Find “Fake” Barriers To Entry
Have you ever experienced a “Matrix moment” where reality as you know it seemed to shift and you realised that there’s a whole new world out there that you’d spent your life not seeing?
I had one of those last night.
I was trying out a new product. Not as a businessman, copywriter or sneaky salesman, mind you, but as a consumer. It was an expensive product that had been lovingly created and shipped from most of the way across the world.
It was fantastic quality, and I enjoyed it a whole lot.
There was one thing that irked at me though. One part of the product was unique, and something about the way it was described seemed off somehow. The description of the product was obviously written by a fellow copywriter, evocative of the loving care that sent it out into the world and the journey it’s been on to get to my house in England.
Yet there was a specific phrase about a specific part of the product that seemed strange. It was almost like it had been written by an outsourced copywriter. It set my senses a-tingling.
Naturally, I searched it on Google.
What did I find? A few things.
Here are some of them:
- You can get a type of the product on AliBaba
- The “unique” part isn’t all that unique and could easily be backwards engineered
- Here’s the first kicker: the product has a 16x profit margin
So for every pound they spend on buying the materials, they get £16 back.
Now, that sort of product doesn’t pass me by. (I’m sharp like that.) I’m immediately interested and start doing some searching to see whether I can just order this product from Alibaba and start collecting the money.
After a little Google browsing, I was disheartened. It turns out that importing and exporting the product has barriers to entry, and whilst you could do the whole dropshipping thing and hope for the best, I don’t like the idea.
After all, it’s shipping directly from a place and taking the easy route that has led to some guy (me) finding out an entire company’s business model, and possibly replicating it.
So anyway, back on track. There are barriers to entry. You need to get some sort of certifications, deal with certain legal things and generally think things through.
Here’s the short of it:
- You need to comply with EU regulations (and the minefield that’s going to come from Brexit and all that)
- You need to get certified so you know what the hell you’re doing (lest you end up being one of those dropship guys who gets sued when the electronic appliance he’s selling doesn’t meet regulations and blows up a child’s face)
- If you want to do it right… then you should have contacts in the countries you’re getting the product from
- Also, you need to find a market for your product (It’s luxury and thus niche)
It’s not a four hour work week kind of thing at all. Those are real barriers to entry, and during my searching I found a few forum threads and reddit entrepreneur posts with people asking, “Is this business a good idea?”
Naturally, people warned them of the risks and told them do not pursue this business because of those risks.
Now, I might be wrong, but this is gold and I’m going to tell you why.
False Barriers To Entry Are A Businessman’s Best Friend
When you look at the laundry list of barriers above, and pair them up with the fact that some companies are already doing it therefore it’s possible, you have to note one thing:
- Most of those barriers to entry are insignificant
It’s like the guy who won’t apply for a job because he doesn’t have “Excellent Excel skills in a financial context.”
You can say, “This job isn’t for me I definitely couldn’t do it” or you can be the guy who writes on his CV “I’m the best god-damned Excel guru you’ve ever seen in your life” and then go to your local bookstore and read a book on it.
It’s not lying, it’s anticipating future success.
Anyway, back to the topic at hand. Those false barriers will keep the majority of lazy and risk-averse people out. That’s good because there’s not an unlimited amount of competition.
The other reason it’s good is because it’s still pretty accessible. I looked up the qualifications… it’s a weekend job at most and probably not even that.
Then I looked up the EU regulations… again, the goal there is to ensure kids don’t get murdered by demonic Sesame Street toys… they’re false because you pass the burden on to the manufacturer and then test whatever you buy.
In other words, you contact suppliers (or get your contact to) with the express of goal of seeing that you meet the requirements. Then you don’t dropship.
If you can earn 16x what you pay in product creation, then you can afford to ship the product to your home, test every single product you sell and then ship it out again. You can do this at least until you’re up and running and then you can work on a better solution.
What About Selling The Product? Aren’t I Competing With Established Businesses?
If your competition leaves evidence that they’re dropshipping from China, then your competition has weaknesses and flaws.
That said, when you find the sort of thing with this barrier to entry, competition isn’t your biggest concern because you’re selling a product with a barrier to entry.
You don’t have to worry about any guy with a laptop stealing your idea. (Just the obsessive ones.)
Because there’s a barrier to entry, you’re also selling a limited product. Ergo, you’re selling some luxury item, whether it seems like it or not.
Finally… if you’re on this site, then you shouldn’t be worried about selling a product full stop.
Write some letters to potential customers, build the luxury brand thing and get affiliates and resellers on board.
Very few companies do any of this outside of the internet marketing world, so if you do, then you are ahead of the curve.
The Point Is…
If you find barriers to entry that’ll keep the average guy who Googles “How to start [Product X] Business” and you think they’re pretty easy to accomplish, then you’re on to a winner. Probably.
Most businesses don’t exist because they have a monopoly on an idea. There are multi-national conglomerates who do have those monopolies, but most businesses don’t. Instead, they have a product and attached service that the average person doesn’t think about, has no interest in or doesn’t think they can create.
When you see barriers that you think, “I can achieve those quite easily” then they turn from being a negative hoop to jump through to a positive indicator that you’re going to be able to get a seat at the table in the market and keep it that way.
(Side note: Not sure if I’ll act on this business idea. E-commerce isn’t really a strength of mine, but I have the itch. Will update you all on future progress if this goes ahead.)