I was talking to an old friend on the phone yesterday and he asked how the booze business was going. This is what I told him:
Imagine you’re one of the only popsicle stands at the beach year round. Then, over the course of a few years, popsicles become all the rage again. Soon there are hundreds of other popsicle stands servicing a very crowded beach. Overall, you’re selling more popsicles than before, but there’s no consistency and business is streaky. You’re making more revenue, but it’s offset by the amount of popsicles you have to continually purchase.
“What do you mean by that?” he asked.
Let’s say you stock up on cherry because cherry is the most popular flavor, but all of a sudden they stop selling. You’re scratching your head, wondering what’s happening, only to realize that tangerine is the new hot flavor. By the time you get fully stocked on tangerine popsicles to capitalize on the trend, everyone’s raving about guava. Every week a new popsicle vendor has the hottest flavor, and customers bounce around from stand to stand, trying as many new popsicles as possible, rather than continuously buying from your stand.
“That seems difficult,” he answered; “It sounds like oversaturation.”
“That’s exactly what it is,” I responded; “And it’s coming for all of us, sooner or later. It’s forcing retailers to expand beyond their means. No one can carry everything, and no one guesses right every single week. At some point, the bubble goes pop.”
-David Driscoll