This holiday season there has been a torrent of articles about how bricks and mortar retailers are facing increased competition from ecommerce and mobile apps. Amazon was widely criticized for offering app users a coupon not to buy something at a bricks and mortar store. Slate provided a blue print for how physical retailers could fight back, but the trend seems inevitable.

Some people are upset by this, especially as it relates to emotional product categories like books, but this increase in competition can only be a good thing. Take this example:

Is the retailer adding much value? Educating customers about which tools is useful in a given scenario? What powers this will confer upon them? No, it is a mess and offers no help to the user except for immediacy and the ability to inspect the product.

Hope is not lost. This display gives a hint of what a retail display could do:

With this display you see what tool should be used in a given context and what purpose it serves. It isn’t perfect, and doesn’t help solve the larger structural problems inherent in the conflict between retailers and ecommerce merchants, but it does use the physical space to help a customer make a smarter decision.

Considering the Swiffer costs ~$20 and the average price of the power tool hovered around $100 I expect more from power tool display. Traditional retailers have challenges ahead, but they also have an amazing stage to educate and inspire their customers that no ecommerce sellers can match. Hopefully they will think more like Broadway producers rather than community theater players, otherwise their will be few frowns when the show closes.

The always interesting Professor Thomas posted a request to Twitter wondering if there was a “Board game of the month club” or similar offering as a holiday gift. Unfortunately, I know of no such service, but it got me thinking. Subscription ecommerce has been a hot area in the tech world this year with companies like BirchBox coming out of no where. The Christmas season has to be the busiest time for “_______-of-the-month” club purchases, but there doesn’t seem to be much innovation in the space. You can find dozens of services that will ship wine, cigars, chocolate, and other savory treats on a monthly basis, but they don’t do much to expand horizons or educate their audience. Could the “_______-of-the-month” club do more? What about:

Game-of-the-month clubs – This is a great idea. German/hex style board games one month, Dominion/deck games the next, dice games, table top games, and so on. Most clubs of this kind are an attempt to broaden your aesthetic sensibilities, so why not do the same with products that appeal to the intellect rather than appetite?

Fitness-of-the-month-clubs – The spiritual successor to the “Couch-to-5K” program. Every month you get a new supplement, work out tool, diet guide, or other fitness product. A gentle reminder that you should resolve to think about your health every month, not just around new years.

Craft-of-the-month clubs – KiwiCrate and BabbaCo both are approaching this market for kids, but what about adults? Do you have a relative who has always wanted to get into wood working or quilting? What if every month you got a new tool and block of wood to experiment with? Would this make the undertakings seem less monumental?

Chef-of-the-month clubs – What if every month you got a new ingredient or implement and ideas for dishes you could prepare with it? Could you create a dynamic like the Iron Chef competitions where people share their various creations online? Could this ignite innovation in kitchens across the country?

There are a lot of barriers to make these kinds of programs work, but there is a spark of a cool idea here. In the past, the monthly gift did more for the giver by reminding the recipient of who is sending them these monthly parcels, but what if we could use this appointment dynamic to improve the life of the person who receives it?

Coinstar has partnered with Threadless, the crowdsourced Tshirt company to test out kiosks containing their stylish products. It’s an interesting move and exciting to see from a company whose major claim to fame in the past was collecting the money you found in your couch cushions. It’s a good reminder that “ecommerce” doesn’t have to occur on a website like Amazon.com.

Ecommerce currently makes up between 5-10% of retail spending, but I wonder if we are in a transitional phase much like when early cars looked like horse carriages? Current ecommerce websites are essentially better versions of catalogs, but a new crop of companies and experiments hint at the future. Square, Tesco’s QR/subway experiment, Apple’s self check out, and other innovations suggest a future where ecommerce is more of a “Bricks & Clicks” or “Clicks & Mortar” experience.

Retail is going to shrink and proliferate. Coinstar is also the company behind RedBox (Netflix’s retail competitor). Blockbuster was once the undisputed king of the video rental industry but was squeezed by Netflix on the digital side and Redbox at retail. If your product doesn’t need to be touched or demonstrated and it is relatively small, your retail footprint is going to shrink dramatically. This is bad for retail clerks, but exciting for entrepreneurs because it could become easier to sell products in places that you couldn’t previously.

On a completely unrelated note, this is a presentation I made unmasking the secrets of winning a Threadless design competition.

Mass market and grocery retailers have long sold “Private Label” or “Store Brand” products e.g. CVS brand Aspirin. In most of these stores you can find a private label in almost every product category. However, the practice hasn’t become as wide spread in other kinds of stores. For instance, there is no Toys R Us brand action figure.

However, while browsing at Barnes & Noble I saw this display of their collector edition books. The books were intended to look like they had come from a mahogany paneled library – they have foil stamped hard covers, gilt edges, “classic” designs and other trappings of high society libraries.

The titles were mostly in the public demain, but there were also contemporary editions by authors like Neil Gaiman and Douglas Adams. They were priced at $20 which is below the cost of new hardcovers, but represents a serious price increase over the free ebook editions that are available.

The books are interesting for two reasons. First, it shows that retailers of widely available products like books are moving up the value chain to produce their own products and thinking about their retail positions differently. Second, it is a view into the future of what the book might become once Kindle swallows most of the market.

I love the idea, but I’m still hoping that Paul Graham or one of his disciples will actually start a company that makes truly spectacular editions of great works.

If you visit any seaside town in the northeast of the USA you will likely find an old time commercial district with a board walk, games of chance, and a candy store that is making fresh saltwater taffy in the front window. This demo, where the candy is repeatedly stretched using a civil war era mechanical contraption never fails to draw crowds and sell otherwise underwhelming candy.

I wonder if the MakerBot and laser cutters could serve the same purpose for a next generation of DIY shops? A glittering lure to bring people through the doors where they could be sold all the DIY tools they could need. Salt water taffy is an inferior product by any metric, but millions of pounds of it are sold each year because of these gravity defying machines that make the process look magical.

Current DIY retail is a waste land. Michael’s owns suburban art supplies and generates $4B a year in revenue in cavernous, but uninspiring stores. New breed retailers like Ponoko help people make custom products, but all the magic happens behind closed doors and requires weeks of waiting. There seems to be an exciting opportunity to fill that gap with a store or service that provides all the staples you need to build things with the wizardry of next gen DIY tools.

One of the best design firms in the world is sharing it’s technical tricks for free online. Art School will barely exist as we know it in 10 years. Oh and currently for profit, online art education is worth ~$2B/year.

QVC is the second most profitable channel on television with revenue in excess of $5B. YouTube is now offering a tech platform that will let tens of thousands of bands (and other folks in the future) create their own QVC/HSN channels.

With increasing access to machines that can produce production quality goods at quantities of 1 we are going to see more high quality product satire like these cereal box mock ups.

Combat robotics seem like the natural evolution of UFC and NASCAR, but are currently limited to the world of fantasy at this point (Unless you count the BattleBots that look like toasters). However, this behind the scenes feature from the movie Real Steel talks about how the robots are made for the silver screen.

The DIY urge waxes and wanes over time. The Arts and Crafts movement came into being during the industrial revolution as a counterweight to poorly made goods coming out of factories. During the depression people “used things up, wore them out, made do, or did without” out of necessity. In the 1970′s, environmental activism and increased cultural awareness led the masses to macrame and caning. Martha Stewart brought DIY out of the doily cupboard in the mid 90′s and now on the border of 2012 we see elements of all these prior waves coming together, but super charged with communication tools.

Whenever I learn about a new site that focuses on DIY i’m always interested to check out the quality of the site and it’s traffic. Usually I’m shocked that some poorly designed site focused on some niche of a niche has a thriving community with more unique visitors than a consumer web tech company that has raised $25 million dollars.

I like having dashboards to check the pulse of an industry so I compiled and embedded reports from Compete.com for all the user generated content/community driven DIY sites I could find. Please let me know if I missed any good sites (e.g. there must be a bigger/better hobby robotics site). Also, if there is a tool that automates this kind of reporting, let me know!

Two things popped out when looking at all these sites:

• Tech < Community – You don’t need much more than VBulletin or PHPBB to get 100K+ unique views per month. Many lightly customized message boards have 500K+ user bases while some high profile VC funded sites struggle to find an audience. The ad revenue they generate might be insignificant, but they have demonstrated the ability to gather an audience.
• “Makers” vs. Crafters - There is a lot of excitement about the “Maker Movement“, but O’Reilly Media’s flagship site Makezine.com gets less traffic than niche sites Cake Central and Dave’s Gardens. This is a huge opportunity for O’Reilly and anyone else interested in DIY as a business.

Tech + Crafts

Etsy

http://www.etsy.com/

Instructables

http://www.instructables.com/

Kickstarter

http://www.kickstarter.com/

CustomMade

http://www.custommade.com/

Fabric Arts

Ravelry

https://www.ravelry.com

Cosplay.com

http://cosplay.com/

Quilting Board

http://www.quiltingboard.com/

Burda Style

http://www.burdastyle.com/

Nerd Craft

Deviant Art

http://www.deviantart.com/

BoardGameGeek

http://boardgamegeek.com/

iFixit

http://www.ifixit.com/

TheRPF

http://www.therpf.com/

MOCPages

http://mocpages.com/

Thingiverse

http://www.thingiverse.com/

DIY Drones

http://diydrones.com/

Open Wetware

http://openwetware.org/

Let’s Make Robots

http://letsmakerobots.com/

Shop Class

Dave’s Garden

http://davesgarden.com/

LumberJocks

http://lumberjocks.com/

Practical Machinist

http://www.practicalmachinist.com/

RC Groups

http://www.rcgroups.com/

Random Crafts

Tattoo Artists

http://www.tattooartists.org/

BalloonHQ

http://balloonhq.com/

Food Sites

AllRecipes

http://allrecipes.com/

CakeCentral

http://cakecentral.com/

Discuss Cooking

http://www.discusscooking.com/

Craft Media

Food Network

http://www.foodnetwork.com/

HGTV

http://www.hgtv.com/

DIY Network

http://www.diynetwork.com/

Martha Stewart

http://www.marthastewart.com/

Make:

http://makezine.com/

Fine Woodworking

http://www.finewoodworking.com/

Art Supply Retailers

Michael’s

http://michaels.com/

Jo-Ann Fabrics

http://www.joann.com/

A.C. Moore

http://www.acmoore.com/

Hobby Lobby

http://hobbylobby.com/

Dick Blick

http://www.dickblick.com/

Scrapbook.com

http://www.scrapbook.com/

Davison Product Design and Development is a design firm with a unique business model. Instead of designing products for the Fortune 500 like IDEO or Frog Design, they run commercials and banner ads appealing to garage innovators. Their sales pitch is simple, for $800 dollars they will help conduct a preliminary IP search around your idea. Starting at $12,000 they will help you produce a model of your product. New services include product animation and commercial production.

Their office space is also highly unusual among design firms in that it is modeled more after Disneyworld than the Bauhaus. This video shows off some of the themed “InventionLands” that their designers work in, including a pirate ship, race track, and tree house.

Davison has run into claims of fraud and recently lost a case which would force them to return money to a number of their customers. That said, their new marketing materials, including the one embedded above, make clear declarations that most new inventions do not succeed.

Davison is a strange entity combining design, Walt Disney, and infomercial-esqe marketing, but their success is staggering. 100-300K people visit their site every month and 55K+ call for info. This represents a staggering amount of entrepreneurial energy and one that disruptive companies should jump on.

Angry Birds Cookbook

Rovio, the creators of the Angry Birds franchise, are releasing an egg themed cookbook with the popular avian brand. Putting aside how off brand that is (What’s next a Bambi themed venison dish at DisneyWorld?), it is one more SKU bringing in revenue.

AngryBirds is showing how important physical products can be in growing and sustaining a digital brand. The company which spawned a cultural phenomena made only $10MM in 2010, has earned $20MM in Q1 11, but is on pace to rack up $140MM in revenue by years end. While the video game is important, the licensing deals and merchandising even more so.

GrabCad Funded by Matrix

GrabCad is a market place for CAD/Mechanical engineering talent which was recently funded by Massachusetts based venture capital firm Matrix Partners. Given the growth of the product category on Kickstarter and the increasingly blurry line between digital services and physical goods this could be a very important tool in the years to come. Additionally, Antonio Rodriguez of Matrix Partners is one of the most savvy VC when it comes to the world of Bits & Atoms which should help the GrabCAD team immensely.

Pixar Lightning Mcqueen Master Builder Video

Lego gives a peek behind the curtain on how the star of Cars 2, Lightning McQueen was turned into a Lego masterpiece. It is everything you would expect, the artist talks for a minute, cut to time lapse of the construction process, and boom, work of art. What is really neat to see is how CAD is used. Pixar is in an interesting position where all of their characters exist as 3D models and so can very easily be turned into tangible products via any CNC process. Disney/Pixar have created a finely tuned machine that turns stories into products and a $6B/year revenue stream which dwarves their theatrical grosses.

Unrelated, but interesting, here is the trailer for Cars 2, recreated in Lego form.

JJ Abrams on Making Movies

I remember a friend in high school wanted to be a director and I was baffled by how you would even go about it. This was just over 10 years ago and there were no cheap DV cams, no home friendly editing tools, it was a hassle getting film converted to a VHS cassette, and there was certainly no YouTube. Now, indie film makers from Uraguay can get a $30MM film deal based on the strength of a $300 short on YouTube.

Lost creator JJ Abrams has an awesome bit of advice for teens who want to get into movie making on Quora (Just do it.) and points out that it is no longer a technical challenge, but one of leadership. This is also becoming more true of product design where you can get free or low cost tools at every phase of a project, but require a community or enthusiastic fans to help launch your brand.

Shapeways’ smart marketing making their customers smarter

Companies like iFixit, Sparkfun, and AdaFruit have grown multi-million dollar revenue bases by teaching their customers how to use their products. Shapeways has struggled with revenue. They look to be changing their strategy to better reflect the success of other bits & atoms companies by setting up a workshop to help teach 3D modeling and printing to their customer base. It is a good move and hopefully it will pay off.

Amazon has just announced the creation of a new publishing imprint for mystery books called Thomas & Mercer, joining four other imprints they created in a continued attempt to vertically integrate the publishing industry.

Apple’s retail stores are celebrating their 10th anniversary this month, a notable achievement as retail was Apple’s last step in the vertical integration of the computer market. While many analysts predicted Apple’s failure, the stores have been instrumental to the launch of Macs, iPods, iPhones, and iPads and helping make it the largest tech company in the process.

These two news stories dovetailed with an idea a friend hypothesized, that we may be entering a phase where we see a “Moore’s Law” for atoms. The analogy between general purpose computing devices and general purpose 3D printers breaks down pretty quickly, but it is apt in another way.

The first computer was designed on paper. The second computer was designed partially on the first computer, the third on the second, and so forth. The history of the last 30 years of technology has been self-reinforcing with each previous generation of technology enabling a faster and better delivery of the next.

This phenomena is especially apparent in the last 5 years of web innovation where Amazon’s Web Services platform has enabled entrepreneurs to permeate every nook and cranny of the consumer web because the technical infrastructure details have become almost trivial.

In the “Maker” world we are beginning to see “EC2 instances for atoms”. Services like Ponoko let you get started with a CAD file and a credit card. Once you have a product ready to go to market, Protomold can make a proper injection mold for less than the cost of a big screen TV.

My guess is that the increasing availability of small scale manufacturing tools will lead to more vertical integration. Product inventors will be able to fund their designs via Kickstarter, produce them at Protomold, create a store front using Shopify, and send products to customers using Amazons “Fulfillment By Amazon” service.

This vertically integrated approach will increase the margins of product creators and allow them to produce and sell more unique offerings. More SKUs will be introduced by smaller and smaller vendors. There will be more friction than with web innovation, but I have a feeling we will soon see a Cambrian explosion in the physical world as CAD, production, and fulfillment become available to anyone with an idea.