Wednesday, May 14, 2008
Beware of Seller
Aldi's has an interesting business model. Rather than customer service, rather than trying to meet all of their customer's needs, they focus on getting the best price for maybe 50% of the customer's needs. If you've been to an Aldi's, you know that they don't take checks, they don't bag your groceries, they don't play music, and they don't have shelves. But they have good prices on staples, and that's usually worth a trip.
Well, a "trip" on the internet is a couple of clicks, so it's much more worthwhile to comparison shop. On the internet, you have more and more retailers who specialize in offering the best price for one thing. Some people have taken the Aldi's model to a ridiculous extreme. Woot comes to mind; Woot sells one product per day at a very low price, and when they sell out, it's gone. You can't back order, you really can't get refunds or exchanges. There's no guarantee that they have enough of any one item to satisfy demand, and they have subsequently developed a cult of followers who go to their website at 11:59 and jam the F5 key until midnight, just to have a chance at buying the new product or catching the new promotion.
It seems hard to fathom that a successful company could embrace such contempt for a typical customer's demands, but there it is. And they can get away with this because the anarchy of the net has bred a generation of online shoppers who have "buyer-beware" pre-programmed into their psyches (or perhaps they're all just eBay burn-victims, but that's a rant for another post). There is an understood risk discount. I know that what I'm buying may not work and I may not be able to easily get it returned. I'm taking that into account and am therefore willing to pay less for it than I would at a brick-and-mortar store. I buy a $15 mp3 player online, I understand that there is the very real possibility that it will disappoint. That's why I was only prepared to pay $15 for it, and if I need to return it, I'm going to lose money on shipping.
And it's the shift away from a customer-oriented shopping experience that can sometimes drive prices down. The overhead of having a sales floor with shelves that need stocking and the money spent on theft-prevention, not to mention return and coupon scammers--these are all very real costs of doing business. Doing away with them means that you can reduce prices significantly. Is it significant enough to offset the costs of shipping and risk?
I guess that all depends on what you're selling.
We sell GPS trackers. We cut out middle-men, and that is what makes us competitive. Also, the risk discount is not insubstantial for products that cost $85 or $200, so we offer refunds and customer service. Shipping is not a major, major part of the end-customer's cost. Also, you can't exactly "steal" GPS service off of a store shelf. It makes sense for us to focus more on the customer.
But it's a different story with, for example, mp3 players--which are high-theft. So you can frequently find good deals on the web--far better than what you would ever find in a store. Just be careful what you buy.
Well, a "trip" on the internet is a couple of clicks, so it's much more worthwhile to comparison shop. On the internet, you have more and more retailers who specialize in offering the best price for one thing. Some people have taken the Aldi's model to a ridiculous extreme. Woot comes to mind; Woot sells one product per day at a very low price, and when they sell out, it's gone. You can't back order, you really can't get refunds or exchanges. There's no guarantee that they have enough of any one item to satisfy demand, and they have subsequently developed a cult of followers who go to their website at 11:59 and jam the F5 key until midnight, just to have a chance at buying the new product or catching the new promotion.
It seems hard to fathom that a successful company could embrace such contempt for a typical customer's demands, but there it is. And they can get away with this because the anarchy of the net has bred a generation of online shoppers who have "buyer-beware" pre-programmed into their psyches (or perhaps they're all just eBay burn-victims, but that's a rant for another post). There is an understood risk discount. I know that what I'm buying may not work and I may not be able to easily get it returned. I'm taking that into account and am therefore willing to pay less for it than I would at a brick-and-mortar store. I buy a $15 mp3 player online, I understand that there is the very real possibility that it will disappoint. That's why I was only prepared to pay $15 for it, and if I need to return it, I'm going to lose money on shipping.
And it's the shift away from a customer-oriented shopping experience that can sometimes drive prices down. The overhead of having a sales floor with shelves that need stocking and the money spent on theft-prevention, not to mention return and coupon scammers--these are all very real costs of doing business. Doing away with them means that you can reduce prices significantly. Is it significant enough to offset the costs of shipping and risk?
I guess that all depends on what you're selling.
We sell GPS trackers. We cut out middle-men, and that is what makes us competitive. Also, the risk discount is not insubstantial for products that cost $85 or $200, so we offer refunds and customer service. Shipping is not a major, major part of the end-customer's cost. Also, you can't exactly "steal" GPS service off of a store shelf. It makes sense for us to focus more on the customer.
But it's a different story with, for example, mp3 players--which are high-theft. So you can frequently find good deals on the web--far better than what you would ever find in a store. Just be careful what you buy.
Labels: technology
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