Why Shorts Should Cost as Much Pants

Posted: Mar 06 2014

Today, I'm going to tell you a story, one that may initially prompt you to initially ask yourself, “what the hell is he talking about?” However, I promise you that it'll all make sense at the end and I think, or at least hope, that you'll be happy that you stuck around to read it. I wouldn't have wrote it otherwise...

I expect that many of you have either used or heard of Box and Dropbox, two young yet large tech companies.

In just a few years, Box and Dropbox have grown rapidly. They've done well. Very well. Today, Dropbox has over 200 million users and Box has over 200,000 clients, including 97% of Fortune 500 companies. However, what is more interesting than their user numbers is how they've grown. They've had to reinvent themselves, adapt, placate old users, and aggressively innovate and win new users.

When both companies started in 2007, Box and Dropbox had similar value propositions but different target customer bases. Dropbox was the cloud storage provider to consumers and Box was the cloud storage provider to enterprises. In 2007, these were strong value propositions. Storage space was scarce and expensive, USB drives were a pain in the butt, and allowing someone to access anything from any computer, anywhere, anytime was exciting. In 2007, Dropbox and Box offered differentiated products that were worth paying for.

Since 2007, the companies have significantly changed and so have their value propositions. In fact, if you asked their founders today for a short, declarative sentence that describes what they do and how they add value, I would be willing to bet that they wouldn't even mention the phrase, “cloud storage provider.” In fact, earlier this year, Box gave away 50 GB of storage space to every individual who signed up for it with no gimmicks or strings attached.

So why the change?

You could write on essay on why and how Box and Dropbox have evolved, but the gist of the “why” part would be: because they had to...because what they offered in 2007 wasn't as valuable in 2008, was even less valuable in 2009, even less in 2010, and so on and so forth. In fact, what they offered in 2007, has very limited value today. You could even argue it has no value today. After all, Box did give it away for free.

The evolution process for these companies began as people began using the cloud more (demand rose) and more companies focused on servicing these consumers (supply rose). To gain an edge on competitors, companies began offering free storage to consumers and ultimately, there were a number of options for people to store their stuff, in the cloud, for free. And because you could use these services simultaneously, the amount of free cloud storage space available to each individual was the sum of the spaces offered by each company.

Cloud storage is no longer scarce and it isn't expensive either. It is cheap and plentiful.

Cloud storage is, a commodity.

Dropbox and Box have adapted, evolved, and learned from the past and they've found a way to shield themselves from another tsunami.

Today, Dropbox and Box offer more than just a place to put stuff. More than just “a thing.” They add value by offering services. Cloud services to be precise and these services not only co-exist with the storage space they still offer, they leverage and complement the storage space component of their businesses. Furthermore, these services were built in a very deliberate fashion, with features that reflect the needs and wants of these companies 200 million users and 200,000 clients. And users and clients pay for these small things that set Dropbox and Box apart from its competitors. Users and clients pay for the details.

While very different in many ways, many of the same fundamental themes and elements that have reshaped cloud computing have reshaped niche areas of fashion including, most notably fabrics.

Seven years ago, if one went to Barneys and checked out their men's denim section, they would find it difficult to find more than a few pairs of selvedge jeans and though selvedge denim was well known among “early adopters” in the fashion world, it hadn't made its way into mainstream culture.

Selvedge denim, like cloud storage in 2007, was relatively rare. Consumers had to search for it and consumers couldn't afford to be overly picky about what the jeans would look, fit, and feel like if they were determined to buy selvedge. As a result of this scarcity, consumers were willing to pay a premium for selvedge denim.

If you go to Barneys today, you won't have a tough time finding selvedge jeans. They may not make up the majority of jeans on the floor, but they'll likely make up 30-40% of what's on the floor and a customer will have a wide variety of options. American sourced and American made denim, Japanese sourced but American made denim, Japanese sourced and Japanese made denim, Turkish denim, etc. Furthermore, most of these options will be fairly good and if nothing else, the quality of the denim used will be high.

Not only is selvedge no longer rare, high quality selvedge is no longer rare. It's mainstream and people expect it. Thus, consumers are no longer willing to pay a premium solely for the fabric and a customer can afford to be as picky as he or she wants to be because even if he or she is, they will still likely have choices.

Other fabrics have followed a similar path and, like selvedge, they have become a commodity. But like Dropbox and Box, clothing manufacturers have adapted and with high quality fabric having become a commodity, the way to differentiate oneself is via details. Details matter more than ever, details differentiate, designers and manufacturers invest in details, and consumers pay for details.

So how does this relate to the cost of shorts vs. pants?

Well, let's start off by examining some of the key features and components that go into the making and pricing of shorts and pants: a) cost of labor b) fabric/cost of fabric and c) details (examples include, but are not limited to, hardware components like zippers, buttons, pocket bags, and stitching).

Of the these factors, the only one that varies when manufacturing shorts and pants is fabric, which is also the component that is commoditized and thus, a relatively low cost component. However, regardless of whether pants or shorts are being manufactured, the details, remain the same. The investments, remain the same.

So, as a consumer, though we may be shocked at the convergence of price with respect to shorts and pants, we really shouldn't be because the details are exactly the same.

And as Steve Jobs said, "Details matter ... "

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