I was recently thinking about the changing business model for many brick and mortar stores, like Best Buy. Where Best Buy used to be price competitive, they now charge a steep markup in-store. People making these purchases seem to be mostly those unaware of the true price. I occasionally purchase from their stores as well, when I absolutely need a physical item and can not get it shipped. Chris had the pleasure of listening to me vent about the absurdity of purchasing a $25 ethernet cable the other day.
Basic economic theory holds that competition should put downwards pressure on prices to where they approach equilibrium, and are fairly close to the cost of manufacturing. Yet this is not happening for ethernet cables. Why is that?
When you boil it down, it seems to be convenience -- you're able to purchase the physical item when you want it, and examine it before you purchase it. Going further, though, convenience doesn't only apply to in-store items.
Weebly is a great example of the power of convenience. When we started off, we heard "Oh, web hosting... that's a commodity" quite a bit. Most people considered it a "solved" problem, and quite boring. But the problem of designing visually appealing content, uploading media, and hosting web pages was far from solved, and a simple, easy to use solution gained quite a bit of traction fairly rapidly.
Which begs the question: "How do you model convenience?"
When analyzing competition, it's quite easy to model out all of the service characteristics, such as features and price. In fact, if you compare Weebly to several horribly outdated web site creators, the feature list might not look that different. The user experience, on the other hand, would be. Where Weebly shines is its simplicity and ease of use. Or, more simply: convenience.
Hopefully, someone with experience could shed some light. How do you model for convenience?
CommentsDerek S. 12/18/2008 21:03
If you are really interested in exploring the answers to this in a bit more depth, I'll be happy to talk to you about it. One thing I will say: convenience can be thought about in terms of opportunity cost. how much extra money (or utility, or whatever) did you gain by getting that ethernet cable a few days earlier? Did it allow you to do meaningful work that is likely to increase Weebly's profitability? That right there would be a good start. There are lots of intangibles to factor in as well. This might be best discussed over drinks. Sarpedon 01/06/2009 07:32
Ethernet cables are not sold as cheaply as they might be because most retailers understand that people have no idea about the true cost of manufacturing such items, little idea about purchasing them from alternative sources and no idea how to make one themselves! Also, retailers are experts at 'loading' their sales - so that they offset savings offered on bigger items by pumping up the cost of 'peripheral' items. If someone is prepared to pay me $25 for an ethernet cable, I ain't gonna tell 'em they can have it for $2.50!! Stephen 02/09/2009 20:42
I like your site and am thinking about setting up a blog/website. My eye goes to the word "model". Modeling convenience is pretty soft. You may propose to those around you that your business concept delivers convenience but the most honest and reliable feedback comes from sales which can only partially be linked back to the convenience that you were sure that you were providing. What if it really was convenient but the price was way too high? Another problem with convenience is that over time what was once seen as a positive convenience becomes accepted as the norm especially if there other competitors. Pretty soon your “delighted” customer has a new, higher standard for what would cause her to say that your product is convenient. I like the pictures too, by the way… Mike 06/14/2009 10:12
</b>How do you model for convenience?</b> Comments are closed. |  David co-founded Weebly, an incredibly easy to use tool that helps millions of people create a professional web site, blog or online store.
He was named to Forbes' 30 under 30 list, is a part-time DJ and has traveled to over 20 countries. Investments include Cue, Parse, Exec, Churchkey, Streak, Incident Technologies and Adioso. 
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