them present there.

JODI: Ok, so as we tie things up, I think some valuable points were made in this discussion. One being that foursquare, if used properly, can be a tremendous marketing and customer service tool for companies and two, if no one is using it to share, then, well, it’s useless unless you’re only in it for the badges and mayorships.

ZAC: That’s why it’s up to users like us, the early adopters, to be the evangelists for foursquare! From a business perspective I have definitely seen the number of unique check-ins steadily rise at the hotel. The momentum is there and with corporations and advertisers starting to get into the game as well, this will only increase. As a business owner I don’t see why you wouldn’t want to at least try it out. One of the great things about Social Media is the low cost of entry, and unlike a Facebook Fan Page or Twitter Account, once your foursquare venue is setup you don’t really have to do much else. Of course launching a special would require the analytics necessary for any ad campaign to see if it is working.

JODI: So that wraps up today’s audio discussion on social media, communications – and today’s topic of foursquare. Thanks for joining us!

And nce again, feel free to visit my blog at JodiKiely.com or follow me on Twitter at @Jodi underscore Kiely (that’s J-O-D-I as in “igloo”, underscore K-I-E-L-Y as in “yo-yo”

ZAC: Follow me on twitter as @zacharylong and follow the hotel as @thefrontdesk.

JODI: And as we close, I just want to give a special thanks to our technical specialist who oversaw the technical recording aspects of putting this audio show together. A huge thanks to Betty Feng who also has a blog at GSC Motion dot wordpress dot com and who is on twitter at BettyFeng (that’s F-E-N-G), BettyFeng (one word). Betty has also shared her thoughts on foursquare with me on my blog and I encourage you to search for the article in my archives and read what she has to say on the topic, too.

So thanks again for tuning! We hope you got a lot from our discussion and please feel free to leave a comment on my blog as this is a topic that holds potential for much discussion!

Take care and thanks again!

ZAC: Thanks and bye!


02/10/10

Social Media: Listen More and Sell More

There are so many articles and blogs about marketing through social media. I just read one titled Social media: Listen Less and Sell More, by Clay McDaniel. It’s a great article about how companies should use buzz-monitoring tools to find out what people are saying about their brands and what people want, and then give customers the right promotion through social media.

Although Clay meant that companies need to analyze social media data to get social medial promotion right, the title “Listen Less” might be misleading. As a matter of fact, companies need to continue to listen more and then sell more!

I wish my personal experience can be a showcase of why companies need to listen more to Voice of the Customer (VOC) through social media and keep customer loyalty.

My husband and I used to be loyal Amazon.com customers. We bought everything from books to high-end camera equipment for our small business because their price is almost always lowest one in the market. We paid for an Amazon Prime membership so we could enjoy two-day free shipping. We also shop from their vendors through Amazon marketplace so we don’t need to register at other sites. We might not be their biggest customers, but we spend a fairly large amount on their site. We also rarely returned any shoppings, one or two out of our hundreds shoppings, as I can remember. We’re the best customers every company desires. However, our feeling got hurt recently by their ignorance of our voice through twitter.

Recently there have been quite a few incidences of stock-out and long delivery lead-time up to two months with Amazon.com. So, my husband and I both tweet @amazon and asking about the stock-out situation. I understand stock-out happens as a supply chain professional, but I need a response to let me know when I can expect to receive my product, not up to two months! No response. Quiet. So, I tweeted: ”@amazon has fulfillment issue lately even we paid for Prime membership! Too busy with their acquisitions apparently.” Still NO response!

Now, I’m angry. Amazon apparently is not listening to customers now because they are too big and too busy, so they don’t need to care about customers experience although they say so all the time. Thus, we found the same products at B&H Photo and Video at competitive price. We would rather pay for shipping to get the products quickly. My husband sent a tweet: “Just placed 1st order from @bhphoto (since @amazon was out of stock).” We didn’t expect @bhphoto to response, but Henry Posner @bandhphoto saw our tweet and bumped our shipping to UPS 2-day rush! This unexpected surprise definitely made us decide to more business with B&H in the future.

Now, it’s fairly clear how company should use social medial to sell more. They need to constantly listen to what their customers say about their brands and then interact with their customer. Many times, customers just need some little comfort from their response. It’s OK to be out of stock or delay delivery, but they should do something, such as a small coupon for next purchase, to rectify the situation and keep our loyalty.

Service companies already realize the importance of social media and utilize these tools to interact and communicate with their customers in order to provide better customer satisfaction. For example: Marriott hotels were one of the first to use twitter to engage directly with customers through their @MarriottIntl account. My husband, as a Front Office Manager, even monitors the comments about his hotel at property level through @TheFrontDesk on twitter. Many times, I hear stories how customers are happy with their quick responses and small little ways to remedy the damages. Just like us, many customers prefer to express their opinions through the internet even when they’re at the locations, hotels or restaurants. Through monitoring the social media closely and responding to customers complaints will significantly improve customers experience and improve their reputation through “word of mouth”.

Yes, I’m now leaving Amazon.com because our Amazon Prime membership didn’t give us customer satisfaction, especially because they ignore our voice through social media and deeply disappointed our trust of their service. Companies listening to Voice of the Customer and giving more than the customer expected will definitely sell more and win over the market.

11/28/09

From Wii to Zhu Zhu Pets – A Black Friday Phenomenon

Before this Black Friday, I had no idea about Zhu Zhu Pets. Then over night, I learned about its hot sales situation from all Media outlets. A Google News search yields 2249 results as Zhu Zhu Pets have become this seasons’ most desired products and hottest news topic. This situation reminds me of the Nintendo Wii three years ago. Both Wii and Zhu Zhu Pets created such a unique Black Friday phenomenon: a hot product caused a huge buzz during Black Friday sales and “disappeared” from retailers’ shelves due to a supply shortage. Do you remember that Wii was sold at a premium in the black market three years ago? The same thing is happening to Zhu Zhu Pets, which is now being sold for as much as $50 at eBay, five times more than its original price!

There are a few things in common between Nintendo Wii and Zhu Zhu Pets:

1. Both are great products at a low price, creating great value for budget-cautious consumers.  Wii is less than $200 and it is a game console designed for everyone in the family.  Zhu Zhu Pets, the fuzzy robotic toy hamsters, are less than $10 and targeted at children. Both are well designed products with a great pricing strategy, which made them stand out from all other competing products in their respective categories.

2. Both products experienced surprised high demand exceeding the forecast and supply, and hence results in a shortage. From a supply chain point of view, out-of-stock is never a good thing because it means loss of revenue, especially when consumers can easily switch to competitive products. However, for both cases, because the uniqueness of the products, consumers will patiently wait for the products to be back on the shelf.  We can see Wii as a good example. The market size for Wii did not shrink because of the supply shortage. I don’t like to diminish the importance of supply chain, however, it’s far more important to develop a great product to stimulate the market. The challenge for the supply chain here is how quick the products can be replenished from overseas and available for customers again.

3. Both cases might use a clever ploy to make the item more desirable by having a short supply. There were many speculations that Wii used this marketing scheme three years ago to make Wii such a popular product and continue to be one of the top console systems. (Example: Nintendo’s Wii: Privily, Why So Rare Art Thee?). Today the buzz caused by the shortage is behind us. We can see Wii’s piled up at any electronic store this year. I suspect that Zhu Zhu Pets is using the same ploy to make this inexpensive fuzzy toy the most desired product of this Holiday shopping season. The question is whether this cute robotic hamster can be the toy remaining on the shelf for years to prove its value proposition. Wii did it. I finally own a Wii console three years after its first launch. Now, let’s see if I will able to buy a Zhu Zhu Pets for my child after three years.