Yesterday I had an interesting chat with a startup which is selling its product at a very nominal rate. Via their website.
Like any other company, we (i.e. startups) tend to believe that a lower pricing can break all the barriers and will bring in customers.
Maybe. Maybe not.
The ‘Channel’ Value of Money
Money on the web is much more costlier than the money in the offline world.
Here is why.
If you are a ‘normal’ user, you are comfortable transacting on branded websites, i.e. irctc, makemytrip, cleartrip, rediff, indiatimes, redbus etc, i.e. websites ads you have probably seen on TV or were referred by friends/colleagues.
For an unknown company (especially early stage startup), the customer literally has no trust (we are talking about a typical user who doesn’t understand what a verisign certificate means) on your product and swiping credit card detail is probably the last thing customers will do.
But..I am selling at such a cheap price (on the web)
In real world, it’s just about taking out the cash and betting the same minimal amount on the product. You probably have the same question ‘Will this product work or not? I haven’t even heard about this company’, but the risk is so minimal that you do not care so much.
Come online and you have so many questions –
How will the checkout process work? How will the product be delivered? What about my credit card security? Is the product original or duplicate? When/How will I get the delivery?
Trust. Faith is missing when your brand is not known and add to this, a lot of cheap stuff done by e-tailing companies in India have added to mistrust that an average Internet user has on online transactions [read this analysis: ecommerce in India – The Misunderstood Indian Internet User].
Expecting customers to carry the same behaviour in online world as well as offline world is too much to ask for. In the online world, customer is way too wary of money and is concerned about different aspects of transactions, as compared to offline world.
And if you are a startup, it’s a sin to equate yourself with the offline world, especially when enabling transactions are concerned.
Hence, the channel value, as I said earlier is quite higher as there is a general distrust with ecommerce and early stage companies need to work more on bringing a sense of confidence in their product, before they reach customer’s wallet.
What’s your opinion?