Frictions are anything that slows down or stops two or more parties from having a mutually positive experience. Common commerce frictions include:
Price
Availability
Product knowledge
Discovery
Payment and terms
Commerce frictions / Price:
For any product, there is the highest price the shopper is willing to pay and the lowest price the retailer is willing to sell it for. As long as the listed price of the product is between these two numbers, both parties are happy. Buyers want the product for the lowest price as possible. When a retailer is willing to sell a product at a lower price than what is listed, the buyer is losing the difference between those amounts because they do not have complete information. When the buyer is willing to pay more than what is being asked, retailers are losing out on additional profit.
From the buyer’s perspective, it is best to find the lowest price a retailer is willing to sell for. Any time the buyer pays more than necessary or the retailer sells for less than they could have received, they are experiencing information friction that is stopping them from maximizing their benefit. In this case, one person’s loss is another person’s gain, but this is not always the case.
Another friction that can take place is when there is no transaction because the buyer did not know how low the seller would go or the seller did not know how high the buyer would go. A buyer that would have bought an item for $10 but only believed the seller would go as low as $11 is sacrificing a potentially positive transaction because of missing pricing information. This missed transaction can be considered a commerce friction because it stopped two parties from having a favorable exchange.
Commerce frictions / Availability:
A customer may want something immediately but must wait two hours, two days or two weeks to receive it. The product exists but is not close to the customer.
This friction can be resolved in two ways.
A better understanding of who has an item for sale. This may include the store down the street or the person living next door. It could even mean someone that does not have the exact item but would be willing to sell you a similar item that would work but is not 100 percent what you are looking for.
A better understanding of who wants an item. If the seller knows who will need an item, they will transport it to a warehouse closer to the buyer or better advertise it to the right person. If red rain jackets are popular in Seattle but not in Atlanta this season, retailers can be sure to move the inventory to the northeast distribution centers.
Commerce frictions / Product knowledge
If a buyer is not confident that a product is one they will like, fit well, last or complete a task, they may not purchase it. Even if it will do these things, the lack of knowledge could prevent them from purchasing the item. Buyers may never find all relevant knowledge but retailers can provide as much information as possible.
Customer reviews, online videos, and new technology such as augmented reality can help shoppers make better decisions even when they are unable to view the item in person. Shoppers are unable to touch a coffee table when shopping for one online but they can read customer reviews and use augmented reality to see what it will look like in their house. Neither of these are available when simply visiting the physical store to look at the table in person.
Commerce frictions / Discovery:
There are many products that exist that—if known about—a buyer would gladly purchase. A pair of pants that perfectly fits an individual’s size, style, and price range may exist but if the shopper does not know where to find them, the cost in time or money (frictions) to discover the item is a real roadblock. New businesses and features are forming to combat this. Customers are no longer limited to purchasing items that are close to them in proximity. Alibaba, Wish, eBay and others are eliminating many of the discovery frictions related to eCommerce.
Commerce frictions / Payment Options and Terms:
Many frictions are related to how, when, and how safe customers feel when paying. Providing a variety of options including credit cards, PayPal and Amazon payments would be a great start. New options such as Apple Pay and Bitcoin are also becoming popular for several reasons.
Offer customers the option to pay the way they want.
The ability to offer credit to the right people based on new forms of data is an interesting and evolving business. Signals that help banks or other lending institutions are continually increasing. Tala Mobile services give people micro-loans in Kenya, Tanzania, and the Philippines based on how they use their phones. These services examine hundreds of clues from the user’s phone such as how often and when they use it, what apps they use as well as other signals to provide instant loans to people that would not have qualified in the past using traditional methods.
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