In 1995 I developed Math Flashcards 4 Kids. It was a project to show PTA's that the Internet could be used for education (a good thing). It was a simple program. I started getting e-mails to give it more features, and what about other games... so by 1999 I had developed a large number of games. Then in 2000 I left my position as CTO of an Internet startup and went back to consulting. A friend asked me to help him set up an on-line store for pool supplies and I said I would help, so I had to learn what was needed. About that time I was also looking for a side income. Thus was started the store which we launched in 2001.
At the time almost all educational products were purchased from either catalogs or from mom&pop stores. I had connected with the largest distributor of such items. Mom&pops generally sell items at MSRP because they have overhead. Catalogers do it because the catalogs are pre-printed with MSRP. The end result was, with low overhead and the ability to change prices on the fly, I was able to undersell both by about 8-12% on every one of the 23,000 products.
The store took off. Why? Because a yacker-tracker from my store was the exact same product as one from the catalog. That meant that all the products were now commodities; the exact same item, save pricing. At about this time Google came along with their "shopping" listings and amazingly customers found that they could go on there, search for an item, sort by price and buy from me as the lowest cost. The store really took off and more of my time was getting devoted to it.
This continued with nice steady growth through 2012, even when I changed servers and kind of shot myself in the foot in 2008, it wasn't all that bad, and I recovered a bit. In 2012 something changed. I had disrupted the old sales model, being part of the disruption that caused over 50% of the mom&pops and catalogers to close. Now I was getting disrupted.
Product went from Manufacturer -> Distributor -> Retailer. Each step had a built in margin on every product. But in 2012 that model got shaken out by a distributor that was also the reatiler. So, now this company would purchase from the manufacturer, move product to their distribution warehouses and then also sell those products as a retailer. So, a product I would purchase for $20 and sell for $26 with a MSRP of $28 was being sold for $21 by the distributor/retailer. That's a 5% margin. When I have to pay over 2% to a credit card company and have operational costs that are about 1.5% what I was making about $5 on now was showing a profit of about $0.25 if I was to match the price of the competition.
How could they do it? The actual price from the manufacturer was $14.00. The Distributor was making $6.00 selling it to me. I was making $5 selling it to the customer. Under the new model the distributor/retaler was making $7, and I couldn't compete with that making $0.25 on the exact same sale.
The distributor/retailer picked out the top 2,500-3,000 selling items and entered my field in late 2012, start of 2013. By the end of 2013 I had seen my business drop by almost 30%. By the end of 2014, another 20%. By the end of 2015 it was an aneimic 20% of what it once was. I attempted to change the revenue model to a flat 20% above whatever I purchased the item for from my distributor, but even that only barely held the company on for 2016.
The funny thing is that you are most likely not even aware that the way you shop has undergone massive change over these last 16 years. You used to go to Google, enter in what you were looking for, go to Google Shopping, sort by price and then go to where it was sold for the least. Most of you don't do that any more because you have been retrained. Now you go directly to the distributor/retailer's site and search there first. And for those of you who haven't figgured it out yet, the distributor/retailer is Amazon.
Now, I'm not upset. I had a great 16 year run supplying teachers and parents with great educational products. Now I am back to focusing on consulting, a educational startup based on a patent I co-wrote and maybe finaly getting back to upgrading the free drill games that started all this.
It was a great ride. I am glad that I was able to help so many people save money. I wish you and yours all the very best. Check out the drillgames here (as we will be finally updtaing them). And please check out the math products from EduCAD Learning Solutions built on our patented technology. Thank you again for your patronage.
JM Ivler, Owner, Education 4 Kids, Inc.