Saturday, February 27, 2010

End of Geography and Ignorance as Competitive Advantages

Two of the biggest barriers to price competition for traditional retailers have been geography and ignorance: it was a hassle for customers to physically travel to another retailer to comparison shop and as a result they were relatively ignorance of prices even for identical or very similar products. This creates a bit of monopoly pricing power for retailers, boosting profits. From the beginning , online competition has been very different (although far from frictionless).

The Rise of the the Shopperphone

Mobile apps are now eroding these two traditional barriers to competition in the physical world as well. For instance, the NY Times describes emerging tools like ScanLife that let you snap pictures of items in stores and order them online. RedLaser photographs the bar codes so you can find cheaper vendors online.

I confess that I even used plain old Google on my iphone last time I bought a pair of pants. In that case, I found that the online retailers were not significantly cheaper, so I felt comfortable buying them in the store.

These tools mean that even traditional retailers must now match worldwide competition for the products they want to sell, or else deliver unique benefits that can't be matched.

Sitting out the emerging Battle of the Retail Channels is not possible. Both online and traditional retailers have some unique advantages over their competitors (e.g. immediate gratification vs. broader product selection, to name one for each channel) They'll need to identify and cultivate them aggressively in the coming years or find another line of business.

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