How do most business owners order stock?
Well, honestly, they probably just eyeball it. A lot of business owners have been “in the game” so long they can probably just guess at how much to buy.
I ran a company that supplied restaurants and hotels for a good while and can tell you that precisely 0% of our customers were doing anything other than calling us from inside their walk-in cold room with a list scratched on the back of a chopping board directly from memory.
Last week Pakk reached a major milestone. Of course there have been many others: our alpha launch, our first live customer site, their first order etc. This one, however, was really big, both on a personal and professional level. This is the story of how that milestone was reached and what it represents — right from the very beginning. It’s a reflection on the past and future, on business and entrepreneurship, on technology, software and web development, on commerce and e-commerce. Mostly though, it’s about life: my life, our lives and life in general.
If you’re just getting into e-commerce, there’s a high chance your top priority when shopping for a platform is “having a great looking store”. Are you finding yourself browsing through template galleries and customer portfolios? Obsessing over image carousels? Considering contracting a designer to help put your store together?
Sure, I get it, it’s natural for a business owner to want a “great looking store”. Wouldn’t we all? Why would we set out to build an online shop and not want to make it look as good as possible? I’m here to tell you though, that having a great looking store, even a good looking store, is not as important as you think. And I can prove it with one word: Amazon.
Nothing wrong with the aesthetics of Amazon — it looks, well, OK, but it’s not going to win any design awards — I think we can agree on that. So why is the way your store looks not all that important? Well, there are actually quite a few reasons.
What looks great today, might not look great tomorrow
The web changes. Fast. If you look back at web trends over the past 15 years, it’s mind bending how quickly styles have come and gone. If you’d have created an ‘on trend’ site in 2005, you’d probably have had to completely overhaul it 4–5 times by now to keep current. That’s expensive and tiresome.
Flashy things often bog a site down
It’s no coincidence that half the web is bust and the other half slower than a broken down bus. Often, in a misguided attempt to make their site “flashier”, designers and store owners load them up with widgets/plugins/carousels/themes or any other manner of digital cruft. Mostly it just gets in the way of the shopping experience. Then it ages badly and you’re back to point 1.
E-commerce visuals have become standardised
Ever noticed how easy it is to tell apart a small-business online store from one of the big players? The small store is the one with the black background, wood-panel-effect header, handwriting font and video carousel. The big ticket store is the one that looks, well, like every other big ticket store.
Will your site look good on a smartwatch, viewed underwater at a distance of 20 meters?
OK, that’s a complete exaggeration, but you get where I’m going with this. It’s hard to make a site look good across the modern gamut of devices. Not “design hard”, but “engineering hard”. You might be happy with the store you’ve created when viewed on a desktop with a lovely big monitor — but you also need to be sure that it looks that great on any of the 1000 handheld devices your potential customers might be using.
So if I’m saying you shouldn’t obsess about creating a great looking site, then what should you obsess about? I think it’s quite simple. Design-wise, this is what I would obsess about:
- Clean, minimal, timeless style — doesn’t need to be updated yearly
- White background across the whole site — few exceptions
- Simple, high quality product shots — white background, high res
- Subtly branded — think one or two colours, logo and font
- Readable font size — if in doubt, go bigger
- No moving or rotating elements — e.g. carousels, sliders
- Prominent main product navigation menu — 5–7 main categories
- Everything where you’d expect it to be — don’t make the customer relearn e-commerce layout just for your site.
I won’t go into all the different elements of functionality — that’s for another day. I think it’s enough to stress that aesthetics should take a back seat to efficient functionality. Go simple, fast and clean over flashy, gaudy and “custom”.
Unless you’re selling diamond rings or custom-designed travel experiences, you don’t need to tell a story — you just need to present your product catalogue in the most efficient way possible.
A year ago, a little man with round glasses rang our doorbell and asked me if would be interested in buying some cherries. I was in the attic and busy with work so had to run down to front door, phone in hand. “Bloody annoying salesman,” I thought, and sent him on his way. Despite one’s natural tendency to treat any travelling salesman these days as a con artist (although a fruit-based scam would be almost worth going along with), I was just too busy to give him any time.
Fast forward exactly one year and the same little chap rings my doorbell again. Again I sprint down to answer the door, pen behind ear, dog barking in excitement. This time he holds out a full box of bright red, fully ripe cherries and says “Look what lovely cherries I have – would you like some?”. I looked down at the cherries and my mouth watered slightly in anticipation. I was sold. “Well how much are they?” I asked. “It’s a 2 kilo box for 5 Euros”. I’m no expert on fruit prices, and probably would have bought them at double the price, but 5 Euro for a full box of ripe cherries seemed like a bargain to me, so I paid him and took ownership of my fruit.
As is custom in Spain, we chatted for a while, eating ripe cherries in the sunshine. “They’re from my land in El Bierzo,” he told me. I had assumed that they were from the south, or imported, like most of the fruit in Spain. “Picked ‘em myself this morning with my daughter,” he said, showing me, at close range, his filthy fingernails as proof. Of course, I was delighted: I’d bought 2 kilos of locally-grown, same-day-picked cherries, direct from the farmer and his daughter (who was 6 or 7 years old in my mind – I pictured him holding her up to pick the cherries off the top of the tree (Do cherries even grown on trees? Spot the London boy). Alas, when she drove round the corner in the van, she turned out to be middle-aged and definitely unhoistable without mechanical aid).
I called over to my neighbour who was doing some work in the front garden. “Hector, look at these fantastic cherries,” I shouted, “they’re local and fresh picked this morning”. He strolled over, tried one and bought a box too.
So just a lesson for vendors really. Ask someone to buy your cherries, and they probably won’t. Show someone your lovely, fresh, bright-red cherries in their best light and you might just sell two boxes.
Consumer surplus is one of those useful little concepts you learn about in elementary economics that, once understood, sheds light on all manner of commercial activities and pricing decisions.
Without getting too technical, it’s the area under the demand curve and above the market price, as illustrated in red in the above diagram. The traditional notion in economics is that demand starts low when price is high (red line, start at the top left) and increases as price comes down (follow the red line as it falls to the right). What that suggests is that even at the highest price, at least one person is willing to buy it. But as we know, goods are sold at the market (or equilibrium) price where demand equals supply (also shown on the diagram), which means that the one person who was willing to pay top dollar, and all the people who were willing to pay at least something above market price, have got themselves a bargain, right? That quantity of money (all the people who were willing to pay more multiplied by the amount extra they were willing to pay) is the consumer surplus.
To an individual company, exploiting the consumer surplus means trying to charge each consumer just, and no less than, what they are willing to pay, which is notoriously difficult. Astute traders have known this for centuries and exploit the consumer surplus essentially by letting you haggle. Starting with a high price, a good commercial bargainer will quickly ascertain how much you are able or willing to pay for an item and try to sell it for you for just that. Sell high to the people who can afford it, and sell low to the people who can’t. Student discounts do exactly the same. Companies know that students have less money to spend, so they sell them exactly the same products at a cheaper price. This is not some seedy tactic – it’s going on in most of the shops in your local shopping centre. Fair? Probably not. Commercially effective? Definitely.
Once you grasp this concept, you’ll begin to see it all over the place. Another of the tactics that companies use is to repackage the same (or very similar) product in some way so as to be able to sell it at different price points to consumers. At your local supermarket, there are probably 3 or 4 different types of baked beans, or tinned tomatoes, ranging from the shop’s own brand, to some sort of gourmet brand in black packaging with gold writing. Do you really think there is much difference in these products apart from the salt content and/or 2 cents worth of oregano or some other ‘gourmet’ ingredient. No. They do this so that people who can afford to pay 3 times the entry level price will. And they’ll feel good about it too. I think Apple do this with iPads and iPhones. Does it really cost them anything significant to go from 16 GB to 64 GB? Probably very little. But the products are priced hundreds of Dollars apart. Why? So there are options for consumers who can only afford entry level units, and there are options for consumers with money to burn. Classic consumer surplus.
Anyway, why the hell am I rambling on about this on a Friday morning when I should be doing something more productive? Well, Jessi ordered some stuff online yesterday, which arrived today. We had a little theory about this order related to the concept of consumer surplus which proved, I think, to be correct. Let me explain.
Stradivarious (at least in this context) is a clothing brand with a chain of stores and an online shop. Jessi ordered some clothes yesterday (Thursday). Since she spent more than 60 Euro, she qualified for free delivery. When she got to the checkout, there were two delivery options: the ‘standard’ (free) one, which was quoted as taking 2-3 days, and the ‘express’ option for 6.99, which was next day. Since we operate an e-commerce business ourselves, we were pretty confident in thinking that mainstream national couriers, like MRW used by Stradivarious, do not offer anything other than an overnight service. It wouldn’t make sense. Since their infrastructure and procedures are built around getting a parcel from A to B in less than 24 hours, they’d probably have to work even harder to make it take longer. No, I suspected that what Stradivarious were doing here was exploiting the consumer surplus. Of course there will be customers who are very keen to have their stuff the next day, and will be willing to pay an extra 6.99 for the privilege. But then there will also be customers who balk at paying delivery charges. Great pricing tactic, no?
We tested the theory – Jessi chose the free delivery option. Sure enough, at 9am this morning the courier turned up with the parcel, clearly labelled as having been sent on an overnight service.
So let this be a lesson. To e-consumers – watch out for this tactic. I’m not sure how widespread this particular trick is, so keep an eye out for premium delivery service charges that don’t seem to add up. And to online sellers – depending on your degree of morality, perhaps this would be a good pricing tactic for you to milk a little more out of your customers. We won’t be doing it though.