Jörg Ladner, 2020, firstname.lastname@example.org
Many entrepreneurs from the purchasing economy see the subscription economy as an opportunity to open up new markets in order to secure the future and growth of their company. Often they are confronted with unforeseen and unknown hurdles and problems when implementing their plans. The consequence of a lack of understanding of the subscription economy.
Lemon Operations uses an apt analogy in its workshops on the Cloud Economy to describe the differences between purchase economy and subscription economy. In this paper I use the analogy chosen by Lemon Operations to give the timid, the curious, and the determined a glimpse into the subscription economy.
In the workshops that Lemon Operations has designed to introduce cloud-based offerings to the IT industry, the transition from the purchase economy to the subscription economy is compared to the changes in the apparel industry in the 20th century.
Let us travel back to the beginning of the 20th century. Whether evening gowns or work trousers, custom-made clothing was the standard when it came to purchasing clothing. In the novel “Ein Mann will nach oben” by Hans Fallada, the business model of that time can be read well. Rieke, the girlfriend of the main protagonist Karl Siebrecht, desires nothing more than a sewing machine. And not to sew for herself, but to earn money. Anyone who needed a jacket, trousers, blouse or skirt went to a middleman with their fabric. This intermediary placed the orders with her seamstresses, who produced the ordered garments overnight. The sewing machines were procured and paid for by lenders via an early leasing model. Until the early 1950s, the share of ready-made garments in the clothing market was only 25%. In the meantime, the custom-made production of clothing has become a marginal business. Buying finished garments is the norm today.
The reasons for this change are initially not economically justified. They are initially due to the immense demand for clothing of the same type and uniform quality in the first half of the 20th century: soldiers’ uniforms. The resulting factories were then used in peacetime for the production of civilian clothing. We do not need to think long about the advantages for the manufacturers:
– a faster production with less manpower
– consistent availability
– more market shares and the development of new markets
– Clothing is transformed from an article of daily use to a fashion item
– higher turnover and more profit
And of course, problems and hurdles quickly come to mind when introducing ready-made clothing:
– People are thin or fat, small or large.
– Clothing is or was gender-specific
– Clothing serves various purposes: Work clothes, evening clothes, sportswear, weather protection, …
And where are the parallels to the change to subscription economy?
Of course, the manufacturers were initially confronted with the diversity of customers: large or small, fat or thin, male or female, … The problem initially lay in the classification of diversity. For the clothing industry, this meant deriving clothing sizes as standards from the measurement of mankind. Standardization makes it possible to offer products that fit many, without having to meet individual needs, while avoiding the impression of arbitrariness.
With an evening gown, a woman does not like to run 100m and with work clothes, a man does not like to visit a restaurant. Along with the packaging goes a focus on customer groups. There are clothes for young people and for senior citizens, for sporty and leisurely people, and and and. However, no brand covers the entire possible clothing spectrum. There is no one-fits-all. The orientation simplifies production and communication for the supplier and enables employees to specialise in the target focus group. It is easier for the customer to find the brand that fits his needs and values.
Customer standardization and market orientation support us in developing and offering ready-made products. The packaging leads to uniform products. This is what makes it possible to industrialize production and leads to the provision of the quantities required. This enables the automation of processes, a better utilization of resources and (hopefully) consistent high quality. The customer can use his product immediately after provision.
As a tailor of individual made-to-measure clothing, the communication strategy is based on emphasising my skills as a tailor. The “I can do everything you want” is the focus. The needs of the potential customer are not important as long as he realizes that I could fulfill his wishes and needs.
The marketing of ready-made clothing puts the needs of the customer and how we fulfil them in the foreground. The image of a brand also plays a role. This applies not only to sneakers, but also to B2B offers of the IT industry. Branding is therefore a task to become and remain successful.
The production of ready-made clothing has an influence on the existing company organisation. This not only affects the areas of marketing and sales. All cross-sectional areas from controlling to reception are affected by changes. New activities and requirements led to new job descriptions or to a change in the necessary qualifications. What do you think happened to the tailors who used to work in production?
In two sentences: The garment industry is a possible analogy to draw conclusions for the subscription economy. The success of the manufacturers of ready-made clothing should make everyone think.