Is Selling Shovels Always a Better Idea?

[MTF]

@randomnumber314 recently started a thread asking about the current gold rush markets. While there's a lot of money to be made in these markets, the fact that they're so popular makes them extremely competitive. At the same time, the sheer number of the people producing for these markets create numerous opportunities to serve them.

Do you think people selling shovels are always going to be better off than people who are trying to make it big in these extremely competitive markets? After all, when you're providing services to these people your competition is much smaller and you can charge much more (people are more willing to invest money if they think it's going to help them make more).

 

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[randomnumber314]

Haha, you discovered my ulterior motive for that post

It's probably not always better to sell the shovels, but the phrase is intended to show that you can make sure buck with little risk selling to people trying to make an "easy" buck who assume a lot of risk.

Oil was mentioned a few times in that thread, so selling the oil miners boots, trucks, tools, water, or any number of things is less risky than buying/leasing land and drilling for oil then building the infrastructure to store and move that oil.

 

[Mark Anthony Le]

Shopify sells shovels to entrepreneurs

Internet Marketing Gurus sell shovels to entrepreneurs

How many entrepreneurs make it?

 

[MTF]

@randomnumber314 - the question is how much easier it really is to sell shovels instead of drilling yourself.

@Mark Anthony Le - that's exactly my question. I'd say maybe 2-3% of people entering a gold rush market make it (meaning they stay long enough to at least make a living). But how many of them do really well? And how many of them are doing as well or better than Shopify and Internet marketing gurus?

 

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[Jamesdoesmith]

obamacare is a huge burden to employers. There has got to be a better way to suffice this problem..


compete with obama care?

or offer aflac during a time of higher taxes and stricter regulations on doctors and insurance providers. Offer a cash benefit with a no hassle no dispute action in case you get hurt.

Aflac sells shovels to employers who don't want to deal with Obamacare red tape. And they get a competitive insurance to their employees.

 

[jazb]

In the wholesale industry it certainly does. All sorts of people remortgaging their homes to open a restaurant..without putting much thought into it. Some make money others don't

...but you can certainly bet the guy supplying them all the goods is making a killing

 

[teabag]

If you can sell some decent gloves to go with the shovel, you might make some decent dough.

 

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[MJ DeMarco]

Shopify sells shovels to entrepreneurs

You could even say Fastlane is selling shovels.

Do you think people selling shovels are always going to be better off than people who are trying to make it big in these extremely competitive markets?

Personally I've always held that being in a B2B business (shovels) is much better than being in a B2C (the gold). IMO, the value equation always seems to be an easier sell.

 

[Mark Anthony Le]

You could even say Fastlane is selling shovels.
.

Ah but herein lies the secret. You've made millions before the Fastlane.

Shopify makes millions off people wanting to make millions. Without the people, shopify's millions are nonexistent.

You on the other hand, do not need us.

 

[MJ DeMarco]

ou've made millions before the Fastlane.

Yes, but I would also say it's easier to sell shovels (hence why many business people go the guru route) than it is to go into the gold panning business.

 

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[mayana]

It's not only about how competitive the market is. There are so many factors that would make a business "better".

Yes, but I would also say it's easier to sell shovels (hence why many business people go the guru route) than it is to go into the gold panning business.

It's a barrier-to-entry AND scale question. How hard is it to make a website calling yourself an expert (a platform, but no barrier to entry)? It can be done in 30 minutes. But it's much harder to gain the expertise (like you did - via your previous pursuits) and THEN make the business-expert website (barrier to entry AND the platform to help millions!).

Using the gold rush analogy, if a person has enough money to buy the super-high-tech machine that has a 75% success rate in finding large gold deposits (high barrier to entry, since such a machine, if it exists, would cost millions, and scale), it would be superior to the guy selling maps of gold mine areas (low barrier to entry, little scale).

Now, if the guy selling the maps had 10 other guys posted in 10 other places around the gold rush territories, it might be a different answer.

The other issue that comes to mind is that the business selling maps of the gold rush territory is only useful when people are actually looking for gold. People probably thought that the California gold rush would never even... and yet, it did. Did any of those companies survive since then? There are some that did... worth a study.

Do you think people selling shovels are always going to be better off than people who are trying to make it big in these extremely competitive markets? After all, when you're providing services to these people your competition is much smaller and you can charge much more (people are more willing to invest money if they think it's going to help them make more).

I'm wondering if you have an idea in mind

 

[MTF]

I'm wondering if you have an idea in mind

Ideas are everywhere. I do have one in particular, but I decided I don't want to split my attention.

How hard is it to make a website calling yourself an expert (a platform, but no barrier to entry)? It can be done in 30 minutes. But it's much harder to gain the expertise (like you did - via your previous pursuits) and THEN make the business-expert website (barrier to entry AND the platform to help millions!).

I'd say it's easier to become an expert in B2B than B2C, at least in some specific areas. For instance, all you need to become a marketing consultant for, say, plumbers, is some basic marketing knowledge most of these guys don't possess. Now, to become an expert as a fitness guy, you need to put in years and look good enough (and be healthy enough) to tell other people how to do it with authority.

 

[The-J]

If the EV is higher on digging for gold (and you're OK with high variance/stdev/volatility/risk) then go for the gold, champ.

 

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[GSF]

Ideas are everywhere. I do have one in particular, but I decided I don't want to split my attention.



I'd say it's easier to become an expert in B2B than B2C, at least in some specific areas. For instance, all you need to become a marketing consultant for, say, plumbers, is some basic marketing knowledge most of these guys don't possess. Now, to become an expert as a fitness guy, you need to put in years and look good enough (and be healthy enough) to tell other people how to do it with authority.

or instead of being the marketing consultant, sell software to the marketing consultants (sell shovels to the people selling shovels)

 

[RichyV]

I think this is a floored way of thinking about it. Take shopify for example. If we say they are selling shovels in a gold rush, dig deeper. Shopify themselves bought a shovel in the firstplace, eg. The website development, a shovel in itself from a Web development company maybe. Now you can say the website development company sold shopify a shovel in a gold rush. But who's coding platform is the web development company utilising? That in itself is a shovel. You could keep going and branching off, even going to who supplied the raw materials to construct a computer in the first place, who is supplying the energy, who developed the Internet etc.

I prefer to think of it based on the saying "standing on the shoulders of giants". We are building systems on top of systems on top of systems and so on. Leveraging other people's time and systems to build our own systems, which then may be built on in the future.

Think about it this way, you could build a store on shopify, i.e buy a shovel, and then go onto sell a product that itself is a shovel. It's never ending. All we are doing is building on what already exists,one block at a time. Obviously not all products sold from shopify are going to be shovels,I'm just using shopify as an example.

 

[GSF]

theres so many ways you can sell shovels not only online but offline too, I have a friend who owns a fastfood/ takeaway restaurant good location and no local competition, however theres nothing stopping a competitor from setting up nearby and stealing his business, my partner on the other hand has a family friend who is within the exact same niche of fastfood, however his business is in supplying the fastfood packaging to these shops, and he does very well from it.
How about selling packaging supplies/ fullfillment services to the millions of online ecommerce businesses?

 

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[Jakesynli]

How would you go about starting a fulfillment service company?
Would it be possible without a warehouse?
Its not as simple as contacting eCommerce businesses and telling them you can pack their orders? is it?

 

[theag]

How would you go about starting a fulfillment service company?

You buy or lease a warehouse and get customers to fulfill orders for.

Would it be possible without a warehouse?

No.

Its not as simple as contacting eCommerce businesses and telling them you can pack their orders? is it?

No.

 

[Jakesynli]

thanks for replying

 

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[randomnumber314]

You buy or lease a warehouse and get customers to fulfill orders for.

No.

No.

I don't know much about this type of business, but I'd be inclined to use mine and my family's garages until I wore out my welcome. Of course I wouldn't be fulfilling orders for refrigerators and hot tubs....but that seems like a low risk way to test the market

 

[Jakesynli]

Thats what I was thinking of doing. Start small first and then move once you grow. I've tried googling this information but I cant find it. I might be wording it wrong.

 

[Learner Guy]

Someone's got to be digging - not everyone can sell shovels! I know what's rational for YOU is the most important thing, but eventually selling shovels looks a lot like the latest goldrush in any case.

I read Getty's autobiography a while ago and was struck by the fact that his success came from exploiting what was very profitable at the time. My takeaway note was something like 'Internet stuff is the oil boom of our times.' I haven't acted on it but may.

 

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[Dwight Schrute]

What brand of shovels were sold back in the gold days, anyway?

Levi's Jeans thrived and covered people's butts during the original gold rush, several oil booms,
the dotcom & real estate boom/bubble.

Revenue 2008: 4,4 Billion

Useful for digging? Yup.
Dependent on the boom? Nope


And when the next bubble bursts and people run around throwing their hands up in the air, thus lifting their shirts a few inches,
we'll be able to catch a fleeting glimpse on Levi's logo again.

 

[RHL]

Do you think people selling shovels are always going to be better off than people who are trying to make it big in these extremely competitive markets?

No, and MJ pretty much said as much IIRC. Selling shovels is the safe play, the one that offers the surer path to wealth. The shovel mfg almost always gets rich. 1% of the gold miners will be way richer than the shovel seller, but the other 99% will be flat busted.