Hypotheses
“There’s nothing quite as frightening as someone who knows they are right.”
― Michael Faraday
In our modern, non-traditional approach to an owners’ association for Mobile Vendors, data collection and analysis will be used rather substantially to steer its members toward measurable success in a tangible way. At a fundamental level, while one can determine value in part by how much more or less remains in the cash box at the end of the day, there are notions of fairness and market trends which are not so easy to show and which are not so easily believed when they are described, usually because they are not observable from an individual perspective, or perhaps not observable at any given instant.
As we continue to reach out to interested mobile vendors wishing to join this organization, and those who are not sure, it is important to make clear the value proposition in terms of pains felt today and remedies available over the near and longer terms. For better or worse, the pains are not difficult to identify, and they are not uncommon in the general mobile vending marketplace (beyond the local and even state levels, perhaps these are simply the perils of doing business without a fixed location), but remedies are difficult to posit because they require a certain amount of cooperation to measure effectiveness, and a certain amount of trust to enable that cooperation, and a certain amount of belief to enable that trust. This is embodied in some of the hypotheses below, the value of a cooperative effort not only from a technical and game-theoretic standpoint, but from the much more human sense of Team that comes of it.
The Mobile Vendor marketplace is itself an economy with conditions which can be measured and analysed over time, which will help to make better decisions if we can properly characterize the state of the economy from day zero forward. Determining what kinds of data to look at and how we can alter the marketplace dynamic for the better, from the perspective not only of the association members, but of the mobile vending community at large, and the consuming public, is no small part of our Marketplace Elevation effort, and will ultimately direct and enable some of the Advocacy and Education efforts as we color each pixel in The Big Picture.
This is not intended to be a comprehensive rundown, which will likely form in parts over the life of the organization and various experiments, but certainly some of these ideas and assumptions are driving initial plans:
The Marketplace is Observable
Collection of data according to Key Performance Indicators (KPIs) enables characterization of the marketplace and changes to it over time, which if done diligently should provide observability for continued analysis. This is essential to determine whether most of the activities of the organization and its members, and interactions with other actors, are having a desirable impact on the marketplace for individual members as well as overall market health.
Which data are key performance indicators is likely to change over time as the processes and models improve, but are likely something like
- Customer volume per mobile vendor.“tickets” or similar
- Customer volume error. actual versus predicted customer volume per mobile vendor
- Customer volume deficit. the actual customer volume lead to financial loss, gain, or break-even per mobile vendor
- Cooperative alignment.
- Customer loyalty (likelihood of attendance, fit to appeal or draw per vendor, distance traveled against appeal if possible, etc)
- Impact of customer volume on non-mobile vendor interaction (instantaneously and over time)
By forming an owners’ association for all Mobile Vendors within Nevada, we can work across geographical areas, event types, customer engagements, and in general across a representative part of the marketplace, which might otherwise be unavailable if an association formed around a smaller, more vertical population.
The Marketplace is Controllable
Changes in behavior on the part of the sellers in the marketplace can alter the characteristics of the marketplace, ideally to the benefit of the sellers and other participants in the marketplace. In other words, if the nature of the marketplace at the beginning of this experiment is, according to the Oligopsony hypothesis below, is the result of sellers undervaluing their individual and collective contributions to the marketplace and their collective leverage over the buyers (organizers and other market makers, not individual customers), then we hypothesize that observing the marketplace and making changes to behavior on the part of the sellers can alter the marketplace. If this is true, the marketplace will have been controllable.
Members are Rational Actors
Rationality is not a universally-true assumption when it comes to people making a living, but if we assume that any mobile vendor taking a pro-active step to join and participate in a business league is closer to rationality than their free range peers, we can hope for the best. We can and do assume that members of this association will have a predictable profit motive, will make business decisions to sustain and build their business, and will generally behave as any entrepreneur does; with the addition of a collaborative business league, though, one additional rational behavior can be added, to take into account the success of other members as a part of this association.
One of the more lengthy steps in forming the operational component of this business league, namely the adding of members to the league to make it a league, has been crafting a Membership Agreement which will be a form of constraint to help guide rationality, as a form of ultimatum to encourage collaboration and professionalism without the need to always weigh the possibility of intrigue. It is nearly impossible to enforce this completely, but the effort has been made to consider members as rational.
Members may participate in Integrative Negotiation
The mobile vending marketplace is not necessarily a zero-sum game, so long as the number of vendors (the sellers) outnumbers the capacity of organizers and hosts in general (the buyers) to make use of their services. While an oligopsony does not help move the marketplace toward a positive-sum game configuration, the sellers themselves can help to move to positive sum outcomes if the number of independent buyers can grow and the sellers can take advantage of that market growth.
If the number of buyers increases, especially such that individual sellers can interact on a smaller scale in an increasing number of locations (ie several smaller events over a large area rather than fewer larger events over a small area), and if our rational sellers are able to participate in a cooperative interaction, then integrative negotiation of improved event participation in better-performing sub-groups (eg well-preforming “pairings”) can yield measurably improved outcomes for all involved IF each seller can make decisions about participation in a particular exchange when selecting with others from multiple exchanges (ie multiple opportunities presented by multiple buyers).
On the other hand, if oligopsony dictates the availability of exchange opportunities and if there are too many sellers, negotiations become distributive and there must, by definition, be a population of losers unable to participate in any exchange. As well, if the barrier to entry into some number of exchange opportunities presented by a limited number of buyers is too high, some number of sellers will likewise be kept away from those opportunities, with similar outcomes.
Diminishing Returns and Event Size
The Law of Diminishing Returns is fairly straightforward and well-accepted, but when it comes to the masses the notions that “more is better” and “bigger is better” and so “bigger and more is best!” are not a stretch. There is a belief that very large festivals, gigantic fairs, and tremendous markets with outrageous attendance by consumers is an idea which ever Mobile Vendor should aim for. This may be true to a point, and it is that point we will attempt to locate.
In order to “right-size” a particular event, so that the possible attendance by consumers and participation by mobile vendors is balanced to enable vendors to, in the worst case, break even on their cost (forgetting the opportunity costs), it becomes valuable and worthwhile to make estimates prior to events of reasonable and unreasonable size concerning vendor customer engagements, and then measure actual values and determine the source or sources of error. There are several hypotheses herein, but this notion seems to be at once among the most obvious but as well the most difficult to sell to an eager population of mobile vendors.
In order to prove this hypothesis practically, it will be essential to expand the number of events, over a larger and more diverse geographical area, with differing levels of vendor participation and consumer attendance. Coupling these variables with consistent KPI data collection will lead to a more easily-consumed view of the charts that describe this law here. Charts, plural, because it is possible that maxima will move based on a variety of considerations, and we shall tackle this hypothesis with several sheets of graph paper.
Mobile Vending Marketplace as an Oligopsony
In the absence of early efforts to organize and avoid formations of these, many mobile vending marketplaces will tend to naturally organize into a customer-organizer-vendor hierarchy, where individual consumers attain access to mobile vendors by way of organized events such as markets or fairs or festivals, which are typically organized by a for-profit entity of some kind, where the number of these entities grows as they find success making their profits with a positive consumer perception. These for-profit entities can and do capture access to venues and hosts to construct more and larger events, and engage customers by inviting mobile vendors to enable these events.
If these organizers obtain a controlling interest in the overall marketplace, and are able to charge “Vending Fees” (including up-front deposits and other fixed amounts, and perhaps scaled amounts such as a percentage share of gross sales, also known as a “rev share”), the marketplace can be identified as an oligopsony, solidified further as customer, host, and venue expectations settle on these arrangements, and mobile vendors accept these terms as prevailing, acceptable, and perhaps inescapable.
This is not an argument against vendor fees, which may be used to enable events by funding initial costs, licensing and permits, marketing, and so on, nor against revenue sharing, which may help to further defray event costs and help to share overall risk between vendors and organizers. An issue arises, however, when this mode is presumed to be, and is in fact accepted as, The One True Way, with other business arrangements made foreign and strange, even though they are not.
Game Theory: Association as Cooperative Game
Contributions to the overall marketplace game scenario can be derived from comparisons across smaller game scenarios (ie events and individual vendors conducting business where they may) to approach a derivation of Shapley Values for each member, in the marketplace as a whole and in individual exchange or event scenarios. The ability characterize contribution to smaller game scenarios helps to address the issue of “fairness,” which can lead to rifts and fractures and the formation of cliques within the vendor community.
With the inclusion of a membership agreement for those who join the business league, and partnership agreements between the organization and other parties, some aspects of cooperation may be externally enforced with binding agreements and clear and transparent terms. As this is an organization made up of entrepreneurial business owners, though, self-enforced cooperation is an important part of the way the game is to be played.
Cooperation across the entire marketplace is essential to elevate that marketplace, to enact business-positive change through advocacy and development of grassroots community support, and development of individual dominance strategies for the competitive aspects of the mobile vending game.
Game Theory: Association as Competitive Game
Mobile Vending market games are non-zero-sum, and so the calculation of one or more Nash Equilibria is assumed to be a non-trivial problem. While a shift away from oligopsony represents a substantial challenge across the marketplace, a valid, convincing representation of ideal decision strategies for members to adopt is likely the second most challenging aspect of what we undertake with this organization.
While at first glance one might think competition is for sales (and indeed, sales is a competitive undertaking generally speaking; one would be hard-pressed to find someone who does not understand that fundamental), competition is actually for best outcome within the single marketplace game scenario by selecting one smaller game scenario, or event, based on strategic dominance presumptions, accounting for similar presumptions by other members. The competition is for where to conduct business at any given time, selected from available options with as much correct information and projection as possible.
Strategic dominance presumptions at time zero are based on previous decisions and outcomes, without the benefit of collaboration and most likely without the benefit of rigorous and structured data collection (beyond business accounting). Moving forward in time, strategic dominance calculations will be subject to adjustment with new information provided by the collaboration of fellow members and their organization, with the help of analytics tools and methods executed with this goal in mind.
Location, Location, Location
A common expression in the world of commercial real estate, is that these are the three most important features of any property. Whether a space intended for retail customer interaction or not, the geographical physicality of a business is at least important, usually essentially, and sometimes critical consideration. In the case of Mobile Vending, two of those Locations are changing in most cases daily!
With Mobile Vendors and Mobile Consumers coming together in empty streets and parking lots, fields, and other venues to for impromptu markets, the need to codify and understand these important variables is obvious. The way lucrative markets form, with a proximal combination of vendors and consumers, becomes an important predictor of success, which plays a role in the other hypotheses already mentioned and while is address by the outcome of those other measurements and analyses.
Portable Variety + Social Activation
Finally, the mantra printed on our business cards, appearing on our website and other social media, and uttered at ever turn; the notion that introducing a familiar surprise to an otherwise empty plot of land might actually draw a crowd of interested and interesting individuals from near and far, where they otherwise might have been somewhere else. Protectionist legislation and plain old misconception, based most likely on the misperception that people (“my customers!”) going “over there” are being taken from me “over here.”
Our efforts to Advocate, Elevate, and Educate all benefit from making this easy to accept, that introducing something new to a familiar place actually encourages consumers to visit a place one more time; While legislation and regulation limiting Mobile Vending and its proximity and recurrence in the interest of protecting “brick and mortar” business from unreasonable competition might appear to make sense, it ignores the familiar surprise of Portable Variety and the resulting Social Activation which, we hope to prove, does the exact opposite for businesses stuck in the ground.
These are the musings of an engineer with a minor academic concentration in economics and a few years experience working with mobile vendors and observing mobile markets. This is the beginning of a discussion and that will extend in a few directions and for months and perhaps years, and corresponding explorations and corrections from which we hope to learn a great deal.
