A $1 billion idea...that I know I'm not ready for
jessepollak.me
jessepollak.me
Ok now look at it from the vendor side. I'm running my store, I need to make $2500 - $25,000 a day to make payroll. I carry a bunch of products, I don't make them, I just resell them. This kid is offering me a free inventory management service, that's really cool since inventory turns is one of the ways I manage my business, but they offer it to everyone. Now stocking X doesn't make a lot of sense if everyone stocks it, or I use the App to look for things stores around me don't stock and I add some of those, except they do the same thing. So now we're carrying the same stuff and we're in a race to the bottom in terms of margin. If I put my price on the item then the fact that there is a wall mart 2 miles left of here and sells it for 1/2 what I do will be painfully apparent. I'll get very little 'exploratory' business because people won't even come in to check on something if they know I don't have that one thing they are looking for even if I do have things that they ARE looking for but forgot they needed. Pass.
The 'big brand' stores almost all have a 'find it at a store near you' and there is probably a week of Node.js and UX work to create an App that goes out and wiggles all of those search boxes and simulates what you want. It can't tell you that Bobs Sporting Goods has an umbrella but if you're in your car and it can get you within a couple of miles you're probably ok with it.
So to pursue something like this you have to make it at least marginally useful for the people who sell stuff. And to understand them you have to 'walk a mile' in their shoes. That is the hard part, getting honest feedback about what they are going through.
That said, if you do spend the time to find their problems there are easily a dozen $100M ideas lurking in there to be solved.
Apparently, all the restaurants hate opentable, but they feel compelled to use it, because their competitors do.
1) It costs them money which eats into their already thin profit margin.
2) It makes it harder to build a relationship with the customers since the customer has to opt-in to giving their e-mail address to the restaurant which they're less likely to do compared to being asked for an e-mail address if you're making a booking directly with the restaurant. Having e-mail addresses for customers is clearly valuable for a restaurant for the purposes of marketing and using things like special offers to increase demand during slower periods of the week/month/year etc.
3) If/When opentable breaks, they've got no access to their reservations - a problem you don't have with a traditional paper reservation book. You probably do have chaos though, if you're a busy restaurant!
In the UK there isn't so much the mid range large chain restaurants outside of a couple of chains which largely cater to the office lunch-time crowd (such as Itsu or Nandos type places), the possible exceptions being Pizza Express, Cafe Rouge, Strada and Carluccios which are well positioned in both middle class residential areas and office areas for both the sit-down lunch crowd and the evening casual dinner crowd.
I would say that the mainstay of midrange dinning is almost certainly the upmarket pub or gastropub which are often independent or semi-independently managed (they might be affiliated with a larger brewery chain, but the chain doesn't dictate things like the food they serve), and they're the sort of places which would most like to keep in touch with their customers. The bulk of their customer base is almost certainly pretty local, and has already expressed a willingness to spend money their, and being local they're also easier to entice back in with special offers.
A fairly good example would be my local which was launching a new menu back in November of last year. To trial their menu they sent an offer out on their mailing list offering a free dinner (starter and main, not including drinks) from their new menu to anyone on the list who made a reservation during that week. While it clearly cost a not insignificant amount of money to run a promotion like that (probably equivalent to $50 per head were they charging menu prices) it also gained them practice in preparing their new menu, high quality feedback on the new menu, and a certain degree of loyalty towards the establishment as a whole. The later in particular is no mean feat for the area in which I live which is both affluent and quite foodie.
And that's exactly why you have to opt-in. Imagine the size of your inbox (or spam folder) if every restaurant you've ever been to had your e-mail address.
Generally, I hear a few reasons why restaurants feel they can't leave OpenTable:
Myth #1: they won't be discovered through the web anymore. People actually discover restaurants via word of mouth or local search (Google usually). Great food, SEO, marketing, PR, guest care, etc. matter a lot more than being in one particular portal. See studies about restaurant discovery.
Myth #2: their guest information is locked into OpenTable. It isn't. You can export your guest database with phone numbers (if collected) and email (if they opt-in). While it may sound like they are missing something if they can't export email addresses (unless they opt-in), it isn't. They can't email those guests through OpenTable either.
Myth #3: guests care a lot about points. This is a smaller, sub-population of the restaurant going public. Most people don't care, they just want the ease of booking online when they want, which is generally 2/3rds of the time outside of the restaurant's hours (see poll by OpenTable).
Generally, those people that use points a lot (or discounts) are not great customers either (see any study about Groupon discounting).
Why would you want to give your guest a discount to eat at another restaurant anyways?
Anyways, if you are interested in more restaurant reservation analysis feel free to check out my Quora account:
http://www.quora.com/Chris-Butler-7/answers
Also, check out Complete Seating (http://completeseating.com) an OpenTable alternative I work on!
The corner grocery in an urban neighborhood doesn't compete on price with the supermarket 10 blocks away. It competes on convenience.
I'm not saying the idea works, but there is more to it than just mapping all existing old school retail establishments into a search engine.
Pro: You get a free inventory system
Pro: You show up on local search results
Will some (maybe most) people go to Walmart instead? Sure, but those are people already using the app, which means that if you're not listed at all, you have absolutely zero chance of winning the business. Unless I'm missing something, this seems like a no-brainer for vendors.
Another way to look at this is: what if the business could use the inventory system for free, but opt out of showing up in the local listings. Are you saying that you think there's a vendor on this planet that would actually choose not to show up in the search results?
It's an interesting core idea, but it needs to account for the path dependence of existing retailers and how ill-equipped they are to adopt something totally new.
However, my comment was directed at the parent who claimed that a business wouldn't want to use it even if the product did exist.
Wastage you get through stock takes, which could be done with a camera (same tablet or a phone), cloud sync so no cradle needed
It could integrate with the latest cloud based accounting systems which their existing pos wouldn't be able to handle (referral $$$), and large companies who have a lot invested in their pos system could pay an employee to integrate it though the apis if they want the search traffic
The biggest problem would be integrating it with the cash tray that goes ding, which I think is desirable I think to stop costumers reaching over the counter and grabbing money while you aren't looking. I guess deploy it as a phone peripheral.
I just wonder if the idea itself has merit. I suppose neighborhoods would specialize more and there'd be less stores with identical stock.
The other opportunity would be advertising to those retailers by suppliers and taking a cut of sales for orders to suppliers, I think that could be where the real money is
The company providing the service could also get access to shopping records of individuals at various brick and mortars--something that probably doesn't exist, which could lead to targeted advertising on receipts (which the shop owners could take a cut of, for instance). There's lots of ways that all parties involved could benefit without killing the small businesses.
But can't I stop to think of pg's frightening ambitious start-up ideas here? The odds are certainly against you, but the rewards will be equal if manage to pull that one of.
POS systems are complex and need to have very low latency. On top of that, there are many different types of registers that can be used. On top of that, since you are dealing with the everyday transactions of a business, in order to ship your product you need to be damn sure it works as expected. This is going to lead to very long and expensive development times.
The investment for the stores that would likely be excited to be apart of this is too high for those stores. That software isn't free when they need to get new hardware to support all of the systems that need to integrated so that they can be apart of the search.
Yes, big stores like walmart and competitors compete on $0.01 (and openly advertise that they're $0.01 cheaper) but any store that isn't providing grocery type items doesn't, although maybe England is unique and in America it's different? I know that this idea would not work in England.
edit: when I say terrible idea I mean it's deeply flawed and has serious drawbacks for a party involved. The idea would be great if nobody were to lose out; but then if that were the case this would have already happened.
Again, maybe England is different, but we have this sort of thing here for large chains, there is a site called mysupermarket.co.uk that will take your shopping list and tell you which supermarket is cheapest.
Why would a small store (the sort that aren't already engaged in this sort of thing) willingly signup to be pitched against their competitors in a race to the bottom? It's nonsensical. My mother shops at specific stores for specific goods because over the years of custom she has had a good experience with their pricing and service, she views the good experience she's had as justification for not shopping around, "they've always been good to me so spending time looking around at new shops to maybe save 2% isn't worth it" but if she could just type "umbrella" into a website and instantly be told which shop is the best for that item she'd no longer be loyal to that shop.
Retail isn't the hackernews world of SaaS, people don't choose to spend an extra 20% every time because "it's a good brand", "the founders are good people", they choose primarily based on price and service is a small part of it, a part most people will sacrifice to save 10%.
Sure, some customers will go to Walmart instead of a locally owned business, but how does the local business benefit from not being in the search at all?
As I explained in other comments, people currently shop based on expected value, they can't know for sure that shop x has the best pricing but they have been there before and got a good deal so they assume it will again provide them with a good deal.
If the only concern when purchasing is "which has the lowest cost?" this app would mean that EVERY user of the app can have that question answered, currently in the real world the question is "does the potential saving justify the time investment of visiting every shop and finding out their pricing"?
If there are 4 stores in the local area and you've previously bought a DVD player from store #2 for $100 and you want to buy another and you think $100 is around the best price you'll find you go to that store and purchase it; sure you didn't get the best price but was the POTENTIAL SAVING (which is entirely theoretical) worth the time investment to search out by visiting every store?
This app would create a race to the bottom, it would be worse than online for retailers because shops are quite close together, the only "cost" to the customer is the effort required to get to the cheapest store, in any mall or shopping district that's probably a very short walk. With online stores you can compete on shipping, next day vs. 7 days even though the item costs $5 more? I'll take next day, but $5 more to save me walking 20 yards? Not going to happen.
Local search would be great if you're the lowest cost retailer, otherwise it'd be a big problem.
You are assuming a store like walmart doesn't differentiate itself from other stores by having an easier return policy, or that target doesn't differentiate itself with a nicer store.
If you could get 1 store to adopt this system, others may follow since they would be losing out to store 1. Would it take a while? Yes, Would it be really, really tough, yes. Has it happened before in other industries? Absolutely: Airlines, Hotels, Its happening with cars, carwoo. etc. etc. etc.
So, while you may think it is a terrible idea, and it very well may be a terrible idea, it could also be a very achievable idea.
To me, it is more like the steam engine concept. It may not happen exactly as the OP describes it, but my guess is it will happen in time no matter what.
[added] for those that say no store will ever agree, that is a really bold assumption. You may be right, but if you just worked on getting 1 store in 1 industry online, then got a competitor, then got another one it could work.
I'm talking about the "normal" stores, the ones that might have 1 or 2 locations in one city, or have 2 or 3 locations across the country, the stores that rely on brand loyalty and don't compete with their competitors on $0.01 difference.
No small business would ever choose to compete on $0.01 price differences; the idea the OP is proposing would cause exactly this.
And then as you said, once one business does it, the others follow so that they don't become disadvantaged.
It would seem to me that the key to success is ensuring that your inventory management software is highly intuitive and easy to use for the time-poor business owners.
You could have all kinds of cool extensions, such as ordering ahead of time on your phone and having pick-up drive-thrus at big box stores and supermarkets, where payment could be taken care of automagically, via NFC. You could sort not just by price, but by price + time/distance from current location (the latter for gas costs) + tax, sort of like Hipmunk's "agony" sorting feature for airfare. You could make a shopping list and the app would optimize which stores to buy which items at, and in which order you should visit the stores, based on things like individual item costs, geographical locations of stores, opening/closing times, delaying of purchasing of frozen foods, etc.
But retail outlets will never cooperate. They'll be the big losers here, as the last barriers to comparison shopping disappear and customer loyalty is replaced by the cold, hard facts.
I don't necessarily think that it completely ruins the idea though—bigger brands wouldn't suffer from the same problem and if you could get more than a few in, the momentum would start to build.
To be honest though, this post was less about the idea and more about reflecting on thought of committing to a big idea at a young age. It's cool to see all these people giving real, and great, feedback on the idea, but I think that's kind of overlooking the idea. As many have said, there will always be huge ideas, and all ideas will always have problems—maybe that's why I don't yet feel comfortable committing a huge chunk of my life to just one.
As the OP, I might get torn up for writing this, but I thought it was worth sharing.
I agree with your main point that small stores might not like such a system but then to assume that all buyers will make a decision based solely on price is flawed.
What if you're standing outside the store and decide to check out a service that will price check for you across EVERY store; you type in the item and it says "this item is $90 at store y" and you notice store y is just 2 doors away. What do you do, do you shop at your regular store or do you shop at the new one? The majority of people will go with the new one, it's stupid not to walk an extra 10 feet to save $10, the new store might even be better!
But hey you know you'll always get some constructive criticism no matter the idea, and that's definitely worth something.
That's actually a pretty good discussion when we just stop being meta and debate it.
Here is what I would do (and yeah I've run my own business for many years, always easier said than done.)
#1 Build this produce but make it specific to a specific retailer or chain.
#2 For #1 to happen, the system needs to be pretty much "free to try" and seamless for the retailer. Think about that one real hard.
#3 Build a checkout system where customers walk in to the store and walk out with the product. All sales happen electronically, payments through the application.
#4 Now instead of "Walgreens App", "CVS App", etc, you consolidate the data in to one system. This sounds far fetched, but is very much the business model Google has employed. Tens of billions of dollars of customers flow through Google's platform. Google's method of consolidation include search algorithm "updates", opaque Adwords "quality score", moving Google Shopping from free to paid, and so on.
If no one manages to accomplish #4, retailers will start doing it internally. To some limited degree, it is already being done.
Accomplishing all of this could take a while. Whats certain is the US has a vast overcapacity in retail, and people waste too much time wandering through stores trying to find crap (and then there is the whole driving to stores thing for the rest of the non-urban areas.)
Where it shines would be for something semi-obscure: "I need a plumbing snake" or "I need some fabric glue". Do they carry that at my grocery store? What about Wal-Mart? Where's the nearest specialty store that might have it? If I can just type the product in and know which stores have it, that saves me a ton of aggravation -- and might, as a byproduct, mean I do some other shopping at that store instead of my normal place.
1. Heading to a grocery store with a list of items that you frequently buy that are priced at similar prices at every store.
2. Going to a store to purchase a specific item
3. Going to a store to find an item
For case #1 it's most likely that you're shopping at a place that is already competing for the lowest price point (places like Walmart and Target) so this application would be useless to you; however these stores already engage in the sort of activity the OP discusses.
For case #2 if it's an item you've purchased previously you probably have a "favourite" store, one that you used previously and had a good experience with so naturally you go to this store. If this is an independent store they might have the item for $5 more than another store of a similar type, but because you've used this store before and because it has always been cheaper on previous occasions you bet that extra $5 against the time investment of finding if it is cheaper elsewhere (which isn't guaranteed) and go with the "safe" option.
If in case #2 you didn't have to consider your previous purchases, if you could just type in the product into your phone and be told (without doubt) that the product is $10 cheaper at a store across the street from your normal store most people would take that; it's $10 that would be saved by walking across the street, it would be stupid not to, right?
So now you have a situation where in case #2 any store that stocks an item (HP Printer, for example) is required to stock it at the lowest price because if they don't and a competitor is within 2 blocks (the "distance of $10") people will just go there instead. So now where is the value to the retailer? They enable themselves to be pitted against their competitors, thus requiring they lower their margins and inevitably lose out to bigger stores that can work with lower margins.
In example #3 the same situation occurs, you enter a store and locate the item that you want, enter it into your phone and get told exactly where it can be acquired and at what price; if the store that has it cheapest is 2 blocks away and the price difference is $15 why not go over to the other store and save the $15? That store just lost a sale because of the system.
Almost everyone that I know (I'm not from a rich background) would absolutely walk over the street to save $15, that's a non-neglible amount of money to quite a large portion of consumers. Sure if every other store has the item cheaper but it's only $0.25 difference people probably aren't going to go to another store, but then it becomes a race to the bottom. Wonderful for the consumers, awful for the retailer.
What incentive is there for a retailer to force themselves to reduce their own margins? Currently purchasing an item in a retail store is a gamble on whether or not you'll pay the lowest price (unless you spend time researching every stores pricing), stores make money because of this. Currently it's a matter of taking a consumer, showing them a product and convincing them to purchase, if this system existed it would have an extra step: convince them to purchase at that particular store.
Also note that your store in case #3 doesn't lose the sale from their use of the app; I can see their price because I'm standing in the store, so they lose the sale whether or not they're using the app. Using the app doesn't gain them anything, so they might not use it -- but it does gain their competitor a sale, so the competitor definitely should use it.
And of course a lot of what I buy costs little enough that comparison shopping is pointless. It's $3 at Wal-Mart and $4 in the store right next to my house? The closer store might gain a sale by telling me they exist and they have the thing I want (whether or not Wal-Mart is using this app, the dollar savings isn't making the difference). So the retailer again has the chance to gain value here.
The net result here is that there is incentive for retailers, at least in some markets, to use such a system. They've already lost all the sales you worry this will make them lose, but this provides some opportunity for them to make back some sales in other circumstances. So it's a net win.
Of course, it may not be enough of a net win to make it worth the effort for either the store or me as a consumer to use. Execution matters an awful lot. But it's not unreasonable that, done right, it could provide a lot of value to customers and retailers alike.
Again, maybe this is a difference between America and the UK, I've never seen a retail store compete with an online store in price, the value in retail is instant purchase and no shipping cost. If you're already comparison shopping you're not the average customer.
> Also note that your store in case #3 doesn't lose the sale from their use of the app; I can see their price because I'm standing in the store, so they lose the sale whether or not they're using the app. Using the app doesn't gain them anything, so they might not use it -- but it does gain their competitor a sale, so the competitor definitely should use it.
I think I explained it poorly. My example #3 is if you walk into a store and see an item is $15, if you then think "it's probably at cheapest going to be $10 anywhere else, it's not worth walking to the 4 other shops that probably stock this item to find out, as 1 hour of my time is worth more to me than a $5 saving" that store retains the sale; if you pull out your phone and it says "it's $10 across the street" you're going to go that new shop. Therefore a sale is lost: stores that offer the lowest price win (to a point, $0.25 difference won't matter to most consumers)
> And of course a lot of what I buy costs little enough that comparison shopping is pointless. It's $3 at Wal-Mart and $4 in the store right next to my house? The closer store might gain a sale by telling me they exist and they have the thing I want (whether or not Wal-Mart is using this app, the dollar savings isn't making the difference). So the retailer again has the chance to gain value here.
So that there is marketing; a store exists and there are potential customers that don't know it exists. Surely the solution to that problem is proper advertising? In your example what if there is 2 grocery stores right next to your house; if both use the app then you go to the cheapest. The only way the app would be valuable in that situation is if the shop was far enough out of the way from cheaper shops that the time investment wasn't worth it to go to the other shops.
> The net result here is that there is incentive for retailers, at least in some markets, to use such a system. They've already lost all the sales you worry this will make them lose, but this provides some opportunity for them to make back some sales in other circumstances. So it's a net win.
I'm not sure what you mean. If you go in to a shop to buy a $15 item and you know that there are 4 other shops that stock it and MAYBE one of them will MAYBE stock it for $5 cheaper do you go to each of the 4 other shops to find it MAYBE cheaper? No, nobody does that, it's insane. Now if you could pull out your phone and be told "Shop x has it for $10" you KNOW you're getting a $5 saving and the other shop is across the street. You'd be stupid not to go and get it from the other place. This means that the only shops that win are shops that price it the lowest, or shops that are in an isolate environment (say a small town) with no competition; but then the people would never be using the app because they would know where everything is.
> Of course, it may not be enough of a net win to make it worth the effort for either the store or me as a consumer to use. Execution matters an awful lot. But it's not unreasonable that, done right, it could provide a lot of value to customers and retailers alike.
Customers, absolutely, this would be incredibly valuable to customers, but I have yet to see a situation posted that makes it valuable enough to retailers that they could risk the downsides. If you're the cheapest store, great, extra custom, but if you can't afford the margins that others can? Then your business won't last, whereas currently a store can exist with higher priced items because of people have a "favourite" shop because of expected quality of pricing and experience.
You're also considering the value proposition symmetrically, when you should be considering it asymmetrically. That is, you're thinking "the store that sells this for $15 wouldn't use this app, because then the store selling it for $10 would steal all their business." That's a crappy value proposition for the $15 store, but a great one for the $10 store. Some stores might not use it, but those with better prices or better selections would basically consider it free advertizing.
Also, I'm pretty sure you're wrong about retailers not being able to compete if their prices are higher, and about this sort of app destroying those businesses. We already have this scenario with grocery stores, where you can compare them just by reading the paper (or the online ads), and yet certain more costly stores still survive. Maybe it's location/convenience, maybe it's unique selection, maybe it's customer service or return policies, or maybe it's that cute girl ringing up your groceries.
I think, ultimately, you're conceiving of this app as "how do I get the best price on X within a Y block radius?", whereas I'm conceiving of it as "can I get X from anywhere at all within a Y block radius?" and only secondarily "can I save money on X?" Phrased my way, there's an obvious value proposition for retailers.
- there are many items people buy on price and are willing to order online. Such items will gradually become unavailable in stores whether or not this idea is ever implemented.
- there are also many items that people want immediately, and are not well suited for online ordering. This convenience makes them well suited to these local search capabilities, and this characteristic may overcome a good part of the resistance to share data.
This distinction is crucial. It may not overcome the psychological resistance you mention, but it isn't obvious how serious that is or whether it can be overcome by system design. For example, you point out a key feature of this system which is the need for limited query capabilities and no downloading (cue debate on how possible that is).
But you miss the real problem with the idea. System integration difficulties will prevent the system from achieving critical mass and broad coverage. It will be unreasonably painful for stores to join the system for extremely mundane reasons like file formats and the difficulty of mapping proprietary taxonomies. Offline retailers just won't have data as ready to integrate as online.
Not impossible, but the sort of unrecognized under appreciated real challenge of the system.
The biggest problem, as the parent said, is that brick and mortar stores would be actively hostile to this idea.
I'm not saying that there are enough categories of items that are not well suited for mail order, and have a high degree of value based locality. But this is the central question for such a product.
Retailers whose businesses are protected by locality won't be as reluctant as you imagine. Note that these will be the only successful local retailers over time anyway.
These are also precisely the businesses that currently have the loosest idea of their actual inventory and would incur the most changes to move to the kind of inventory tracking necessary for this to work.
They are also frequently the categories of items that consumers would comparison shop the least. Few people care about going to a few corner groceries to get the right brand of milk. They all carry mostly the same group of products and anything were consumers care about choice (coke/pepsi) they already carry all the options for the same price as everyone else.
I don't think that would be impossible. Unlikely maybe, but if the Groupon approach was taken (huge sales teams) it could work.
The hardest part of this idea is not getting stores to use it[1], it's proving that the product has enough value to stores for them to put work into it. Look at Groupon, places are falling over themselves to get involved (or were) to their own detriment (see the stories of people selling $20k of product for $1k) and with the rise of the internet high street shops are having problems. A place in my hometown that had been around for 30 years shut down earlier in the year because their business was being taken by online alternatives; they would have jumped at the chance to take anything that would have improved the businesses prospects no matter the work involved. It's not the question of "should we have 100k profit this year of 101k?" it's "should we break even this year or shut down?"
If the product actually provided value to the stores (which I think it won't, it would harm them) then getting stores involved wouldn't be hard. Again, maybe it's England specific but a lot of high street stores here are losing business fast and I doubt any of them would be stupid enough to ignore an opportunity to increase their business, regardless of the work involved, I think that the OPs idea is the problem. Stores aren't big giant corporate machines with hundreds of different parts, if a system had a good sales team and a good product I don't believe it would be as hard as you state.
[1] Technically the hard part is getting stores to use it, yes, but that's a byproduct of showing there is enough value. If there is enough value I believe getting stores to switch to the system would not be as difficult as building a valuable product.
Why so? because they are doing the same thing, more or less. the biggest advantage amazon has is logistics and range. but sometimes locality matters. I think there will be enough place for both approaches.
But this idea will only work if you work out two things: sales for market penetration and to gain acceptance by local stores and logistics. Both issues aren't trivial but the idea certainly has potential, HUGE potential. In more than one way. I can imagine that as "your social and local amazon alternative". And the main benefit smaller stores have is a means to ultimately counter amazon in some way or the other. But again, convincing these stores, very hard, logistics, very hard. And that's exactly the reason why the potential is that big.
not saying the core of what you say is wrong, but it's difficult to apply in many cases these days.
I don't know where you've been living, but this is already here, and that's exactly how I (and millions of others) buy more expensive stuff.
Never would reach critical mass. Stores have legacy systems in place that are integrated and do many things. Keeping on top of inventory requires input and discipline to keep it up to date. So a store with an existing inventory program is not going to switch the best you can hope for is to get a data feed from them. And to be helpful to the end user you'd have to get enough stores to make the app do something worthwhile. (Lest you think some store is going to ditch their legacy system for a startup's free software where the company could fold..)
Bottom line is you can't even begin to think about an idea like this without doing some research into how things are being done now which from the post hasn't been done. The OP had a manic moment where anything seemed possibly. Then they came down to earth (sugar high wore off?)
The OP seems to realize they need to keep learning, and most importantly, if I might add, to get some real world experience:
"What I’ve come to realize, however, is that I still have so much to learn and so many things to do before I really feel comfortable"
I know I have and I immediately dismissed it because you would have to get the business co-operation of many retailers for it to be any use (and what is in it for them?).
You would have to develop your own software, ok fine. You would have to integrate with all these retailers archaic inventory systems which you probably would not be allowed to touch, so you have to convince the retailers do make the changes...good luck.
The whole article seemed a bit "I have a $100 billion idea, make a moonbase and mine Helium 3, you just have to do X Y Z "
Regardless of what you intend to charge for your software, your first customer would be "chartered" (they wouldn't pay much, if at all). You'd get in the door because your wife is friends with the daughter of the CFO of BigBoxChain, or something like that.
All of the above is doable of course, but the idea itself is worth nothing. It's 100% sweat. All about execution, in other words.
But also, depending on the type of store you are, inventories are not as tight as you would think. Stores have a general idea of how much inventory they have on hand, but they never have an exact amount. And the thing is, most don't care. That was the part that surprised me the most. They expect a certain amount of theft, misplaced inventory, wrong inventory counts sent from their suppliers, etc, so they don't waste a lot of time making sure their inventory is extremely accurate.
This is certainly not an original idea and I'm not sure how it could be possible to become a leader in it. Users need a map to locate the shops. So the map is a key component here.
Correct me if I'm wrong, but isn't this one of the reasons why Wal-Mart became so successful? They could track their inventory very accurately.
...unless SaaS providers of this kind of service exists, and the fixed overhead costs bourne by a lot of small shops together.
So they got at this problem by writing integration code with the existing inventory systems, and thereby got the data for a large portion of the market (nationally!).
I really like OPs idea, actually, but the Milo approach turns a 10-year plan into a 1-year plan, and if you can survive off the revenue you get from your 1-year plan, then you can use the excess to see your grand vision executed all the way through.
Clearly the Milo guys didn't go this route and instead sold to eBay (quickly!), but it's these kinds of "pre-pivots" that I think allow great companies to be built.
If, after reading all the recommendations on here about how you'll fail, you still think this is worthwhile to approach -- spend your time understanding the retailer (not the consumer user.) If you can meet the retailer's needs, you're onto something.
Spoiler alert: be prepared to learn about how everyone else has tried and failed to do exactly what you're proposing.
As a side note to anyone who comes up with an idea - any idea. Do some research. Go out on the street and talk to some (for this idea the one the OP has) merchants to vet the idea. See how hard it is to get in front of a decision maker. Whatever effort it takes you as a student or someone doing research it will be magnitudes harder when you are actually selling something (business owners tend to have a soft spot for students and younger people who they see as non-threatening). They love to help people with their research. They aren't so eager to talk to salesman.
Eliminating the licensing costs of a new untested inventory system is not a very compelling incentive for any medium-to-large sized retailer to consider trying out an untested startup's product. For various reasons the IT deparments of big retailers are very conservative.
As for smaller retailers and mom-and-pop-shops that have less integration concerns. It might be easier to have them find your system and be willing to invest hours of labour to have staff recode their existing inventories into your system and integrate this into with their existing POS systems (oops, there's that problem again) or I guess pay you for your fully-integrated POS system.... signing these up presents its own set of challenges. I think you're overestimating the licensing costs of existing POS systems for smaller retailers, and underestimating the costs of replacing any system that has already established itself.
A better approach might be to get a feeds of data from the inventory systems that already exist, which larger retailers are already sharing with their suppliers. Then you're still faced with similar integration problems, just from the other side. Others in this thread have covered the reasons why it would be very difficult to convince retailers to give up this valuable information.
https://www.nytimes.com/2005/11/22/technology/22shop.html?_r...
http://googlemobile.blogspot.ca/2010/03/in-stock-nearby-look...
And being local, there should be enough space for more than one provider if you want to stay in the game yourself.
I would guess they started back in the days just scraping web sites on their own and then gradually got stores to supply them with "price files" that contained everything they needed. I know they have deals with create-your-own-web-shop businesses like Shopify and others so that these businesses create the price files automagically for every store THEY have.
As for revenue I believe that a store has to pay Prisjakt to actually have Prisjakt put up a clickable link to their web site. So if I search for Samsung Galaxy S III and go to the product page, I am presented with an array of stores carrying that phone, and I can click to go immediately to the stores own product page for Samsung Galaxy S III and go through with my purchase. If you don't pay it seems your website url is more hidden (on the store profile page) it's not clickable even their. You can also pay extra for having your logotype visible etc. They probably have a lot more going on as well.
2010 Prisjakt had $7.6M in revenue and made a $3.36M profit.
edbpriser was bought by Aller in 2005 at which point they were said to facilitate 10% of all computer hardware sales in Denmark. I remember back in 2001-2004 where a major CPH street was full of computer hardware stores; most of them went bankrupt or gone online only.
Here's the catch, the vast majority of retail businesses aren't going to be willing to risk a critical aspect of their infrastructure on something that is "free".
As a hypothetical small business owner, I want to know who I'm going to be able to call at 8 PM Saturday night when my inventory system breaks, and how long it's going to take to send someone over to fix it.
As a hypothetical small business owner, I want to know what happens when I need to upgrade my systems in 5 years, and whether your company will still be around to support me.
As a hypothetical small business owner, I want to know that if I commit to your inventory system and retrain all of my staff, that your company won't go bust in the next 18 months, forcing me to repeat the process all over again.
As a hypothetical small business owner, when you offer something to me for "free", I see red flags all over the place. The cost may no longer be up front, but there's no such thing as a free lunch.
P.S. While consumers may like things that are free, business owners by and large do not. They understand that businesses need to make money in order to survive, and that extends to the services and infrastructure they purchase.
The real thing here is that finally, even if only in part, a software for business use has come to the HN first page. It would be cool to focus on that for once...
I wouldn't judge how lucrative or feasible and idea is without examining the domain and talking to domain experts.
A simple example would be the taxonomy of a product. In terms of commerce, the adequate description for a product would be the minimal required to identify its price and perhaps track its quantity (for FMCG). Ex. Clover 2 litre low fat milk.
On the other hand, some mass retailer clothing stores might settle for categorising products into pricing ranges. Ex. Shirt 20$ and therefore you wouldn't be able to uniquely identify the stock.
Feasibility wise - creating software that's 'free' to lure the market will bring in a lot of headaches. If your idea of accountability is 'It's free, so it's your problem if you lost all your data' - it probably won't work.
Honestly, the idea behind creating an all-in-one solution sounds much more feasible. Mini ERP software is becoming the norm nowadays.
I agree that it's a good idea :)
I think that was a better path forward - less software to develop, fewer companies to sell on the idea, etc.
Pitch on Milo is more "share your inventory" rather than "manage your inventory with incredible easy." Subtle but important difference in the pitch's underlying meaning...
Based on Milo's integration list it sounds like there's lots of inventory software out there already. Not sure how much of it is "great". Suspect a lot of it needs to leverage RFID, handheld scanners, etc.
For anyone moving on this, think about hardware compatibility that's drop-dead-simple for storeroom, warehouse workers, and the guy who's unloading the truck to use. This is one part web app, 99 parts warehouse app from the retailer's point of view.
The other significant thing here is just how fractured the retail POS market is. There are literally dozens of single-point POS systems, and Milo integrates with 5 of the larger ones. Many of them are regional players who built their market up through hands-on customer service. They just aren't going to get unseated that easily.
Another thing to consider is, many people shop by convenience, not by price. I always pay for convenience. Not worth it to drive 5 miles out of my way to save $1.
Not to say the idea couldn't work, and most startups are 3-4 years in the making before most people even hear about them.
Frankly, taking inventory is the easiest part of this. Many places are fine to do it with just pad and paper.
As others have pointed out, getting local businesses to use it will be problematic for a number of reasons. So, another variation would be to turn it on its head and make a 'I want something' system - something for people to signal what they're looking for - and make these requests available to any local business to watch/review and respond to. The kicker would be they'd have to respond pretty quickly.
If I'm looking for X - I may not even know exactly what X is - but I describe X as best I can - few words or exact UPC or whatever - along with my city/location/area, then start getting response/offers back to me within a few minutes. Perhaps I put a time limit on it - I need to know in the next 30 minutes. If I get, say, 3 offers back telling me store ABC has it for $y and store DEF has it for $z, I can go to either location, or contact them back and arrange a deal, or just ignore them because it's too high.
It's not the instant gratification tied with realtime inventory propose here, but it's a step in the right direction. And once you have one half built, and see the signals/searches people are putting in, you can more easily convince local retailers to participate. Perhaps they pay a subscription to review a feed, which they can tie in with automated systems, or they pay a fee on a per response basis (almost like a slowed-down turn by turn google adwords).
I'm available to talk about this idea more at mgkimsal@gmail.com if you want :)
http://googlebase.blogspot.ca/2005/11/getting-off-first-base...
I haven't played with Merchant Center, but Google Base was never good enough that merchants would adopt it in numbers.
I'm used to assume that if I'm too optimistic with my plans without actually picturing the whole scene, then I'm being too naive—if I really knew what I was doing then I would 1) be able to see some deterrents to the idea clearly or 2) have the whole problem solved. OTOH it's clear to me now that I cannot wait for a complete-and-with-every-detail plan to start anything, from software to a startup. Bets got to be made. This realization is what moves me away from analysis paralysis.
I feel like this is something that can't be taught, but I'd like to hear from you guys. There's a gray area somewhere in between both and I can't find a place that satisfies me.
An interesting way to approach it, which I don't think people has mentioned is to provide incentive for people to share/store their own shopping. Scan a slip with your phone and it stores it. Now you can easily create a new shopping list, and or remember what you bought.
Now you start building up this database. Now you go to retailers and say: Look, customers are using this app, why don't you make items available so people can search them before making their to-buy list?
As with any idea, this one has holes as well. How many people actually make to-buy lists? And would be willing to scan their slips to process what they bought? Interesting thought experiment none the less.
The main impediment to ideas like this are getting the critical mass of users to make it worthwhile for both the buyers and the sellers.
The meat of the concept is fantastic, but why not come at it from the consumer side of things. Try to figure out a way to take transaction information (like, from a receipt) and upload it at the point of sale. You'd get a live data stream of what was being bought, where, and for how much. You could entice consumers to use the product by providing them with mint-like app for day to day purchases. You wouldn't have inventory for individual stores per se, but you could make a lot of inferences.
1) If you can make a really good software in this space, you can make millions just selling it.
2) If you really want to try this, you should get a deep pocketed friend who will buy a company which already has the software, so you can focus on getting the service running asap, not after 5 years.
3) Retailers are not naive about their data and store experience. And there are countless variables that you will need to accommodate. Even if you have a service in place, it may never fly in the volume that you are hoping for.
4) If it doesn't reach the volume you are hoping for, you will not make more money than you would have made by selling them the software. Perhaps you should have tried another strategy, that is more directly related to the data you were hoping to get your hands on.
For those of you who are saying stores would never go along with this: I ended up buying ice cream at the first store I could find that happened to have the soap, because I was tired and wanted ice cream. There's a competitive advantage to being the closest/best-priced store with a particular thing I need, because that gets me in the door with a guaranteed sale, and once I'm there I just might buy something else I don't need. If every corner store had a data-driven way to choose which products to carry, they would improve their business in a positive-sum way.
It's easier for the store, easier for the customer, etc. The odds of a retailer not having something in stock are low enough it isn't a big problem, and you have a phone right there so you can call to verify.
Most importantly, the barrier to entry is extremely low... and yet, it's very hard to get enough content to make the service really work. So adding that more complex barrier to entry is NOT going to make things better.
...you'd still need to make them use it and actually inventory stuff, click the buttons, etc. It's not that the idea is bad or anything. it's to actually make people use it. its not because its free that they will use it. they would if it was free AND you'd handle their inventory for them, and guarantee a benefit every month from that (yeah, that's impossible).
You are 100% prepared to pursue this idea. Build the best inventory software that you can and give it away for free. If what you make is easier to use than the current average solution, you'll be able to find someone to use it. You don't need anyone's permission or approval.
What I have seen people do recently is focus on a single vertical such as say used cars or hardware stores. You could start regionally and if you can make it work in say three cities you might be able to raise the kind of money it would take to go national.
Our whole society is defined by that. Bigger projects just don't work out because big companies are so inefficient and small don't have the money.
Err, that sounds wrong... you get the idea!
Now we just need a smartphone-based AS/400 and we're back in the 90's again.
This seems to be part of the core of his idea, but it doesn't sound groundbreaking at all.
Anyone had experience? Some war stories?
From a fortune 500 retailer point of view: They have IT staff dedicated to the POS systems and their inventory management system. They know how to make the POS systems fly. Oh and their supply chain software integrates with the inventory software, can you're product do that? No? Sorry we're going to pass. Not only that, they have tons of data warehouses of sales data going back to who knows when that the marketing people get to play with. They also may have a stringent budget and purchasing process and are most definitely led by non-technical executives. There is the old adage "You get what you pay for" and if you don't have to pay for the software then what do you get? They also have many locations (lets say 2000 for simplicity) all running the same registers. If your software doesn't support their registers, you can bet they are going to pass on you. Plus they have the advertising money to spend on AdWords campaign or paid search if need be.
Now a medium sized retailer a handful of locations. They are interested because it will allow their products to be found by those and they may be able to poach a few customers from the big box stores. Alas, but they too have existing POS software and inventory management software and would be willing to ditch them for something new. However, it may be hard for them to be the first to test out a new product since they rely on their customers and know that they could probably get the same items cheaper from a big box store. If there is any snag in their experience at their store (such as POS issues) than they could lose that customer for good. They are hesitant but would accept once it is proven and stable.
Then there are the small mom and pop stores. These may want to use the products but they don't have the infrastructure to support it. Heck, they are currently doing inventory in Excel and hate it, this would free up their time. But that free software isn't free when you need to buy new computers and registers to be able to support it.
Notice that I keep saying POS instead of just inventory management. The reason being is that those two need to integrate with one another and if you want live levels of stock at any given time, you will need to use the POS system as inventory management software is by the day (at least from what I've seen).
Plus, you get to the lock in factor. Is the software going to be free if I don't keep paying for the search stuff? What if I decide that it isn't working for us, do we have to switch software or can we keep using it for free? If you allow them to keep using it for free then there goes some profits. If you don't allow them to use it for free, then you get into a situation where it becomes a super expensive test since the software doesn't cost money but it costs time to set up the new software and train everybody on it and then if they don't like it switching back.
And claims of billion dollars are typically baseless. Anyone would commit 10 years to a project if it would be worth a billion at the end.
So appreciate the authors musing on the next big thing, the problems described are the day dreams of any entrepreneur.