March 27, 2023
Why Owning more of the E-commerce Value Chain Offers a Competitive Advantage
Companies selling print-on-demand (POD) or embroidery-on-demand products may be at a disadvantage compared to those who source and produce their own products. Owning more parts of the value chain provides businesses with margin headroom to compete more effectively. When a company owns more parts of the value chain, it has better control over production costs, quality, and the overall process. This enables the company to manage its expenses and optimize processes to achieve better profit margins.
POD companies take a significant portion of the profit since they handle the manufacturing, printing or embroidery, and fulfillment processes. This reduces the profit margins for businesses using POD services, making it harder for them to compete on price with those who produce their own products. Owning more parts of the value chain also allows businesses to be more agile and responsive to market changes, giving them a competitive advantage.
Another disadvantage of relying on POD services is the lack of product differentiation. Since many businesses use the same POD companies, the products offered might be similar in terms of design, quality, and pricing. This can make it challenging for businesses to stand out in the crowded marketplace.
Print-on-demand and embroidery-on-demand business models often work best for influencers with an existing audience. This is because the cost of customer acquisition can be quite high, particularly when profit margins are low due to the POD company taking a significant share of the revenue. Influencers with a loyal base of fans can minimize customer acquisition costs by leveraging their existing audience, which is more likely to purchase products due to the personal connection.
In summary, while the print-on-demand and embroidery-on-demand models can be an attractive option for entrepreneurs looking to enter the market with minimal investment and risk, they may not be the best choice for those seeking to build a sustainable, long-term business. Low margins, lack of differentiation, and high customer acquisition costs can make it difficult for startups relying on these models to compete effectively. Producing and sourcing their own products, owning more parts of the value chain, and targeting a niche market can provide businesses with better control, differentiation, and margin headroom, ultimately leading to a more competitive and sustainable business model