“Possessing utility, commodities derive their exchangeable value from two sources: from their scarcity, and from the quantity of labour required to obtain them.
There are some commodities, the value of which is determined by their scarcity alone. No labour can increase the quantity of such goods, and therefore their value cannot be lowered by an increased supply. Some rare statues and pictures, scarce books and coins, wines of a peculiar quality, which can be made only from grapes grown on a particular soil, of which there is a very limited quantity, are all of this description. Their value is wholly independent of the quantity of labour originally necessary to produce them, and varies with the varying wealth and inclinations of those who are desirous to possess them. These commodities, however, form a very small part of the mass of commodities daily exchanged in the market. By far the greatest part of those goods which are the objects of desire, are procured by labour, and they may be multiplied, not in one country alone, but in many, almost without any assignable limit, if we are disposed to bestow the labour necessary to obtain them.”
David Ricardo – On The Principles of Political Economy and Taxation
Written over 200 years ago, David Ricardo’s thoughts on scarcity are still relevant for us today. Wines of a ‘peculiar quality’ still fetch record prices. A bottle of 1982 Chateau Lafite Rothschild now changes hands for $3299. These wines have a limited supply and a well established terroir. They can only be made by certain people under certain rules, in a limited territory. Terroir limits these wines to ‘grapes grown on a particular soil’ as opposed to any grapes grown anywhere. You may think that another grape grown elsewhere makes for a better bottle of wine, that is only your opinion though. These bottles have historical prices, a track record and are admired. A 1982 bottle of Chateau Lafite Rothschild is an example of well managed scarcity. The value of these wines is maintained over time. The Chateau Lafite is one of over a million wines worldwide, one of tens of thousands of wines from France, one of thousands of Bordeaux wines, one of only 30 or so that inhabit the Pauillac AOC smaller more exclusive region and one of only five Premier Cru Châteaux of Bordeaux. Along with Latour and Mouton Rothschild it is the only Premier Cru Château in Pauliac. With Lafite Rothschild we have concentric circles of increasing exclusivity. From the million or more total set of wine choices we have only precious few that are considered to be ‘the best.’ In other countries and regions we see the same pattern, with thousands of producers found to have a certain quality and only a handful demanding the highest prices. These handful of producers have escaped simple considerations of cost and margin. Their production costs are comparable to that of the tens of thousands of other wine estates worldwide but the prices that they command far outstrips them.
This is an enviable position to be in. In a mass manufactured world there are many other companies that would like a similar position. How did this happen? The French have been very good at exporting their wine and culture for hundreds of years. The idea of French food and the sum total of the French culinary experience has been built up over that time. Michelin stars, culinary education, exclusive French restaurants overseas and the fact that France is a desirable tourist destination have all contributed to this. French literature, art, language and culture were from the very beginning promoted and seen as part of a holistic self-reinforcing idea that was France. French food has long been considered the summum of the culinary world in part because of that. Their cheeses, sausages and wines are expressions of the idea of France. Somehow a French cheese is a better brand than a Swiss or Italian cheese. At the same time big government and regulations have done their part. The French Institut national de l’origine et de la qualité and other French government and private bodies have been regulating the designation of origin for all manner of products since 1411. Yes, 1411. That’s when the French government first regulated that only a certain thing could come from a certain place and only if it was made in a certain way using certain ingredients. Roquefort was then established. Appellation d’origine contrôlée (AOC) labels and standards have since been implemented for hundreds of wines, cheeses and all manner of natural products. By defining terroir and limiting where a certain branded item could be grown the French government and certification institutes essentially increased the value of particular plots of soil in france.
In retrospect this was a very smart move. By defining and promoting the land in concert with French culture and France as a destination France was established in and of itself an exclusive brand, a place where good things come from the land. Their particular land became the best land for chickens, with their chickens commanding higher prices. Other countries have since emulated France. We see now many other people elevating their cuisine or their previously humble and forlorn natural produce to new heights. We live in a world where we now have Three star Michelin Tacos and $80 tequila. Many other countries are now exploring the elevation of their natural products through manufactured scarcity. The mechanism by which a thing is often ordained as exclusive is still decidedly French however. Stars given out by a French tire company in its travel guides, still being the de facto way by which a restaurant and the food it serves is judged by. A lot of companies do business development but the Michelin restaurant guides have to be one of the most successful business development exercises in business history
The company saw the potential of tires and the automobile. It realised that the more people used their cars the more tires they would buy. It started making maps and guides to indicate where people could stop and find gas so they would travel longer. By selecting notable and nice places to visit and showing people how to get there they encouraged driving. By encouraging driving they ended up being the preeminent way through which restaurants are judged. Meanwhile they popularized the idea of recreative driving, gave people places to go and sold lots of tires. Thousands of cooks slave away each day dreaming of being awarded a star by a tire company. Michelin is not alone in becoming a signpost of the excellent through business development. French newspaper L’Equipe has tried many things over the years to boost its circulation. Two of the most successful were to organize the Tour de France and to start what would later become the UEFA Champions League.
The French have a bit of a head start on everyone else. Generally however we can see that value can be created in several very high performing ways: through mechanisms that in and of themselves recognize and celebrate excellence, through manufactured regulated scarcity, through the addition of someone else’s cachet and through the restriction of availability.
Twikit for French retail chain Auchan
Creating a mechanism that defines excellence requires a long term commitment and the idea of impartiality. A bag company can not start a contest for the world’s best bag. Advertising agencies on the other hand drum up business through giving each other awards. In March I’m in the jury and you win, in April we’ll switch places. Advertising awards are an example where through a mask of impartiality excellence is recognized and value is created. A far more effective way to get in customer’s than, oh advertising for example. Something like the Michelin guides can take a considerable investment in time and money to pull off. Alternatives are much easier to do. The 50 Best Restaurants is now seen as another mechanism to determine the world’s best restaurants. The list started as a poll by the British magazine Restaurant, their launch party was promoted and reported on widely in the media. Subsequently their list was presented as the definitive list of the best restaurants in the world. Not having to support an army of inspectors the list relies on volunteers (who are increased in standing because often their association with the list is known) and votes from industry practitioners. The 50 Best Restaurants has a circumspect methodology but it is widely now regarded as the definitive guide to the best restaurants, simply because it was marketed well and no one else had thought of compiling such a list and making this known widely. Similar attempts can be undertaken in many industries. Ancillary suppliers, customers or partners can be elevated through your company by simply holding a contest. Do you make cheese cutlery? Well, there currently isn’t a definitive list of the world’s 100 best cheeses. Who is the best teacher in the world? Secretary? Boat manufacturer? The possibilities are endless. Industries can also collaborate to elevate the average selling price of goods in their industry. The sports apparel industry could create a new category of “Bespoke Shoes” and collaborate with industry magazines to hand out the Kustom Kicks awards for the world’s best bespoke unique sneaker. Their company would not always win but the limited set of sneaker companies would mean that they would win often enough. Besides, just the fact that $1000 sneakers would be celebrated and given media attention would be good for the industry. From the many things on offer these mechanisms have in common that they elevate one above the others which makes that one, and by extension all the others as well, have a higher value.
Manufactured and regulated scarcity is also an option. By defining a certain area or certain product in a certain way and having a body regulate its manufacture many choices are reduced to the very few. If that thing is then branded and promoted as was the case with Brie, Roquefort and the other AOC goods then the sellers which have access to that brand will be able to command higher prices for their goods. Apart from foods, where the terroir and AOC approach seems to be the definitive way to do it, there are many other ways which you could make use of such an approach. There is a profusion of craft breweries and brewpubs worldwide. Any supplier or partner to that industry or people selling an ancillary product to them (nuts, cleaning products) could start a certification foundation that certifies a brewery as “Craft.” This would give them real market power and elevate and bring attention to their client base. By inventing a regulatory body this approach is fraught with more ethical concerns than making a list. But, if you are established then it will be difficult to dislodge you.
Twikit for French retail chain Auchan
Through the addition of someone else’s cachet, the pedestrian can become exclusive. H&M and TopShop have used this to great effect by partnering with famous designers and offering limited edition clothing. The H&M x Balmain collection sold out rapidly and lead to queues at stores and people reselling the items for hundreds of dollars on eBay. The Kenzo x H&M lead to people waiting for days before the launch at stores worldwide, much media attention and even lead to the H&M website crashing. These collaborations also let the company sell items for much higher prices than they usually do. The attention and revenue notwithstanding it also reinforces the H&M brand because of the cachet associated with Balmain and Kenzo. Spokespeople and endorsements are other ways through which a brand can bask in the glow of another. Crucially rather than be available in large numbers items are limited causing shoppers to que and rushes of people to stores. By restricting supply and even making available less than what they could sell H&M is manufacturing exclusivity. Sneaker companies have long partnered with athletes. Now R&B stars and other notable people are getting their own capsule collections or becoming ‘designers’ for the brand. Kanye West’s Yeezy line sneakers sell out on the day they are released and contribute significant revenue to Adidas. Partnering creates excitement around brands and fees for the famous person. New markets can be penetrated and new value can be created through such an approach. “We sell shoes” is not news. But, “these limited edition XYZ shoes by famous person ABC sold out in a day” is news. Limited editions themselves not only create buzz but act as a halo for the rest of the brand’s offerings.
Any manufacturer can create a limited edition. Instead of making available what the market will bear supply is restricted. The idea of the limited edition is communicated and this will hopefully lead to more attention and sales across the board. Even without another brand’s cachet many individual brands can produce limited editions through simply restricting availability. Simply making something unavailable or available only in a limited quantity in and of itself will not suffice however if one wants this limited edition to positively influence your revenue and brand. Care has to be taken to determine if such a limited edition is sufficiently supported by your brand. A move to a more exclusive positioning could be positive for you but certain brands and markets will not support or in fact be damaged by an ill measured move towards a limited edition. There needs to be a certain internal logic to this limited edition also. Limited editions due to collaborations, reissues, new outlandish colors, limited appeal versions of your products, new use of new materials and the above mentioned collaborations make sense to consumers. A combination of this internal logic with an on brand limited edition is necessary. Good communication is important to indicate just how special such a limited edition is. The product has to make sense in light of your brand’s positioning also. It must also really add value not only to your brand but also to the consumer’s life in some way. When limited editions do not work it is often because they are not on brand or the premium paid for them is exorbitant or the item itself ceases to make sense because the premium does not let the customer extract value from it.
If these prerequisites are satisfied, what kind of role can Twikit play in your limited edition? We have extensive experience in digital manufacturing. We have developed, sold and helped guide to market laser cut and 3D printed products. We know how to make functional 3D printed items and have a deep understanding of digital manufacturing technologies and their limitations. Digital manufacturing lets you quickly create limited editions or develop add ons to existing products that make that product unique. Digital manufacturing can be a rapid and low cost way for you to launch a new limited edition. Designing, developing and manufacturing a digitally manufactured product for consumers can however be complex. In many cases digital manufacturing does not make sense but in some it will be the ideal technology for you to develop your next product. Want to learn more about digitally manufactured limited editions? Contact us.