Cost-to-serve

Cost-to-serve is defined as the total supply chain cost from origin to destination, it incorporates such factors as inventory stocking, packaging and re-packaging, shipping, and returns processing.

So explains Tim Laseter, Elliot Rabinovich, and Angela Huang in S+B. I’d say products that have poor cost-to-serve profiles, like shoes, just haven’t redesigned their businesses to take advantage of online opportunities. For example, if shoe return rates are poor for fit reasons, more consideration needs to be put into consistent fit. This was never necessary before because we always bought shoes in a place we could try them on. Consumers may show loyalty to a particular brand, style, and even model given the possible price and convenience advantages of ordering online. Shoe manufacturers may find advantages in not redesigning every model every season, making it easier for consumers to re-order a shoe that fits, and profiting both in lower development costs and higher loyalty rates.

An example of redesigning the business to take advantage of e-commerce is Design Within Reach, which has showrooms to market items that are hard to evaluate online, and an online store and paper catalog for everything else.

iTunes is so, so unfair

The music industry’s lack of innovation ability to even look at business differently is rather sad. Even after Apple showed how digital downloads could be made profitable, they’re pressuring Jobs to change his pricing model, complaining about his ingenuity

A sore point for some music executives is the fact that Apple generates much more money selling iPod players than it does as a digital music retailer, leading to complaints that Mr. Jobs is profiting more from tracks downloaded to fill the 21 million iPods sold so far than are the labels that produced the recordings.

Andrew Lack, the chief executive of Sony BMG, discussed the state of the overall digital market at a media and technology conference three months ago and said that Mr. Jobs “has got two revenue streams: one from our music and one from the sale of his iPods.”

“I’ve got one revenue stream,” Mr. Lack said, joking that it would require a medical professional to locate. “It’s not pretty.”

No, it’s not. But why blame that on Jobs?

Recycle those old CDs

We’re taking the digital+hard drive plunge and getting rid of our CDs. Ulrike discovered Second Spin to buy our used CDs. One just types in the UPC code and they tell you how much they’ll pay. After you’ve entered the discs in their system and get a receipt, you pack them up and ship them off.