Crossover Businesses: How a Business Changes When it ‘Crosses Over’ to Combine Manufacturing, Distribution, and Retail. | Part One

It is no secret that the old clear distinctions between manufacturers, distributors, and retailers have been obliterated. Manufacturers are increasingly selling direct to the end customer (consumers, businesses, or both) via the web, or in some cases with their own bricks and mortar stores (such as Apple, Nike, Goodyear, Ralph Lauren, Sony, Hugo Boss, Tesla, Kenneth Cole, and many more).

Whole­salers are also selling direct to end customers and as well broadening their services to include light assembly and manufacturing and in some cases offering their own branded product lines. Meanwhile, retailers are increasingly relying on private label products to generate margins and loyalty, essentially taking on the role of a brand owner, managing outsourced manufacturing. (For example, Target is launching 12 new private label brands this year).

This trend has been going on for many years, but has been gathering momentum with the accelerating adoption of ecommerce and omnichannel business models. In this article series, we explore what happens when a business crosses over to become a combination manufacturer, wholesaler, and retailer—how it impacts partnerships, services, revenue models, and the business’s system requirements.

How Crossing Over Changes a Business

A lot changes when businesses cross over the traditional boundaries. It changes their basis of competitiveness (competing with their customer or supplier), business model, processes, services, and systems. We’ll explore some of the changes we’re seeing, using three companies as examples:

  • Ryonet—This manufacturer and distributor of screen printingequipment and supplies was founded in 2004 by a musician who built his own screen printing press to make T-shirts for his punk rock band to sell while on tour. He discovered that he could make better money printing shirts than playing in a band, and eventually started selling supplies and manufacturing and selling the equipment. Ryonet sells direct and through traditional and online retailers. They sell or rent the presses, as well as all the supplies including inks, frames, squeegees, films, software … everything needed to do screen printing on T-shirts, even starting a blank apparel division in 2017 under the brand Allmade. They manufacture their own products as well as distributing products made by others.
  • Blue Microphones—Founded in 1995, California-based Blue Microphones started manufacturing and selling studio grade microphones priced in the $1,000 to $6,000 range. Then, about ten years ago, they started making consumer grade mics for things like blogging and Skyping. In addition to manufacturing, they sell direct to consumer (via ecommerce) as well as through retail channels.
  • RST Brands—A designer and manufacturer of luxury outdoor furniture and flow walls, RST sells through major retailers, including Costco, Home Depot, and Lowes. They also sell online through Amazon, as well as direct to consumer through their own website.

Crossover Businesses Become All-Rounders

Crossover businesses and their employees need to become ‘polymaths of business,’ with multi-dimensional capabilities. This crossover phenomenon drives the need within a company for new kinds of expertise, processes, and systems, crossing traditional boundaries. A good example is Ryonet. They have their own manufacturing plants where they build manual screen printing presses, from inexpensive hobby units up to more sophisticated presses. They make about 5,000 units per year, sourcing metal from local suppliers, then fabricating and doing all the manufacturing processes inhouse (except the powder coat). They deliberately retained direct control of manufacturing so they can maintain quality and create unique products, backed with a very strong warranty. The life of a press is very long, so they use that initial sale to drive many years of wholesale distribution sales of ink, screen, squeegees, tape, and other supplies that their customers need every month. Being a crossover business enabled a ‘razor blade’ business model for them; that is, the initial sale of the presses drives significant recurring revenue from supplies they distribute.

Ryonet is a one-stop shop for anyone trying to own and operate their own T-shirt printing business. In addition to selling presses and supplies, Ryonet provides a broad array of other services: they conduct extensive education and training programs, provide financing programs and services, and have their own rewards programs. As the scope of their offerings and services has expanded over the years, Ryonet plays an increasingly diverse set of roles and has developed an amazingly wide range of capabilities for a relatively small company (about 100 employees).

Conoce más en