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« The missing link | Main | Great moments in corporate sliminess »

The Walmart Paradox

Getting what we deserve?

The New York Times > Business > More Gloom on the Island of Lost Toy Makers points out that the toy business is crumbling. The reason: all the stores that love to sell toys are disappearing, defeated by WalMart.

Walmart wants to sell classics and heavily advertised hits. And they want to do it at close to cost. This appears to be good for consumers--get a Barbie for $12 or whatever.

The problem is that NEW toys aren't classics and it's hard to make the bet that new toys should be heavily advertised.

The second problem is that once you reach the level of success of a classic, selling at cost is no fun at all.

The end result is that the toy guys don't have the guts to launch the new and the remarkable. They are boxed in, encouraged by Wall Street and management to play the Walmart game, which leads to short-term revenue and long term destitution.

These toy companies have always needed the profit from their hits to fund their next generation.

So what's the answer?

The answer is to tell Walmart to go away. Toy companies are beginning to discover that they can't win this game. The answer is to find a new and better and more consistently profitable way to launch the remarkable stuff.

And that's happening. It's happening when they sell online, or through local stores, or directly to people who care. No, this isn't mass. This isn't a fraction of what an endcap at Toys R Us was worth. It's still the best deal in town. Over time, consumers will be trained that the toys they need are only available in places that aren't Walmart.

Obviously, I think this same mantra applies to plenty of products in a similar situation. And I expect that the realists among you will tell me to get a clue, that Walmart is the market and you need to play or be irrelevant. I'm saying that playing is making you irrelevant.

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Listed below are links to weblogs that reference The Walmart Paradox:

» Seth on the WalMart Paradox. from The Chicken Coop
[Read More]

» Walmart too shall pass from Northwest Noise
Seth Godin lays it out there for you. And I expect that the realists among you will tell me to get a clue, that Walmart is the market and you need to play or be irrelevant. I'm saying that playing... [Read More]

» Wal-Mart = Goodness from The Post Money Value
Seth Godin has a short post about Wal-Mart making a mess of the toy industry. [Read More]

» Big Boxes and Wal-Mart Hammer Toys, Books from Mutually Inclusive
Seth Godin responds to a New York Times story about the impact Wal-Mart is having on innovation in the toy business. A few years ago, similar concerns were raised by Canadian publishers, who are pressed on both sides by the Wal-Mart and Chapters-Indigo... [Read More]

» Walmart & Innovation from Dummocrats
Internet marketing guru Seth Grodin tackled Wal-Mart in a recent blog post. Grodin's theory is that Wal-Mart stifles product innovation: Walmart wants to sell classics and heavily advertised hits. And they want to do it at close to cost. This... [Read More]

» Toy and Games Retail from dwlt.thinksOutLoud
Seth Godin writes about something I've thought for a while now: that specialist retailers can indeed take on the large discounters: The answer is to tell Walmart to go away. Toy companies are beginning to discover that they can't win... [Read More]

« The missing link | Main | Great moments in corporate sliminess »