13 days ago

Sheep

Today we were walking along a narrow path by the river. The path is 2 people wide with a fence on one side and the river bank on the other. You step over a low, electrified fence to get on the path and climb over a gate at the other end. A few sheep graze […]

13 days ago

CEAN: How to change tyres while driving

Well in architecture we are often confronted with changes while everythings moves. Please listen to the classic podcast on this very normal question for us as architects  https://drive.google.com/open?id=0B91hUBf4y2-gMl9zX2pMSGZwZzQ     Related Post The problem with most global Business & Appli… CEAN: Causality Digital death The failure of actor lead system thinking

14 days ago

My Master’s project and papers. On Walking, Music and Sustainability

First the project report, which was the main deliverable. Ashridge MSc Sustainability and Responsibility (AMSR). Project Report And then the learning review, the secondary deliverable. Year 2 Learning Review And here’s a couple of photos of  my wonderful fellow students and our tutors:

16 days ago

Why You Are Getting Disrupted

The overriding theme of every disruption story I’ve ever heard is that firms thought they had more time than they did. So, I’ve been pondering the why. We can see disruption happening all around us, but why is it so difficult to get out in front of it?…

19 days ago

The Value of Architecture, Reference Architecture and Architecture Framework (i)

continuing
The Value of Architecture, Reference Architecture and Architecture Framework
 
Any system has an architecture. An enterprise does as well. For instance there are Bus and Star styles of architectures. One of these architecture patterns m…

20 days ago

This is not a project

My apologies to René Magritte, as I appropriate his point, if not his iconic painting. After I posted “Storming on Design”, it sparked a discussion with theslowdiyer around context and change. In that discussion, theslowdiyer commented: ‘you don’t adhere to a plan for any longer than it makes sense to.’ Heh, agree. I wonder if […]

20 days ago

The Price of Everything

#PowerSwitch The relationship between the retailer and the customer can be beset by calculation on both sides. The retailer is trying to extract enough data about the customer to calculate the next best action, while the customer is trying to extract the best deal.

There is nothing new about customers comparing products and prices between neighbouring shops, and merchants selling similar goods can often be found in close proximity in order to attract more customers. (This is especially true for specialist and occasional purchases: in large cities, whole streets or districts may be associated with specific types of shop. London has Denmark Street for musical instruments, Hatton Garden for jewellery, Saville Row for made-to-measure suits, and so on.)

But nowadays the villain, apparently, is eCommerce. As a significant share of the retail business migrates from the high street to the Internet, many retailers are concerned about so-called showrooming. It may seem unfair that a customer can spend loads of time in the high street, wasting the time of the shop assistants and shop-soiling the goods, before purchasing the same goods online at a better price. To add insult to injury, some people not only practice showrooming, but then blog about how guilty it makes them feel.

The assumption here is that the Internet can generally undercut the High Street, and there are several reasons why this assumption is plausible.

  • Internet businesses compete on price rather than service, so the prices must be good.
  • An internet store can provide economies of scale – serving the whole country or region from a single warehouse, instead of needing an outlet in each town.
  • An internet store can offer a much larger range of goods without increasing the cost of inventory – the so-called Long Tail phenomenon
  • An internet store typically has lower overheads – cheaper premises and fewer staff
  • An internet business may be run as a start-up, with less “dead wood”. So it is more agile and less bureaucratic. 

However, there are some counterbalancing concerns.

  • The economic and logistical costs of delivery and return can be significant, especially for low-ticket items. With clothing in particular, customers may order the same item in three different sizes, and then return the ones that don’t fit.
  • Investors previously poured money into internet businesses, and the early strategic focus was on growth rather than profit. As internet business become more mature, investors will be looking to see some decent returns on their investment, and margins will be pushed up.
  • And then there is differential pricing …

One of the key differences between traditional stores and online stores is in pricing. Although high street retailers often drop prices to clear stock – for example, supermarkets have elaborate relabelling systems to mark-down groceries before their sell-by date – they do not yet have sophisticated mechanisms for dynamic pricing. Whereas an online retailer can change the prices as often as it wishes, and therefore charge you whatever it thinks you will pay. According to Jerry Useem,

“The price of the headphones Google recommends may depend on how budget-conscious your web history shows you to be.”

I heard Ariel Ezrachi talking about this phenomenon at the PowerSwitch conference in Cambridge a few weeks ago. (I have not yet read his new book.)

“There is an assumption is that the internet is a blessing when it comes to competition. Endless choice. Ability to reduce costs to close to zero. etc … What you see online has very little to do with the ideas we have of market power, market dynamics, etc. everything is artificial. It looks like a regular market, with apples or fish. But because it’s all monitored, it’s not like that at all. What you see online is not a reflection of the market. You see “the Truman Show” — a reality designed just for you, a controlled ecosystem.” (via Laura James’s liveblog)

In his play Lady Windermere’s Fan, Wilde offered the following contrast between the cynic and the sentimentalist.

Lord Darlington: What cynics you fellows are!
Cecil Graham: What is a cynic?
Lord Darlington: A man who knows the price of everything and the value of nothing.
Cecil Graham: And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything, and doesn’t know the market price of any single thing.

According to one of the participants at the PowerSwitch conference, some eCommerce sites quote higher prices for Apple users, based on the idea that they are less price-sensitive and can afford to pay more. In other words, the cynical Internet regards Apple users as sentimentalists.

If there is an alternative to this calculative thinking, it comes down to reestablishing trust. Perhaps then retailers and consumers alike can avoid an artificial choice between cynicism and sentimentalism.


Emma Brockes, I found something I like in a store. Is it wrong to buy it online for less? (Guardian, 3 May 2017)

Ariel Ezrachi and Maurice Stucke, Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy (Harvard University Press, 2016) – more links via publisher’s page

Laura James, Power Switch – Conference Report (31 March 2017)

Joshua Kopstein, Is Amazon Price-Gouging You? (Vocativ, 4 May 2017) via @charlesarthur

Jerry Useem, How Online Shopping Makes Suckers of Us All (Atlantic, May 2017)

Price-bots can collude against consumers (Economist, 6 May 2017)

The Dilemma of Showrooming, (Daniels Fund Ethics Initiative, University of New Mexico)


Related posts: Predictive Showrooming (December 2012), Showrooming and Multi-Sided Markets (December 2012), Showrooming in the Knowledge Economy (December 2012).