What is a Pure Play?

Malcolm Tatum

Pure play is a term used to describe a company that chooses to focus its investment of resources into a single line of business. This type of phenomenon is often seen in retailing, specifically online retailing. Rather than providing a wide range of products to consumers, the pure play business offers one type of product. While this model can be very successful, it also leaves the company more open to risk of failure in the event that the limited product line loses favor with consumers.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

In contrast to a pure play, conglomerates which offer a diverse range of products can also be very successful, while remaining less vulnerable to changes in consumer taste. This is because there is a greater possibility that as one particular product line experiences a downturn, another product line is gaining attention and generating additional sales. For example, an online retailer offering an eclectic mixture of packaged foods, over the counter medications, and a range of sports clothing would have a better chance of dealing with shifts in demand than a retailer that sold a single product, such as hardback books.

While there are risks associated with a pure play approach, there are also a number of potential benefits. Since the company is focused on a particular type of product line, the opportunity to capture a greater share of that market is present. By becoming the established leader within that marketplace, the business can effectively influence consumer expectations and determine the standard by which all other competitors are judged. At its best, this set of circumstances can be maintained for a number of years, allowing the company to build a reputation for quality that makes marketing that limited line of products much easier, simply because of the easy recognition of the brand.

In some cases, a pure play approach may be especially effective when it comes to the release of new types of products. For example, if an entrepreneur develops some new technology that is highly likely to attract consumers, he or she may establish a copyright on that technology and establish a company to be the sole manufacturer and distributor of that product. Assuming the product does attract a loyal following, the copyright helps to limit competition and allows the entrepreneur to make a great deal of money. This set of circumstances will continue until someone develops a different process that produces a product that offers consumers the same results. Even then, the goodwill and market recognition that the pure play has built up in the interim may be enough to keep the competition at bay, losing very little of its market share and remaining the industry leader for many more years.

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