As from last paper, we’ve talked about Walmart’s losing young,middle class consumers, becoming a low-income and senior citizen’s markets, and even questioned why didn’t Walmart change its strategy to become a living center with more senior citizen relaxing around.Besides, it would be more attractive for young people.The next second, I realized a serious question : why hasn’t the management of Walmart come out this genious idea before?Why doesn’t this retail giant do anything to change it ? Am I more intelligent than most of their professional consultants or executives? Why is there only me coming with this brilliant idea ?
The following question is ,am I smarter than the whole system ? And when could I change the whole world with a unique thought ? Well, there’re two steps in seaching the answers as below :
1, Individual vs Market
From our common sense, when talking about success, it’s usually linked with dreams, efforts,and so on. That’s all right, and what you’ve mentioned is all related about yourself or based on your own conditions, however, the big thing is more about the society or whole market ,not for you. Not to mention that there’re millions of diligent and intelligent genious.
As for the “genious”idea of living center of Walmart, Walmart might has given full consideration and given it up due to the location,limit space, lack of staffs or securities reason, or cost,or maybe too many existing and potentional competitors about living center. Anyway, there’s no chance for me to bring up with this brilliant idea given the condition of so many professionals working for Walmart.
Actually I was questioning the market efficientcy when I thought I might find a unique opportunity while nobody does. Economist thought in the efficient market, the price is entirely determined by the balance of supply and demand.This approach stems from a belief in efficient-market theory which states, at its simplest, that prices reflect all available information. You could get what you want from efficient market, and sell it there as well. For example, when you see a 100 $ on the ground of Walmart’s exit door from the glass of next store in the buzy time, would you go out to pick it up ? No, at least the economist say so. From their theory, the exit door of Walmart during busy time is an efficient market, if it’s a real 100$, it’s been taken away given the crounded people.On the other way, if it’s on underground parking garage and nobody is around, it’s definitely a smart idea to get it. According to above, it’s more wise to analyze the efficiency of market instead of your intelligence and efforts. In any case, it’s a long way for your success in an efficient market.
Since no way in an efficient market, what about inefficient market? inefficient market is more related with irrationality where price is not reflected all effective information.In extreme cases, such as the period of material deprivation inflation and the monopoly market of super-oligopolies, there will be an ineffective market where prices are still in short supply by a single party. Another cases is the irrational pursuit of extremely high prices of China’s first-tier cities.
Anyway, it’s a tough way for your work there in the inefficient market. The genious such as you could also pursue the fast-growing emerging markets,absolutely right, nontheless these market opportunities belong to brave pioneers who has already hold enough resources.While most of the time, the air vents has past when you’ve accumulated enough needed resouses.
From above, so where is the chance for most of us ? Imaging that there’s a efficient market where includes some flaws which is the content for most of us complating or feeling uncomfortable, while you could provide a solution, maybe not perfect, but much better than the market, than that’s the chance for you.And these chances is called “low-hanging fruits” by economists. The following question is : how do you know those low-hanging fruits is yours ? And when do you know you could pursue these fruits or do nothing but following the market ? We may need to know more information about how does the system work in the efficient market.That’s next one topic--- Inadequate Equilibria.
2. Inadequate Equilibria
Before we mentioned above that the retail market is in a mature and efficient market, Wal-mart, after years of development, has formed a mature and strong sourcing supply channels, as well as the excellent supplier bargaining power and the world's most effective logistics system to ensure its competitive low prices. On the other hand, many years of cooperation and brand benefit make it very hard for suppliers to increase prices unilaterally, meanwhile,those housewives who have already accustomed to rely on the low-price and quality assured products in Walmart,thus from suppliers to customers it’s a very stable equilibrim system. It won’t be easy to compete with Walmart in the global market.
Furthermore, we could divide the consumers into four levels of pyramid structure.At the bottom, there are also the largest number of people, mainly low-income people and users entering the aging stage; Up one layer is small white-collar users, this group of people is growing in a rapid way, typical characteristics are like group purchase and sales promotion, to the convenience and entertainment consumption, like takeout and a movie, the main way to travel is the subway and Shared cycling;Up another layer is in the high-end white-collar, typical characteristics is that many of them is a denizen of starbucks, the main travel tools is driving a car or take a taxi;On the top is the richest, typical characteristic is that they travel abroad going far away from crowded people, preferring to have a unique experience.And consumer demand also goes from the previous conformity to the pursuit of individuality, from the focus on price to the value of quality, and from the attention function to focus on the consumption experience.The traditional supermarket, such as wal-mart, has almost lost the "low-hanging fruit" of two white-collar users in the middle of the pyramid structure as failing to meet their demands in time.
As a matter of fact, back in 2014, Wal-mart had opened a new, smaller grocry store and convenience store. As a retail giant with strong bargining power as well as the world’s most effective logistic system, why did it failed and hadn’t open the mini-store in Chinese market ? Well, of course, a lot of reasones, without a doubh, Walmart has already had the largest number of low-income and aging people which enable it to win a stable profits.The smaller store itself,the harder it will get benefit for the group. For executives, it would be more beneficial to stablize the profits to maitain the market performance as well as their bonus than any risk from mini-store testing given the awareness of the uncertainies with losses.
Without a doubt, there would be a group of experts with professional research and advice internally for the executives of Walmart with the giving up result.
Has wal-mart persued an advice from independent third part with detailed market research? No clue, as well as no speculation here, but as an independent agency of authority, they may verify it at the first beginning if it worthy to conduct the research, as similar studies has been launched already in the market, it would take more efforts if aiming to to get deeper idea. The research, conducted by an independent agency, is more likely to be cited by more people and have a greater impact.From this point of view, focusing on cutting-edge hot topics such as the latest Internet transaction ,electronic payment as well as artificial intelligence is more eye-catching than whether you go to a supermarket or a convenience store and how often during a week.
With the fast growth of Internet and mobile payments, mini-store which are closer to neighborhood or offices with more derived life services are dividing consumers in a more effective way.Then the mini- store as 7-11, Lawson, emerging online and offline combination of fresh daily-deliverred business, caught the "low-hanging fruit" quickily.
From the outside, Inadequate Equilibria is a bad system.It's not a good idea to leave so many problems, even just a piece of cake for them with solution.From the inside, however, each participant in the system maximizes their own interests, and they are very rational. Thanks for the inadequate Equilibria ,there’s chance left for normally people, just like you and me, to grab the low-hanging fruit.
And if you don't like the inadequate Equilibria, meanwhile desdain these "low-hanging fruit", you may leave the system and open a new world.Such as university is a typical inadequate Equilibria, which is criticized by many , as a waste of time without too much real knowledge, most still choose to finish the university with degrees.And some people with enough confidence, they leave the system, dropping out of school and build their own business empire like Steven Jobs zuckerberg.
So one day in the future,once you have a brilliant idea you don't have to waste time to ask a simple question, “Why hasn’t those professionals come out with this idea” or "Since I'm not an expert, am I right?", it’s kind of self-attacking.
The questions we should ask is:
Firstly, is this market an efficient one or not? If yes, give up.
Secondly , is this an inadequate Equilibria market?If yes, then don't worry about the opinions of the experts -- what the experts pursue and what yours is not the same, and they don't care about some low-hanging fruits.
Thirdly, if you prefer something more from the low-hanging fruit , you may leave the system and create your own empire. Once you got there and help people to live in a better place, congratulations, you are the heros for everyone, including yourself.
Reference: Inadequate Equilibria : Where and How Civilization Get Stuck. Eliezer Yudkowsky
