The Realities Of Being A Product-Driven Business
Do you have a product-driven business? On the surface, it seems like product development businesses are the simplest of all. But are they really?
Seemingly, a product-driven business operates with a very basic structure:
- The company produces a product, to their own exact designs and specifications.
- The company then directly sells the product to customers.
This kind of arrangement is incredibly simplistic… and incredibly rare.
Are you thinking of opening a product-driven business? Do you want to manufacture and sell your own product?
If so, it’s important to note that this kind of basic business structure is next-to-non-existent in the modern marketplace.
So what actually does happen?
If you’re determined that product development is the right business for you, then you’ll need to acquaint yourself with the realities of this kind of business.
While it’s nice to think that a product-driven business is simple, they are actually anything but— which can come as quite the unpleasant surprise!
First and foremost, the two-step process mentioned above barely exists anymore. In almost every modern business, extra steps are added.
These steps can involve a number of different tasks, including:
- Few companies that design their own products actually make those products. Most often, the products are made in factories — and frequently overseas factories — and then shipped to the company’s country for sale.
- Furthermore, businesses don’t tend to store their own stock. With the right warehousing options, it’s usually far more cost-effective for a company to outsource their stock management and dispatch to an external company. This is usually cheaper and more reliable than retaining staff to perform this function on-site, and tends to be more reliable also.
- Finally, it is rare for a business to operate its own store. Most businesses will prefer to sell to distributors, who will then sell the item on to other stores. Alternatively, it’s possible to remove the distributors from the process, and just sell items directly to the stores for themselves. This is more complicated, but ultimately tends to drive profits effectively as there is no need for the distributor to take their cut.
Does that mean making and selling your own products is impossible?
Not necessarily. For certain types of product-driven business, the basic two-step process can still work— but it’s important to note that this tends to only be effective for very small lifestyle businesses.
For example, if someone has a small business selling handmade perfumes online, then it’s feasible that they can manage the process for themselves.
They can take orders, deal with customer service, produce the products, and then dispatch them— they’re not dealing with an order quantity that means they will need assistance in these areas.
However, if you want your business to be bigger and deal in higher quantities, you have two options:
- Hire a huge staff to help you. No single person, or even a small team of people, can produce large quantities of products and sell them— you’re going to need to invest in a large-scale company to manage this kind of business in-house.
- Go for the outsourcing options as detailed above. These options are popular for a reason, so it might be worth thinking about whether they’re right for you. Your product will still get made, but just not quite in the same hands-on way you were anticipating.
In conclusion
Self-manufacturing and self-selling businesses are rare these days for large companies, so you’ll want to consider the alternative options if being a product-driven business is an idea you wish to investigate further.
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