First Mover
A first mover is a service or product that gains a competitive advantage by being the first to market with a product or service. A first mover is a service or product that gains a competitive advantage by being the first to market with a product or service. A first mover is a company that gains a competitive advantage by being the first to bring a new product or service to the market. If the market responds unfavorably, then later entrants could capitalize on the first mover's failure to produce a product that aligns with consumer interests; and the cost to create versus the cost to imitate is significantly disproportionate. By the time other retailers established an online bookstore presence, Amazon had achieved significant brand recognition and parlayed its first-mover advantage into marketing a range of additional, unrelated products.
What Is a First Mover?
A first mover is a service or product that gains a competitive advantage by being the first to market with a product or service. Being first typically enables a company to establish strong brand recognition and customer loyalty before competitors enter the arena. Other advantages include additional time to perfect its product or service and setting the market price for the new item.
First movers in an industry are almost always followed by competitors that attempt to capitalize on the first mover's success and gain market share. Most often, the first mover has established sufficient market share and a solid enough customer base that it maintains the majority of the market.
Examples of First Movers
Businesses with a first-mover advantage include innovators, Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY). Amazon created the first online bookstore, which was immensely successful. By the time other retailers established an online bookstore presence, Amazon had achieved significant brand recognition and parlayed its first-mover advantage into marketing a range of additional, unrelated products. According to Forbes's "The World's Most Innovative Companies" 2019 ranking, Amazon ranks second. It has annual revenues of $280 billion and, through the end of 2019, had a 20% annual sales growth rate.
eBay built the first meaningful online auction website in 1995 and continues to be a popular shopping site worldwide. It ranked 43rd on the Forbes list of innovative companies. The company generates $287 billion in annual revenues, with a 2.8% annual sales growth rate.
Advantages of First Movers
Being the first to develop and market a product comes with many prime advantages that strengthen a company's position in the marketplace. For example, a first-mover often gains exclusive agreements with suppliers, sets industry standards, and develops strong relationships with retailers. Other advantages include
Disadvantages of First Movers
Despite the many advantages associated with being a first mover, there are also disadvantages. For example, other businesses can copy and improve upon a first mover's products, thereby capturing the first mover's share of the market.
It costs approximately 60% to 75% less to replicate a product than it costs to create a new product.
Also, often in the race to be the first to market, a company may forsake key product features to expedite production. If the market responds unfavorably, then later entrants could capitalize on the first mover's failure to produce a product that aligns with consumer interests; and the cost to create versus the cost to imitate is significantly disproportionate.
Related terms:
Brand Recognition
Brand recognition is the extent to which the general public is able to identify a brand by its attributes. read more
Capitalize
To capitalize is to record a cost/expense on the balance sheet for the purposes of delaying full recognition of the expense. In general, capitalizing expenses is beneficial as companies acquiring new assets with long-term lifespans can amortize the costs. read more
Competitive Advantage
Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. read more
Disintermediation
Disintermediation is the removal of a middleman in the supply chain to allow producers to sell directly to their customers. read more
Early Adopter
An early adopter is a person or business that acquires a new product or technology before others. Find out the benefits of being an early adopter. read more
Economies of Scale
Economies of scale are cost advantages reaped by companies when production becomes efficient. read more
Market Leader Defintion
A company with the largest market share in an industry that can often use its dominance to affect the competitive landscape and direction the market takes. read more
Segment
A segment is a business unit that generates its own revenue and creates its own products or services. Read how segments help companies make a profit. read more
Social Media Marketing (SMM)
Social media marketing (SMM) is the use of social media websites and social networks to market a company’s products and services. read more
Switching Costs
Switching costs are the costs that a consumer incurs as a result of changing brands, suppliers, or products. read more