Factory Price is a Kazakhstani B2C retail platform, which helps small and medium-sized businesses by using smart contracts. The platform is already used by over 600 suppliers and 2,500 buyers. We talked with the project founder Dauren Mukataev to find out why detailed customer development is necessary before launching a product, and what metrics are worth targeting before entering new markets.
The startups claim to have conducted a serious analysis of customer habits in Kazakhstan and can offer a solution to many problems – above all, the ability to buy directly from the manufacturer without intermediaries. According to their research, the company identifies several main reasons why customers abandon online shopping in 74% of cases:
1) High price
2) Need to pay 100% upfront price
3) No assurance of a refund
4) The product is not listed on a “reliable website” and has no rating or feedback from previous customers.
Factor Price helps reduce the cost of goods for consumers as it removes intermediaries in the supply chain. The startup has introduced a secure escrow payment system through the bank and also QR codes to identify the transaction. Thus, every sale and purchase is accompanied by an offer and acceptance and recorded in the QR code of the goods. The buyer and seller will always be able to download this legally binding mini-contract from the app.
— How did you come up with the idea for the startup?
In Kazakhstan, online commerce has been popular for the last two years. And we, being customers like them, have come up against fraud. Alas, this is not an uncommon story, when a person pays 50% of the price upfront, but does not receive the goods. The platform we created works on a different principle: when a purchase is made, the necessary amount is held on the buyer's card, and 7 days later after delivety, when the buyer has verified the quality of goods, the money is deducted.
— What metrics do you rely on for growth analysis?
We rely on several metrics. Firstly, we calculate CAC (customer acquisition cost) – the cost of attracting one customer. In our case, this is the cost of targeting advertising on social networks and contextual advertising in search engines. When we tested this way of attracting customers, our costs were less than $1 per person. Now we are recruiting new partners. Over the last six months we have recruited 500 suppliers thanks to 1 person in the team: an advertiser finds manufacturing companies and offers our product. As a result, 9 out of 10 companies enter the platform, and 5-6 new companies are added per day.
Another important metric is Value per buyer – how much profit a user will bring to the platform in a year, and LTV (lifetime value) – how much profit he will bring during the entire interaction with our product. We currently charge a commission of 1-5% of a purchase. On average, a person makes one purchase per quarter. And judging by data from marketplaces such as Aliexpress, the customer will continue to use the platform for the next 8 years. So, per person, we will get $20-25 over 8 years per person given that we have spent less than $1 to attract them.
— What kind of investments have you attracted before?
We are residents of Astana Hub, and we received $23,000 from them. Another $11,000 was raised from the European Bank for Reconstruction and Development. We are now completing a seed round, and next year we will open round A. We need a minimum of $100,000 for minimum scaling into neighboring countries including Russia and Belarus.
— What are your immediate plans?
The project has already been implemented in Kazakhstan, and we plan to enter the markets of the EAEU countries, the CIS and India. India is our global target, as it supplies goods all over the world. We want to take up about 6% of that market.