Go high or low

(Readin’ time: a very thought-provoking 3m 54s)

We can see a lot of parallels between the sea changes that have and are happening in retail and those that have, are, and will happen in the world of selling services.

Said differently, I think retail is a sort of leading indicator for what you can expect to happen in the world of services, and the lessons for surviving and thriving in both domains are similar.

To be clear, I’m thinking out loud a bit in today’s email. I wouldn’t stake everything on this claim, but let’s explore the idea anyway, starting with this piece from Recode: www.recode.net/2019/3/3/18249426/helena-foulkes-hudsons-bay-lord-taylor-code-commerce-2019

Here’s the main idea:


Helena Foulkes has been CEO of Hudson’s Bay Company, the nearly 350-year-old retail business that owns luxury brands like Saks Fifth Avenue, for only a year, but she’s already made her mark.

In the past 12 months, Foulkes sold the shopping site Gilt Groupe, which Hudson’s Bay had acquired for $250 million just two years earlier, for much less; she merged Galeria Kaufhof, a popular German department store owned by Hudson’s Bay Company, with a competitor; and she closed the flagship Lord & Taylor store in New York City, which was more than 100 years old. She may sell as many as 10 more stores.

Foulkes said Gilt Group and Galeria Kaufhof were “distractions” — those business moves weren’t difficult for her to make. But Lord & Taylor was suffering from another problem.

“I think it’s in the toughest part of retail: The middle,” Foulkes said Sunday night at Recode’s Code Commerce event in Las Vegas. “It’s neither the high-end luxury where you can really own it, nor is it a low-cost … discount retailer.

“It is handicapped by its positioning in the marketplace,” she added.

Foulkes essentially described what has become a real problem for retailers in the past decade thanks to the meteoric rise of Amazon and other online shopping: The idea of a brick-and-mortar department store just doesn’t make sense unless you can offer customers something special.


Let’s play “Where’s Waldo”, except it’s “Spot the similarities between retail and your world of selling services/expertise”.

“Foulkes said Gilt Group and Galeria Kaufhof were ‘distractions'”

As a small provider of services, expertise, or both, it’s easy to get distracted. The distraction can dilute your focus, which can reduce the value you offer.

The middle of the market is “neither the high-end luxury where you can really own it, nor is it a low-cost … discount retailer.”

In services, low cost (and reasonable profitability) requires exceptional operational discipline. High end pricing requires either exceptionally valuable expertise, a fortunate confluence of focus and demand, or exceptional confidence. (I choose the path of expertise because it frees me from needing exceptional confidence or fortunate timing, giving me more control over my own fate and letting me use dead simple tools like waking up early every day to write and create powerful assets over time.)

Since neither the low cost or high price paths are easy, the “herd” gravitates towards the middle. It’s the option that feels safe, even though this very perceived safety makes it dangerous because it gets overcrowded and it’s therefore structurally harder to differentiate yourself in the middle. At the low end, the pricing alone differentiates you, and at the high end, there’s simply more room to differentiate in simple or creative ways.

“The idea of a brick-and-mortar department store just doesn’t make sense unless you can offer customers something special.”

Oof! Blunt! But essentially true, in my view. Let’s walk through parts of the world of services where we could say essentially the same thing:

  • The idea of hiring a designer to create a logo just doesn’t make sense (because of 99Designs) unless it’s for a medium or large-sized brand.
  • The idea of hiring a designer to create a book cover just doesn’t make sense (because of 99Designs) unless it’s for a book project that needs to exude luxury.
  • The idea of hiring a developer to create a basic integration between two apps just doesn’t make sense (because of Zapier) unless it’s highly customized or falls outside what Zapier can handle.
  • The idea of hiring a developer to create an e-commerce site just doesn’t make sense (because of Shopify) unless it’s a highly specialized situation.
  • The idea of hiring a developer to create a CRM just doesn’t make sense (because of Salesforce and their ilk) unless it’s for a specialized use case that falls outside what the off the shelf options can handle.
  • The idea of posting to hire a freelancer on Craigslist just doesn’t make sense (because Upwork and Fiverr and Toptal et. al. modularize and vet the quality supply) unless it’s for a specialized use case or skill set or business need.

That last point is where we are now, on the boundary between the present and the near-future.

Upwork, Fiverr, and more specialized marketplaces like Toptal are not totally dominant. They’re not the Amazons of services. Yet.

Maybe they never will be. Maybe the market for services is fundamentally different from retail, and it won’t be possible for a super-aggregator to reach critical mass and massive scale by capturing enough demand that suppliers (you and I) modularize our offerings to fit the super-aggregator’s needs and tap into the demand they offer.

If this does happen, though, the reality will be the same as in retail. Your offerings “just won’t make sense unless you can offer customers something special.”

-P