I don’t think they have the cost base to sell online. Most of their own products are “manufactured” by company’s like Iovate who also own brands (like Muscletech). The ironic thing is that Iovate actually outsources manufacturing to another third party. The result is that GNC is paying far too many margins to be price competitive on a site like Bodybuilding.com. They can still sell their high priced products in the retail environment (to generally uninformed consumers), but are losing volume as customers like Yaro no longer visit.
I can’t help but relate this to Kevin’s post on Ikea (as you alluded to at the end). It is so amazing when a “business” is able to create such a connection between different units with seemingly distinct tasks (e.g. “artists had to be trained to operate the machines while the machine workers had to be trained as artists”). It’s hard to believe that this Bauhaus-model is scale-able – it would be interesting to experience it in action.
You are certainly correct on the cost stand point. It seems that “control” is not a huge issue so far – service is exceptional (based on all the bench-marking studies I have seen), but the ICs are rebelling in some areas.
Did you see this:
Yeah that’s a great point, it definitely takes a lot of FedEx’s value prop away if the majority of B2C moves become within-city.
The part that I find most interesting is that they actually think about packing, handling and transportation while in the design phase. I can’t imagine that many other companies do that. It’s amazing that they can foster that kind of communication between different areas of the business – e.g. to understand transportation costs in the design business unit.
UPS may or may not be in too deep… The number one problem is their union though.
I have actually spent a lot of time thinking about that. Right now a lot of the disruption of the courier industry is in the B2C space, but longer-term companies like UPS and FedEx could be in trouble; if Amazon gains scale, why not go B2B? It will really depend on how much customers value same-day shipping. Same-day, if demand by customers, could lead to company’s redesigning their distribution networks and potentially cutting FedEx/UPS out.
It is total genius that they use their store real estate as a manufacturing operation during off-peak hours. I am definitely going to be thinking of other businesses this is applicable to.