The money left behind by everyone chasing the new thing
Every new product makes an old one surplus. Somebody has to sell, support or repair the old one, and few ambitious people want the job.
Everybody’s chasing that leading edge, but there’s an awful lot of opportunity in the trailing edge.
Every few months a manufacturer launches a new model of a gadget, and the previous model becomes a problem. Retailers want shelf space for the new one. The manufacturer wants the old stock gone before it loses more value. Somebody has to buy those units cheaply and find customers for them. Matt Rutledge spent years in computer-products wholesaling watching this happen, and in 2004 he built Woot around it: one discounted product a day, sold until it ran out or the day ended. Amazon bought the company in 2010.
The idea behind the line reaches well beyond electronics. Technology companies, investors and the press point their attention at whatever is newest. That leaves the older part of each market underserved, even though it is often larger. Businesses still run software that vendors stopped improving years ago and pay well for people who can maintain it. Refurbishers buy returned phones and laptops, test them and resell them at a discount. Specialist firms keep old industrial machines running because replacing them would cost far more. In each case the customers are real, the demand is steady, and the competition is thin because the work looks unglamorous.
The trailing edge also has a cost advantage. Its products already exist, so there is little research spending and little risk that nobody wants the thing. Woot did not have to guess whether people liked a particular camera; the market had already said yes at the full price.
The weakness is that trailing edges move. A business built on surplus depends on the leading edge continuing to produce it, on terms it cannot control. When manufacturers get better at forecasting, or sell their own surplus directly, the supply dries up. And some trailing edges are the tail of a technology that is disappearing. A shop repairing film cameras in 2010 had loyal customers and no future, because each year there were fewer of them.
Margins are another limit. Trailing-edge goods sell on price, and a price-driven business must be run tightly to survive. Woot managed it partly through its tone, which made bargain-hunting into entertainment and kept visitors coming back each day.
The practical reading is to look where attention is not. A founder searching for an idea can ask what the newest products are making obsolete, and who is left holding the old ones. Then check that the stream of leftovers will outlast the company built on it.