Two of today's newsy names have just made big changes to how they do business, and it raises the question of when it makes sense to change a business model.
On October 6, McDonald's rolled out "All Day Breakfast." While there are some limitations, this was overall something that McDonald's fans had requested for years. Now there are a lot of pundits talking about whether or not this will be enough to save McDonald's, and only time will prove anyone right or wrong.
But the point with McDonald's is that they've been falling from their once great heights, and they have to do something to adjust to today's market. So kudos to them for trying something. They're also working on some healthier food options, and I suspect that both will be good moves for them. I personally wonder, though, whether the brand itself is what consumers are looking for. In an apparent effort to create a different feel to the business, McDonald's launched a new creepy Hamburglar, as you can see from this Google search result.
In any case, when business is NOT going well for a long period of time, some sort of change is needed, and McDonald's is responding. We'll see if they responded in the right way.
Meanwhile, though, this brings up the question of whether you ought to change your business model when things are going exceptionally well. Or at least appear to be going well.
Jet.com emerged from beta in July of this year with a goal of having millions of members by the end of the year. They are touted as an Amazon competitor, but they had a different business model. They would make most of their money from annual memberships of $50 and then provide prices close to wholesale. Which would be highly valuable to the consumer, if they truly gave wholesale prices, which are often 40% or more below retail. In this model, if you shifted just $500 per year in groceries and home essential shopping to jet, you might save $150 or $200 per year. And I think many people would do much more shopping than that.
Since their launch, Jet has become one of the leading online retailers, is approaching 20,000 orders a day, and has garnered all sorts of media attention. Seems like the kind of results you'd want to have.
But even as I've shopped at Jet, I couldn't help but feel I wasn't really getting wholesale prices. In fact, I would compare with Amazon and a couple other low price stores; Jet was often the lowest. But not always by a ton, and not to the tune of making me think I was buying at wholesale. In fact, prices seemed to be creeping upward since launch.
Then yesterday (October 7) just 3 months after their public launch, they announced that they would offer memberships for free. This only confirms the fact that they're not offering wholesale prices, because they have to make profit somewhere. And what this says to me is that they don't want to beat Amazon by being different. They want to beat Amazon by being the same. Sure they have tricks like choosing smart cart items to save even more. But in short, they're trying to get people to sign up and shop regularly for low prices.
Amazon's already doing that, Jet. You had me at "wholesale," and sure ... you'll continue to have me with low prices. When I can find what I want. But Amazon has a big jump on Jet in terms of functionality, features, infrastructure, selection, a marketplace where others can sell items, a powerful affiliate force, and so much more. It makes me wonder how long Jet can compete by being another version of Amazon. Or for how long they can lose money trying to beat Amazon prices while ramping up. Or really ... why they changed their business model.
This isn't to say the new approach won't work better. But they must have thought long and hard about a membership site that offered wholesale pricing. Why would they so quickly abandon something they knew would take several years to turn profitable?
I'll love to see where this goes, and more competition at this scale is generally good for the consumer. But it makes me think on business models and when it makes sense to change. And I'd love your insights on McDonald's, Jet.com, or anything related to this topic of changing business to stay on top.