Screencapture of our businessplan cover
In 2008, I wanted to start a company based on group buying of customer electronic goods. Initial product offering was based on customer surveys. A terrible idea.
We believed that the company, named ‘dewinkelvan.nl’, translated as: ‘the shop of’ had some potential. The plan was based on a article I found regards the Chinese Tuángòu trend around the time. Potential customers would be able to vote for discounts, creating a online community that would be eligible for a mass discounts.
In a team of three, (I was spending most time on the software development), we setup shop in about three months time. By then, we dreamed to be the ‘Digg of retailing’ Most time was dedicated to voting/viewing algorithm and the social features. Ofcourse, when the launch date was approaching, we started to worry about the launch products that would appeal the right kind of user base.
We made a plan: We’ll make a survey and determine the best product that way. The next day, the team spent a large portion of the afternoon in the elevator of a tall building, armed with pictures of products, asking people about opinions about the matter. The question: What would you pay for this?
We wrote down the results carefully. “FATBOY X FOR 80 EURO”, etc.
The next day we thought: Nice! we have an idea about the products from potential customers, let’s get to work! Soon we would open the store, expecting for the customers to visit and pay for our goodies.
Soon we would realize the error we made. There is a HUGE difference between what a customer says he/she would buy and actually opening the wallet. We didn’t take into account the friendly positive answers we would get. Surveys are only good to get facts, they are terrible for opinions! Besides, web factors like UI design of the site and impulse buying decisions of the customer were not taken in account. In other words, our study was useless.
Luckily, our business didn’t fail because we were out of cash because of production. Actually, we failed because we were nerds who weren’t street wise in making deals. Failing because of a wrong launch product can be fatal.
A student recently wrote to me with the question in the lines of:
We’re starting a product line and want to produce ourselves, we’re thinking of producing in China? Where could I produce product X”
Whilst I praise their spirit, I warned them to take it easy and not start producing the products without proper testing. The student in this case was planning to sell a commodity product. I’d simulate the buying process to investigate the buying behavior of the customer first.
I’ve heard this is how Zappo’s started their business: By buying/borrowing shoes from a unrelated store, adding pictures and descriptions of them to their own webshop and sold them at a loss to their first customers. No send backs? Perfect! Once they figured out what worked, they were ready to move forward in the production process. This is my earlier mistake, the other way around.
This way, you would be able to avoid the painful path of starting a business, producing a product and discovering that it’s not what the customer wanted.