Trying to Find the Aha Moment
When you start a new business there is a moment when you go Aha, I get it and you can see a clear path to success. You never know if it will arrive or if it will come. Until that moment arrives you are scrambling to get there, and the moment only comes if you are successful, otherwise there are a lot of Ahh moments. Picking up from the last post we were trying to figure out why people were downloading the app, but the usage was low. We thought it could be one of four things, the North Bay market was too small, we needed delivery to compete against Amazon, we need to better understand if we saved consumers money, and did the app/extension need to change or was it a combination of all of the above?
So, we got to work by looking at markets we could expand into and one of the best markets we thought was Kingston. Kingston, Ontario is a small metropolis, has a population of 132,000 with a catchment area of 172,000. It has a healthy downtown area with lots of independent retailers. It is also a tourist town. Through happenstance or planning Kingston got it right. Queen’s University is close to downtown, the hockey rink home to Junior A Kingston Frontenacs is one block off the main street and it also holds concerts, many people work downtown and it is all close to the waterfront. For any city it is critical where you put your strategic assets, they need to be concentrated as they generate traffic for businesses and more traffic means more successful businesses. Spread them out and everything is mediocre.
We sent Mike, our VP of Community and Growth, to Kingston to understand the lay of the land. Now I think I am good at networking, but Mike is on a whole other level. I met Mike maybe a year before I hired him, at that time he had just moved to North Bay in the past two years and already knew more local people than I did, and I lived here my whole life. Kingston and the BIA (Business Improvement Area) welcomed us and Mike quickly got to know everyone. You know you are onto something when you can cold-call a business and show them in 30 seconds what we do, and they are astounded by what they see. We would show them one of the products they carried on Amazon and then we would show them the extension which popped up on the Amazon screen showing them the exact same product in their store. With Kingston we decided to test the bigger city theory as well as we wanted to offer a discount through the app to local consumers when they shopped at local stores. We felt this might drive more business to the retailers and drive downloads and usage of our app.
Now when you look at other apps that do something similar to what we did (i.e. Capital One) all of them only work with large brands. It is the same level of work to work with forty large players/brands as it is to work with 40 independent retailers. Working with independent retailers is akin to herding cats. Most of the retailers we worked with all agreed to the discount but in the end did not promote it to customers in the stores. Their mindset was why should we give a discount to a customer who is already in my store by telling them about One Red Maple…and I get it. So, we did a marketing campaign in Kingston to get people to download the app and hopefully generate the traffic we needed in the stores looking for their discounts. Consumers downloaded the app but usage was again lagging. Same problems different market.
In North Bay we tried delivery, we delivered for free any products from a One Red Maple partner. This had limited success, and we did not expand the delivery market in North Bay. It is hard to change consumer behaviour, especially in terms of Amazon, they have product depth, free delivery, and you only need to enter your credit card and delivery information once. But we thought there was still a subset of people who wanted to shop locally and use our app so we would focus there.
We conducted a number of studies to see how the local store’s compared to Amazon on pricing. We randomly sampled local products, then found them on Amazon and compared pricing using a 95% confidence interval (meaning you would get similar results 95 times out of 100 if you did the same thing 100 times). The results were very interesting and consistent, about 66% of the time the local product was less expensive. This was the case whether we included locally owned franchises (i.e. Home Hardware) or not. This surprised us but when you think about it Amazon has approximately 350 million products listed on their site, of which 90% are from third party resellers. All of those resellers must abide by free shipping so they inflate the price to cover the shipping costs. Sounds like we have a competitive position, however it is still hard to change behaviour as Amazon is about selection and convenience and not cost savings.
We rewrote the app after many lively internal discussions. I wanted the app to function like the extension. I thought the magic was when we matched a local product to what you were looking for on Amazon or any other corporate website. However, browsers on mobile devices are not the same as browsers on desktops in that they do not support extensions. When we first built our app we hacked the local browser that comes with your phone and used it as part of the One Red Maple app. It functioned like any browser – you could actually search for anything in our app. However, this meant that when shopping they would need to use the One Red Maple browser to search, and we would match what came up. This meant we had another mountain to climb as we are now asking consumers to change from Chrome or Safari to our browser. One of the upsides and downsides of having a brilliant developer (shout out to Eric) is he can literally build anything. So, at first, he built my vision and technically it worked but it did not work from a consumer perspective as it meant they had to change browsers.
We therefore created an app that allowed you to search local inventory, but the matching functionality was removed. Looking back, I think we should have just gone with the extension and put all our resources into it even though it would cut our potential market in half as half of the market shopped on their phones. We developed an app based on early feedback from users stating they shopped using their phone – in MBA school you are told to listen to the customer and to give them what they want but, in this case, I should have only listened to laptops/desktop users – 20/20 hindsight.
We also entered the Sudbury market during this period. Sudbury is different from North Bay and Kingston in that it does not have the same kind of downtown shopping area. Yes, there are some stores in downtown Sudbury, but their retail market is more spread out across the city. We used Sudbury as our placebo market, doing a little bit of advertising and seeing if it catches fire.
At the same time all the above was going on we were working to figure out how to identify and scrape all the online independent retailers in Ontario.
We spent several months building relationships and planning for the different initiatives and then several months trialing discounts in Kingston and deliveries in North Bay, all with a new app and the promise that we save the consumer money. Lots of downloads but still not much usage. We came to accept that maybe that is just the way, as people do not shop every day. If we had a larger market, we would to get more hits and users, so we set our sights on Ontario.
We even had a little fun and tried to get Ryan Reynolds on board as a spokesperson, he said he wanted to invest in more Canadian IT companies. For a good chuckle watch this video first and this video second, it is the one and only time I have grown a beard.
All the way through this Mike my VP was experiencing cognitive dissonance, he loved the idea of what we were doing but not sure there was anything in it for the consumer. I think we all felt this way, but Mike expressed it the most and he was right.