Commerce frictions

areas in commerce that frictions can be removed.
– all products have a high price a person is willing to pay and a low price a person is willing to sell for. As long as the price of the product is in between these two prices a win win situation happens. As a buyer, we want the product for as low price as possible. Any time a seller is willing to sell us a product at a lower price (we pay 10 but they would have sold for 9) we are loosing out to friction (loose 1 dollar) or not having full information. For a seller of a product any time the buyer is willing to pay more we are loosing out on profit. (Buyer would have paid 11 but we sold it for 10)
from the buyer perspective it is best to find the lowest price a seller is willing to sell for. any time we pay more we have information frictions that can be eliminated. The same can be said from the seller perspective
– i may want something now but have to wait 2 days or 2 hours or 2 weeks to get it. Product exists but is not close to me. This is friction for some situations. Other times i am willing to wait much longer but may end up buying the more available item at a higher price.
product knowledge
– If i am not sure a product is one i will like, it will fit, it will last or it will complete the task i want we have friction. We may never get perfect knowledge but we can get closer.
– many product exist in the world, that, if i know about, I would purchase them. Somewhere a pair of pants that fit me perfectly exist but i do not know what pair it is and the cost of time or money (friction) for me to find them is a road block.
payment options and terms
– i may want to pay tomorrow or pay in
These 4 road blocks can be eliminated or at least slowley chipped away at. And they have been. social media and “you may also like” or “customers like you” are a great example of discovery. Product knowledge has been helped with reviews and videos of the products. Availability of more products is clearly impacted by the unlimited products available online and the increase in quick delivery methods. Price becomes a race to the bottom with sites such as amazon, jet and eBay.
But each of these areas has a change to get get better or reimagined as we continue to invite in the world of commerce. By optimizing traditional types of stores or inventing new ways of connecting sellers and buyers we can eliminate more and more of the frictions in the retail world.
Google shopping is one example of a product that has done a great job of helping us find the lowest price. Past options of purchasing something may have been limited by the one local store selling what i need or want. They could dictate the price with very little competition. Now i can search dozens of people selling the same product online and choose the low price if that is what i am after. From a buyers perspective competition may help lower the price and may get some of the friction of paying a tithe price than necessary for the product.
But that does not mean i am reaching every person that would be willing to sell me the product. I only connect with the sellers on google shopping. And it may not be the best price the they are willing to give me. They may be willing to go cheaper as the simple fact that google is changing some fee for the transactions. That fee is anouther friction. Google Shopping eliminates some frictions but still has some in place and this friction is what gives google the incentive (profits) to create and maintain the service. The fact that we do not know everyone selling the product is a friction that google helps reduce but it still has the cost (a new friction) to its service.
We could also imaging “paying” in other ways than with just money. Some sellers may be willing to sell at a loss if they feel the gain something else from the transaction. customer loyalty, information, sharing of your data, sharing with friends and so on. Retailers could sell at break even or a loss on products and still come out ahead as well as getting the customer the best possible price.
– many items exist in the world that I would buy if i know about them. Any time someone else has a product
a few frictions
– not having full price transparency
– transferring money
– knowing if the product is one i will like
– finding everyone that is willing to buy or sell the product
– paying for it when i want to (getting credit)
– finding the person that has it and can get it to me the easiest
frictions can be eliminated it two ways
– finding current situations where we are bing inefficient and it is a matter of knowledge
– forming new systems that did not exist in order to be more efficient
– if i have a used bike i want to get ride of for 150 dollars and you live next door and want a similar bike and am willing to pay 150 dollars then we do not need to creat anything, we just need info to do the transaction.
– new systems would be me knowing that people in the town i am in need bikes so i open a bike shop and bring in bikes for these people to try and buy.
both are ways of helping to fix frictions.
examples of companies that have fixed frictions in retail
– amazon
– craigslist
– ebay
– google shopping
amazon has done a number of things.
– created a marketplace the encourages low prices and great customer service
– central place for reviews
– easy discovery of similar items
– fast delivery
– low barrier of entry
– minimum friction on price as it is free
google shopping
– find a lot of people selling a specific product with clear price and delivery and availbilty
– helps curate product informations
– low barrier of entry
– helps find optimal price
uber – connects people with free time and a car with those that need a ride – removes frictions – creates a market places – allows people to search by keywords or filters as well as many more people. – helps discovery
some companies filter or evaluate for you. – some stores only sell quality products. you can go to a local outdoor store and pay more but get great personalized quality. i may accept junk at a 99 cent store but not at nordstrums
how can we find the person willing to sell me this object for the lowest price?
how can i discover what i want with the least amount of work.
how can i discover what other people want (gift)
how can i be more certain i am getting the product i want (zaps return policy)
how can i pay for it the way i want. credit card, pay pal, check, now, in 15 days in 30 years, using something besides money?
can a service replace my product? uber replaces second car for many people
how can i get this to me the quickest or easiest or how do i connect with them
how can i be more trusting of the transaction?
how can we eliminate errors in the transaction?
not all of these are business ideas to fix but these are real frictions
if i go to the store why do i have to walk the entire thing?
why can i not return my item easier?
what if my avocado is bad?
how come i do not know where all the ready to eat avadaos are in 15 miles of me so that i do not have to go to 3 stores before making sushi
why is the shirt not pre shrunk?
why can i not see all products in the category in one place

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