This is one of a series of posts looking at the four key dimensions of data and information that must be addressed in a data strategy – reach, richness, agility and assurance.In previous posts, I looked at Reach (the range of data sources and destina…
Last week I was in Berlin at the invitation of the IEEE to help develop standards for responsible technology (P7000). One of the working groups (P7001) is looking at transparency, especially in relation to autonomous and semi-autonomous systems. In thi…
@ruchowdh objects to an article by @etzioni and @tianhuil calling for algorithms to audit algorithms. The original article makes the following points.Automated auditing, at a massive scale, can systematically probe AI systems and uncover biases or oth…
Are algorithms trustworthy, asks @NizanGP.”Many of us routinely – and even blindly – rely on the advice of algorithms in all aspects of our lives, from choosing the fastest route to the airport to deciding how to invest our retirement savings. But shou…
It is difficult to see how we can achieve an ethical technology without some kind of transparency, although we are still trying to work out how this could be achieved in an effective yet responsible manner. There are several concerns that are t…
Last Thursday, @ThinkRiseLDN (Rise London, a FinTech hub) hosted a discussion on Ethics in Technology (15 November 2018).Since many of the technologies under discussion are designed to support the financial services industry, the core et…
Excellent article by @riptari, providing some context for Gartner’s current position on ethics and privacy.Gartner has been talking about digital ethics for a while now – for example, it got a brief mention on the Gartner website last year. But now dig…
Last year, Facebook changed its mission statement, from “Making The World More Open And Connected” to “Bringing The World Closer Together”.As I said in September 2005, interoperability is not just a technical question but a sociotechnical question (inv…
Marketing’s evolution into a practice that relies deeply on individuals’ personal information has created amazing opportunities to expand reach and deepen customer relationships. But this evolution also creates serious risks for marketers and the…
In 2011, when I started this blog, I wanted it to be a place for reading and as such the initial theme was just a bit busier than this one. I didn’t go that far, but you still don’t see categories, tag clouds, my Twitter feed and so on. It was only recently that I […]
Presentation given to the “GDPR Making it Real” workshop organized by DAMA UK and BCS DMSG, 12 June 2017.The presentation refers to two milestones. The second milestone is 25th May 2018, the date that companies will need to comply fully with the new da…
#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)
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: Online pricing practices to be regulated? (October 2009), Predictive Showrooming (December 2012), Showrooming and Multi-Sided Markets (December 2012), Showrooming in the Knowledge Economy (December 2012).