In June, 2014, I woke up one morning only to realize that I was swimming in shark infested waters.
My business partner and I were on the tail end of a riding a long and epic ecommerce wave. We had paddled into it in 2009, armed with the best practices in SEO, PPC, web design, usability and development and only blue water in front of us. All we had to do was follow all the advice we had been giving our clients and we would succeed in the ecommerce landscape.
The ride lasted 4 years before everyone else caught up, and next thing we knew, the wave was getting crowded and sharks were showing up.
The concept of the red ocean/blue ocean strategy is one pioneered by W. Chan Kim and Renee Mauborgne in the book Blue Ocean Strategy - Create Uncontested Market Space & Make the Competition Irrelevant.
Their book goes into more detail, but the basics of a Blue Ocean strategy are that after a while any market and business can find itself in a red ocean. All the sharks have shown up, attracted to the blood of the initial kill and are feeding on an ever-dwindling school of fish.
A Blue Ocean strategy is one where a company deliberately looks away from the red ocean feeding frenzy into the vast sea of blue. It requires new non-competitive thinking, and innovations. It leaves the competitive landscape for the creative, opportunity building one.
For more info on the specifics of finding a Blue Ocean, definitely check out their book, but for the purposes of my point here, that's all you need to know.
Ecommerce as I knew it, as a retailer of designer jewelry had become a straight up red ocean. The cost per click was way up. Amazon, Nordstrom, Bloomingdales AND the brands themselves were competing with us on cost, pay-per-click, loyalty programs and customer services. There were no more ways to differentiate ourselves within the constraints set up in our business.
Our next move wasn't to lower our costs, we couldn't, we had Minimum Advertised Price agreements in place with our vendors. We couldn't add services, we already had fast, free shipping and returns. We couldn't pay MORE per click. As it was, we already only broke even on the first customer acquisition cost, relying on the total lifetime customer value to make a profit. Our only option was to completely pivot. But to what?
We came up with a few ideas. The first, start a subscription-based "box" model, a la Blue Apron, Stitch Fix or Trunk Club. Hand picked jewelry just for you, delivered once a month. Another option was to create our own brand, that contains an element of personalization. The 2 places Amazon can't compete in (for now) are any type of engraving, and when the brand chooses not to sell on Amazon. We'd do both. We also considered a jewelry rental model that you could subscribe to, wear the pieces, and send them to trade out for new pieces (similar to handbag programs out there).
These ideas held water (to keep with the H20 analogies). The problem was this - we hadn't planned for any of this until the red water was around us. We rode the wave too long. It was crashing on the beach. Our boards were on the sand, and it was WAY easier to hop off and sunbathe for a bit, than to paddle back out and wait for the next set.
Personal factors weighed in too. I had an infant in my arms, and bringing a new business model into the world at the same time felt like WAY too much. Also, I didn't want to do it. I was getting tired of the impersonal world of ecom. Never touching the product. Never interacting with the designers. It became mundane and souless.
So, while the blue ocean almost always exists, you may not always like it.
What did we do? We sold the business. Based on the track record we had, we were able to find a buyer extremely fast, and offload the whole project to them to execute.
It was a real moment of reckoning for me. Was this the life I'd envisioned for the business? No. Was it what felt right at the time? Yes. What I do wish I'd done was stay one step ahead of the red ocean feeding frenzy and to put blue ocean strategies in place one small step at a time.
The best way to eat a hippo is one bite a time. Don't wait til the sharks are circling to think about where your next blue ocean might be.
Have you ever swum with sharks? Are you implementing a blue ocean strategy now? Let me know in the comments!