There are really only two broadly successful business models that you would currently follow if you’re building an online store. The supermarket, and the marketplace. Each of the candidates represents one of these business models.
1. You build a supermarket, just online.
This is advantageous if you favor tight control of the entire distribution process and prefer buying products wholesale at just barely above cost from a conglomeration of large distributors, corporations, and a handful of small businesses. You have terms with your sellers intentionally structured to ensure you buy only at just-above-cost margins, which you sell at the lowest price possible as long as your minimum margins are met. You will often have a very rigid minimum margin you must get whenever buying. Paradoxically, the more volume you are moving with a larger company, the more power that seller will have when negotiating margins, even when you are buying at very high volumes.
Often the smaller manufacturers and sellers have the least negotiating power and will sacrifice almost all margin just to move the product. The terms are intentionally very different, depending on whether you are a publicly traded company or a new business trying to get its product off the ground. You buy product in bulk, store at company warehouses, and control all shipping from a centralized company warehouse. You control every aspect of the buying experience, and buy in bulk on as tight a margin as you possibly can. You have absolute control over the entire shopping experience, but in turn you sacrifice the ability to offer a diverse and customized range of varied products from many different businesses, both large and small. When considering distribution channels, you will not be the first choice for up-and-coming businesses developing cutting-edge and unique products. This business model is the Walmart model. You can gain a good perspective on this model by asking any small-business person who sells to Walmart how much they appreciate this model. Herbert is a supermarket.
2. You create an online store using the marketplace business model.
With this model, what you sacrifice in top-down control over every aspect of the supply chain and shopping experience you make up for in creating a diverse marketplace of many different manufacturers, resellers, distributors, and small businesses. You opt to provide a way for any business, no matter how big or how small, or how new, to gain access to a worldwide market, on a scale larger than any one business could achieve on its own. What you lose in control you more than make up for in diversity and quality of products, as well as in developing real, long-lasting, mutually beneficial relationships with the owners of these small businesses.
This is crowd-empowering, sustainable, individualist-focused ideology. Instead of operating on the thinnest of margins with exacting terms and conditions for all your vendors, you have an open marketplace where fair value is given to the tens of thousands of small and large businesses who sell their products in your marketplace. Selling your products through the marketplace business model makes the difference between just getting by, and being able to become a profitable and innovative company. Those following this model will be the business people who create the products that will drive the global economy in the next five to ten years. It has proven to be better than the business model of previous generations, as it should be. It is obvious to most of us that the marketplace model is winning the future. It empowers the small businesses person, which empowers the consumer to buy from the empowered small business, which very often empowers that small business right into a thriving enterprise. Johnson is the marketplace.
What does this say about Jonathan Johnson and his campaign to be hired as Utah’s governor?
Jonathan Johnson had the foresight to create an extremely successful company following a marketplace business model. Overstock.com is the result of his correct thinking as he looked toward the future. At the very beginning, he could see that this structure would be more beneficial to the company and to all of their sellers in the long run. He was right in predicting this would be a more equitable and sustainable way for innovators to create and sell products and for people to buy the products they want.
Looking from the outside, Jonathan Johnson certainly seems to be a very smart businessman. When you get to know him personally, you learn he happens to be a very good man as well. And that is a very lucky thing for all Utahns.
What is the biggest difference in the two gentlemen running for the spot of Utah’s governor?
It is easy to imagine that Jonathan Johnson will do for Utah what he did for online marketplaces with Overstock.com. He will look to the future. He will show innovation and imagination and insightfulness. Gary Herbert, although a very good man who has made significant contributions in his own right, has shown he is happy to maintain the current highly controlled, predictable, and ultimately out-of-date system of government.
Utahns are familiar and even quite comfortable with being the underdog. We like coming out of nowhere to beat out everyone else by being surprisingly tech savvy, harder working, and more than anything, just better. And this is what Jonathan Johnson really brings to us. He is a strong leader and a better visionary. At a rapid pace, he has made a huge impact right here in Utah by building a profoundly successful business. And he has plenty of time to turn his talents toward making Utah an even better place for all of us to live and work.
We work hard to be better as Utahns, and I believe we have earned ourselves the right to have a visionary leader who has shown he can be successful at the helm of our awesome, surprising, underdog state.
Compare the two candidates for yourself and let me know what you think.