To an entrepreneur, Chinese e-commerce giant Alibaba looks like an indispensable offering. Its B2B platform disintermediates, simplifies transnational transactions, facilitates supplier review, and, of course, offers unbeatable unit costs. However, the true business brilliance is how they take advantage of a cognitive bias called the ambiguity effect. With their IPO scheduled for September on the Big Board in New York and slated to be the largest of all time, we are at the very beginning of Alibaba’s story here in the United States.
Each day, retailers are exposing more and more information about their respective supply chains. Details like material cost data, supplier locations, labor conditions, and environmental impact are now being overtly displayed for customer consumption by a selection of companies.
This disregard for what were previously considered trade secrets and the shift to transparency is not simply a passing marketing fad either. This trend actually makes real economic sense.
In just a little over two years, high-tech clothing startup Ministry of Supply grew from a single prototype to over 10,000 customers. By integrating the latest textile manufacturing and fabric advances into their products, Ministry of Supply pioneered the “Performance Professional” category of men’s dress wear. Although customers loved the products, to the tune of $429,276 and $204,601 on Kickstarter, Ministry of Supply quickly confronted the daunting challenge of scaling up their Supply Chain to deliver all of those cutting-edge garments.
So how does a new retail startup scale from one customer to over 10,000?