Unassembled Snowmen

Usually when people speak of the law of supply and demand, they focus on how price is affected by this law. However, another thing which is affected by this law is whether or not there is an overabundance of businesses or potential businesses in a given market.

For centuries, investors have purchased products in a country in which there was an overabundance of supply and therefore very little market and ship them across the ocean to countries in which the same product is either rare or non-existent. One of the reasons that Columbus' voyage across the atlantic was a milestone in marketing is that there are many products available in the Americas which were non-existent on the three continents which are sometimes called "The Old World."

Dr. Jeffrey Cornwell, who is the Director for the Center for Entrepreneurship at Belmont University, posted a picture on December 11, 2005 which very clearly explains what I have tried to say about crowded sandboxes and about the "Bratwurst Rule" of marketing.

It is not sufficient when researching a market to merely discover the level of demand, you also have to look at supply:

Suppose you did some market research and discovered that if 80 people attended an event, 70 of them would want a hamburger and 10 would want a bratwurst. Which business would you decide to get into? The correct answer is "Insufficient data." You next need to know the competition. How many vendors are selling each product? How happy are the consumers with the currst service and quality of product? What available locations are undersupplied based upon the flow of traffic? Etc. Etc.

It is also important to know whether or not the market is oversupplied. This quote is from the conclusion to my article on the "Bratwurst Rule:"

The lessons from this are -

Just because a product or service is popular does not mean it is the most profitable choice.
Market research is key to determining which products or services have the most potential for profit.
If the sandbox is full, play elsewhere.