Sunday, December 21, 2008

SL Fashion Business/Economy/Glut/Marketing/Freebies Omnibus post

Let's talk business, you and I. Suppose you are a designer and you want to make a Beeeelion L$. Everyone does. I do. Anyone got a Beeeelion L$? I've always wanted a Caledon Duchy and Willow Packs of every hair Elika makes...and a pony.

Back to my point, if some new designer came up to me and asked for advice about starting their fashion business I would say:

1. Don't. There's a glut of stuff on the grid, so much stuff that it's overwhelming, and if your stuffage isn't as good or better than the stuff that's already out there you WILL get lost in the glut. For example, as much as I respect Eloh for releasing her skin PSD's into the wild and making it easier for budding skin creators, she created the skin glut of skin makers looking to make their beeeeelions selling skin.

2. Wait for the shakeout. I'd lay odds some of these new creators won't be able to keep going for too long.

3. If you still want to release your stuff, why not partner with another small content creator or an already established business.

4. You'd better have very very good ads and marketing.

5. Don't get caught in the freebie race. Discounted budget items/lines are fine.

6. 200L$ is the magic number, most transactions are that or below. 200L$ represents for me the impulse vs think about it for a while purchase point. In fact the number of people willing to spend even that much is small. The SL fashion economy is sustained by a relatively small number of people because relatively few new folk become part of that economy in a major way.

Gwyneth Llewelyn has a blog post about this

Here's a citation of her major train of thought:

At this stage, I have to formulate my own theory though. Based on my own perception of the numbers, I boldly claim that the number of people willing to spend money in SL is about hundred thousand, and this number hasn’t changed since at least early 2007.

The second bold claim is perhaps even more surprising. The number of service providers (content creators, event hosters, and land managers) is about hundred thousand. This basically means that about one in ten active users is a producer of content, while the remaining are pure consumers.

And the third bold claim is definitely shocking. This number will NOT change in the immediate future. Unless, of course, things change dramatically (which is always possible), but the change will be only a positive one, ie. more users in this group, not less.

The fourth claim is perhaps not so surprising then: The number of informed people in Second Life (those that read and write blogs or e-zines, participate actively in SL-related issues, work for RL companies providing content and services in SL, etc.) is about a hundred thousand.

And the fifth should not come as a surprise either: They are exactly the same people. Sure, I’ll allow a margin of error, of, say, 20-30% in either direction. But I’d say that it’s extremely likely — mmmh 95% or so — that if you’re reading this article, you’re very likely a Premium Account resident, or an owner of a private island (or a set of them), or a content/service provider (these are inclusive “or”s, so you can be all of those). If you’re none of those cases (ie. a Basic Account user who never spent a single cent in SL, live from freebies, and never organised a single event in SL…), you’re probably writing regularly about SL.

Some personal stuff:

I think she's close to the mark. I'm a Basic account holder, and have no intention of going premium. I have a SL Lindex budget that I limit myself to each month, about 3000 to 5000 L$. I ought to unsubscribe from EQOA again, I joined it to see how it looked and played on my PS3, and cut down my SL spending a bit to compensate, that would add another 3000 or so sometimes (but not every month), but I try to keep it as small as I can. Now back when I was working for Linden Lifestyles, that gig paid a bit of L$ so I spent more. I'm not a content creator, I can't design clothes, or build and my LSL scripting skills are minimal, so I can't make money that way. I'd love to have a way to make more L$ in SL to finance a 512 or 1024 in Caledon, but right now, if I was to get a spot in Caledon it would mean much less shopping since I'd be feeding Desmond Shangs cute little meter L$ every week.

In fact, I write these infrequent blog posts these days basically because I don't have a regular commentary writing gig with a "Big blog". I'm thinking I'm one of the few remaining fashion bloggers from 2006 who aren't content creators that is still writing. I'd be tempted to apply for that Second Style Magazine editorial assistant post if I felt I could devote the time to it the job deserved, and of course to fill out my Hat Trick. So far I've worked for 2 of the old "Big Three" fashion blogs: PXP and Linden Lifestyles, Second Style would finish the hat trick. Of course since PXP is on defunct and LL pretty much on permanent hiatus, that might not be a good idea. I'm the kiss of death.

Back to the fashion business:

Here's another citation from Gwyneth:

But these days it’s insanely hard to launch a new brand. It’s not only making sure that you’re well-known enough by all fashionistas and fashion bloggers and magazine writers — which is hard and takes time. It’s not enough to have the best quality products available in your collection. The problem is that there is a limit on how much the 100,000 can spend. They’re stretched thin across the dozens of thousands of brands in SL already, and every week a new designer pops up and wants a share of the market — another market which is also saturated! Put it bluntly: there is no room for more designers except if you’re willing to drive your competitors out of business. So there is no time to use soft silky gloves for fighting; the only way to survive in the fashion world is to eliminate the competition. The Armidi brand is trying very, very hard to do that, and perhaps with some success. Many others have understood that the market has stagnated — but still working under the wrong assumptions! — and are starting to put up a serious fight. Long gone are the days where you put up a shop and would have increased sales just from “being here”. Even long gone are the days where quality defined success, or marketing and promotion helped you to find out where all your potential customers were shopping and open your shop there. These days, we’ve hit the limit on how many different brands are able to survive in SL, because the market is only 100,000 people and they have a limit on how much they spend.

She's absolutely right on this one. I've reached my limit and most others have too. If you want to survive you have to convince me to spend my money with you and not them. You have to be absolutely ruthless. Jack Tramiel used to say: Business is War.

Say it with me, "Business is War." Find out who your competitors are and take them down...hard. You've got to be agile, mobile and hostile. Know them, know their weaknesses, know yours. If they do something, you have to do it better. If their customer service is good, yours has to be better. Your job is constant improvement. You need information and lots of it. Information in SL is one of the most valuable things ever. "Information is ammunition." Know your market, know theirs.

Sounds harsh, I know, but it's the only way to survive the glut.

Gwyn has this to say about Freebies:

In despair, designers tried to give their content away as freebies, hoping to make themselves more popular (and show themselves as politically correct towards the “poor newbies”). Nothing could be worse. As Prokofy Neva put so bluntly several years ago, we’re flooded with freebies. Fashion comes and goes — nobody wears non-sculpty heels these days — and you can rely upon consumers to pay for new, fresh, innovative content. But you can’t fight freebies: they accumulate. Unlike content creators who retire products from the market (when they don’t sell, are out of fashion, or are replaced by better and improved products), freebies never disappear. And to worsen that, while in 2004 and 2005 wearing a freebie was considered hilarious — because they were of such poor quality! — the freebies of 2008 are of insanely high quality. In fact, whole communities have been popping into existence to help people to pick the very best among all freebies in the world — Fabulously Free in SL being perhaps one of the best examples. All these sites, these notecards, these people explaining where to get free things in SL are just increasing the magnitude of the problem. (And I know they mean well, that’s besides the point; none of them are Evil Communists Trying To Bring The Downfall of Laissez-Faire Rampant Capitalism in SL, but just happily giving out tips and ideas, to newbies, non-consumers, and even the 100,000, who are often amused at how good those freebies are these days)

I think Freebies are moderation, but the Freebie glut on the grid nowadays is no moderation. Problem is a lot of folks aren't even willing to pay 10L$. It's hard to become integrated in the SL economy unless you create. It's only recently that more businesses in SL are hiring CSA's and I think most of those get paid in items and not L$, though I may be mistaken on that. I have no skills and am in the economy only because of the Lindex. If I wasn't buying on the Lindex I wouldn't be shopping. It's not like The Sheep or Millions of Us would want to hire me, and most of the major fashion blogs are bankrolled directly or indirectly by a content creator.

So instead of freebies I recommend budget lines, "clearance rooms" and "Everyday low prices". Every L$ a consumer spends with you is one they haven't spent with someone else and you want as many avatars as possible spending with you.

Which leads in to marketing:

A lot of notecard copy and vendor/notecard ads suck. Sometimes the items are sucky too, but sometimes, sadly, the items are great but the ads aren't. I've pointed to this post by Alaska Metropolitan before. And yes, sometimes I think some content creators would be better off getting someone else to model and do their ads for them. Some months ago I bought a really nice gown, from an ad with a really sucky vendor picture. I had seen someone else wearing the gown or else I wouldn't have bought it, the vendor picture was that unflattering. So while I was there hobnobbing. (there was a lucky chair attracting shoppers), I decided to take a few pictures of myself in the gown and my pictures turned out better than the vendor ones. But frankly, my SL image skills both in and out of SL are not very all. To put it in the vernacular, my pictures suck, they just suck less than some of the vendor pics out there. There's people out there willing to help with marketing and ad making but creators are reluctant to use them.

I've been thinking about organizing some kind of fashion blogger summit held via FashCon Cafe or something. Sabrina Doolittle was planning on doing so, but her RL got in the way. I really should keep in better contact with my "colleagues".


Isara Beaumont said...

I almost never care for freebies. I've never seen any that I would really love to wear, and I prefer to spend my time with roleplay instead of camping for lucky chairs.

But I read fashion blogs, and if I see something adorable, I buy it. And I don't think that SL has a saturation problem, since saturation does not result from "not enough buyers", saturation results from "not enough choice / already have all I want".

Just a few week ago I was in Prague, and while I looked at all the gorgeous amber jewelry there, I wondered why no SL designer is doing anything like that. That's just one example for the plenty of opportunities a new designer (or any of the existing ones) could take advantage of.

And many designers simply fail at marketing. I can't count the number of times I've left a shop without buying anything because the ads sucked, or because the vendors did not tell the permissions and layers for a dress.

Layering options (more precisely, lack thereof) are also a severe case of "fail at marketing". That is, even if the vendor is graceful enough to tell them, they're quite often the wrong ones. Seriously, who wants to wear the corsage on the jacket layer? And contrary, if the underwear is only on the underwear layer, where do I put a tattoo?

Shelby Rasmuson said...

Good post.. as a non creator, blogger who has a small piece of land that I rent I also try to keep my spending down....I find myself doing my best to support those creators that I really like and know. You didn't mention hunts but it seems as though, since I joined SL this aspect has really taken off to the point where I just cannot do them any more. There are too many. I rarely do freebies and lucky chairs also consume too much time!

Shimere Felisimo said...

Well, if you want to make a beelion of any currency, you had better go to ninja school because you'll need that cutthroat training.

On the other hand, if you are having fun creating content, why not go for it? You can run a good scale SL business for less per month than it takes to buy a major concert ticket.

I wouldn't recommend that anyone try to make a living off SL - just as I wouldn't recommend that anyone make a living off a beloved hobby. But I certainly wouldn't discourage talented newcomers. You can open up a booth for about $5/month. So there's certainly no reason to throw in the towel to the Armidis of the SL world just yet.

And I think you're forgetting how many businesses that close are because the creators - talented people that they are - just got bored with it - or RL got in the way. For some, this is a living, but for most, this is a game.

CronoCloud said...

Good points, everyone. If someone designs for fun and not money they SHOULD design.

Though I think Designers should do more field testing of stuffage and ads amongst their friends before release, that includes the big names too.

Ana Lutetia said...

hmmm... and I just made a wish list for SL designers

- Ana Lutetia -