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Is this the Innocent Face of Disruption?

How would you like to get a product for 0.27% of the traditional cost? Is this massive price differential the innocent face of the realities of disruption?

My recent personal experience highlighted just how far disruptive models can go, and how trying to compete by incremental changes is doomed to fail. Our remote opener on our European car recently failed – just a rubber bit but not able to be glued. It’s not a flash car, a run of the mill shopping basket now over 10 years old. The traditional path via the supplier in NZ was $500 ($350 for a new key and $150 for setting it up).

A quick search on YouTube had several videos showing our exact problem, and how a replacement case for the key would fix it. I thought I was onto a winner when I found a firm in Albany that would swap the electronics and key shaft over to a new case for $78. Big savings! But it turned out they wouldn’t sell me the part alone, and I didn’t want to have to send the key away for a while.

So I dug deeper. I got a replacement key case for our exact model shipped from China via AliExpress for NZ$1.35, including postage. Nothing to lose, and everything worked exactly as promised. The user experience was fine, the package arrived quickly, and payment (such as it was) was only released when I verified delivery. The work to swap the parts over was 10 minutes, most of which was removing the screw holding the old one together (and isn’t it true that most of the effort in realising benefits from the new is dealing with resistance from the old?).

In a world where a perfectly acceptable service costs $1.35, what value is the same product for $500? How would that supplier even start to compete? Should they even try? One of my colleagues is sourcing things like carbon spacers for bike bars on the same basis. They were $10 each in his local bike shop, and he needed 2 or 3. Because they’re not structural, he thought he’d look online. From Alibaba he found and ordered a set of varying sizes (5 in set with 3mm, 5mm and 10mm) for $2 including postage. While he thought the quality may not have been good or might be replica or printed carbon, it was worth a try. They turned up in the post in about a week and were real epoxy carbon fibre. A very good deal: Four percent of the legacy in-shop per unit price.

These are disruptive models. That price differential for informed consumers is overwhelming. We will spend the savings on other services, so while legacy suppliers will struggle, new ones will thrive.

The big take-outs are:

  • Consumer education is key and needs some initial motivation – but once learnt, you can’t go back.
  • It will be impossible for traditional suppliers to compete on the same basis.
  • To survive in a disruptive world suppliers need to be ready to kill their legacy business – competitors are already destroying their food chain and cutting off their water supply.
  • The user experience and application is absolutely essential. A single poor or dodgy experience will result in a resolution of ‘never again’. A good experience generates trust and confidence.

As for me, I’m sold on the benefits of a little shopping around. I wonder where to challenge myself for the next purchase decision?

To discuss the topic further, please get in touch with the author, Paul Gordon, on 021 718 190.

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