Are you caught up in a commodity business like HP ? Try branding and digital distribution

Every business is feeling like a commodity business, all the buyer seems to care about is price and this was brought to sharp focus with HP exiting the hardware business. The HP brand was great but what margin can you really make at final retail prices of $500 for laptops. So branding does not work as IBM realized years ago. Digital distribution must not work entirely because why would Dell start distributing computers in retail stores? Don't be surprised if in a few years you see computers at the dollar store just like calculators today!

So what do you do if you if you manufacture products and as your industry matures with experience costs keep declining with off-shored production and optimized manufacturing methods and just squeezes out your brand margin? If you are in the car business you try and upgrade your brand from Toyota to Lexus. The latter has better margins but a smaller customer base that is relatively price inelastic.

But if along with your brand you change your distribution policy and are able to capture the benefits of digital distribution like Amazon – then you can actually thrive as a brand even when everyone else is getting commoditized and extinct.Amazon stayed true to its policy of digital distribution and spent enormous effort in improving its supply chain network  and today digital text sales are higher than paper book sales. A clear re-defining of its business helped Amazon ( viz. we are in on-line distribution/order fulfillment and not just an on-line book-seller) while the computer industry and lots of appliance makers  just seem to be going along with the shifting sands of lower global production costs.

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