Speed is Important but so too is Price

In today’s fast paced world, many people’s expectation of delivery times have become just as rapid. This is particularly true if we live in a metropolitan city where such services are abundant. We order our food online and the website promises delivery within an  hour. Place an order for a pair of shoes and expect to receive it in maybe 2 hours or so. We are promised a download of a movie in a few seconds when 5G becomes available.

Does this mean that as a startup, you have to be as fast or even faster than the competition? Well if you are competing in the food delivery business, the answer is probably yes. Or for that matter, in a number of businesses where speed is crucial. However, having said that, it is not true that speed is everything.

I recall ordering something from Australia about 2 years ago and being charged a princely sum of $11 for shipping for an item costing $25. Since the item was not readily available locally, I had no choice but to pay this amount for shipping. To be fair, the item arrived in less than 5 days. I would have been glad to settle for a delivery of 2 or 3 weeks for a considerably lower rate for shipping, say $3 if given a choice. However the supplier did not provide any shipping choices other than the one I mentioned.

This brings about the argument as to whether everyone wants their items fast. Presumably the supplier in Australia thinks so. However as I mentioned earlier, he could not have been more wrong. Let’s go back to the people living in the metropolitan city. Travelling to and from work daily during the weekday, people have a choice of driving a car, taking a train or a bus or even call for a taxi or Uber. In a city like London, driving a car to work is prohibitively expensive especially when parking charges are included. So too is the cost of a taxi or Uber to bring you to work. Thus the majority of people either take the train or use the buses. This example clearly illustrates the tradeoff between speed and price.

The significant thing to note here is that the majority of people favors paying a lower price for slower speed in going to work. While many firms are obsessed with faster deliveries, startups can take a more rational view that most people would prefer to pay a lower price than have a faster delivery.  The solution could sometimes be as simple as giving a choice like the example I gave earlier. Either way, startups could be comforted that in doing so, they are catering for the majority.

 

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