Published on Apr 07, 2020

Shopping carts and business models


The government of Quebec announced an initiative to help stimulate the local economy.  The program seems pretty simple enough. It’s an online marketplace where consumers can find curated local merchants. Consumers benefit from local options, merchants benefit from increased demand. Et voila! One small step towards helping the provincial economy.

It is a laudable effort to protect and promote local businesses that are surely suffering from the current pandemic.  That being said, In its current form, I believe the program to be insufficient to achieve any tangible outcome. This can of course be step one of a larger effort so I will be cautious before passing final judgement.

The website is merely a directory and does not offer any transactional capabilities. That by itself is not the main reason it will not work. To achieve any tangible and sustainable outcome, the government must think about a bottom up & long-term effort. Local merchants must be better equipped to satisfy & delight customers and
offer their services online. The government must invest and enable new companies to be at the forefront of this transformation.

What is different in the internet era is that consumers have all the control; and consumers go where they enjoy a better shopping experience. That is the reason large tech companies dominate. They simply provide a better service. Shifting ingrained consumer habits cannot be altered with a top down dikat. It must be earned with hard work and by helping local merchants better compete.

Putting dollars to work

Luckily, political leaders have been making concerted efforts to invest in a more sustainable and local economy. Funding in startups from venture capital, private equity firms from the government has given rise to a booming technology sector. It is time for the government to take the next logical step and start a more comprehensive digital maturity program for the entire economy. The crisis can be a great excuse to take drastic measures that otherwise would have not been accepted.

Get online now

It is painfully evident, local merchants need to have transactional capabilities as soon as possible. Many retailers I’ve spoken to during this crisis are seeing their online numbers explode. Yet a large percentage of Quebec merchants are simply inexistent online and not benefiting from this channel. Businesses need to accelerate their shift to ecommerce. A quick way that the government can help is by providing tax rebates to companies that invest in their ecommerce.

Customer acquisition

The next step to bolster local businesses is to help them acquire customers.  Unfortunately, there are no shortcuts here. Local companies need to get good at digital marketing. And yes, that means boosting their proficiency on Google and Facebook in particular. To win online, you need to be where the demand is. Quebec consumers are overwhelmingly using these platforms as their primary information destinations. To acquire new customers, local merchants need to understand how these platforms work and invest accordingly. Local service providers like marketing agencies, development shops, etc. can provide a big step up. There is a deep talent pool in Quebec of digital experts that can help. There are no more excuses.

The fact remains, we’re still stuck paying the piper (e.g. big tech). Long term, I believe there is a way to reduce dependence on these platforms; retaining your customers.

Retention is the key

Local merchants need to be able to provide the same level of service than their larger & more well capitalized US competitors. This isn’t easy, the biggest piece that needs to be solved is last mile delivery. There are many innovative startups in the space like RenoRun that solve that challenge in home renovations. The government can fund startups that are working to figure out this important hurdle. Companies like Intelcom offer this service as well but more competitors and options are needed.

Amazon has a massive head start in its logistics and prediction/recommendation engine. Competing with the company head where it is strongest probably isn’t a good idea. Local companies have the advantage of proximity, high touch customer service and niche goods. We need to find ways to emphasize those strengths. If we can remove the biggest barrier which is easy online ordering and quick & cheap shipping, local merchants have a better chance of satisfying customers and keeping them long-term. Innovative business models like subscription will help merchants create a sticky consumer habit.

What about the media in all of this?

I’ve argued for significant investment online and in startups and unfortunately none of this will go to local media – who are probably in dire straits right now.  I’ve long argued that the current business model of advertising in media is misaligned with consumers, the only alternative is having some form of direct reader contribution.  Tax breaks to consumers that subscribe is one way to lighten the burden of the media. Given the small population base, the NY Times or Washington Post subscription model won’t save the media alone. Local media need to diversify their revenue streams away from advertising as quickly as possible. I don’t have any silver bullets here but it is something that needs to remain top of mind for elected officials. Unbiased investigative journalism costs money and the traditional advertising complex is no longer a sustainable business model.

Bigger vision needed

There are many industries that need to be reimagined once we get past this crisis. Some have brilliantly argued on how to do this. From areas like agriculture to health care to environmental sustainability, we need to build a more resilient economy that can face large scale threats like global pandemics. The short-term limits of globalization seem to have been reached. By having a strong buy first local economy, we will be able to weather future storms more effectively and perhaps come out even stronger.

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