Wednesday, January 26, 2011

Driving can't be frictionless, but can shopping for gas?

Pull into a parking lot, open the right [mobile] app and you may be able to save a dollar or two on your next fill-up. Over the course of a year, you might even save enough money for a decent meal out.

That's from an article by Bob Tedeschi in the New York Times on an emerging set of mobile apps that help you find cheaper gasoline. It won't be long until they're bundled with GPS maps and factory-options in cars.

These apps join RedLaser and host of related tools that bring low cost search from the online world to the rest of retailing. The result is not likely to be frictionless commerce, any more than it was for Internet merchants, but it certainly should reduce the importance of geography and customer ignorance as sources of competitive advantage.


  1. How much do you expect this and similar apps to affect the traditional real estate mantra "location, location, location?" It's obviously disruptive in the sales of commodities, but I'm curious as to whether location apps might encourage greater diversity in, say restaurants, by pushing people away from the beaten path towards the out of the way venues.

  2. I wonder what the effects will be on supplier behavior. I would assume that wholesale distributors are constantly adjusting prices based on regional conditions (as they know it); retailers then receive the aggregate of this information as a wholesale “price”, and then add more detailed localized information (as they know it) to this information bundle, and then set a final retail price is set. If we contrast this process with what it must have been like in 1990, to what it must have been like in 2010, to what it may be like in 2020 – if we hold we hold all else constant, we should simply see a tighter cluster around where the price should be/have been.

    So obviously, the more interesting question would be what structural changes may/are occur; but maybe there's none (or maybe even a price lifting effect)

    Location would become less relevant, but still not zero. Consumers will no longer have to worry that they may be paying a price higher relative to another gas station nearby, but neither will the retail outlet have to wonder if another retailer is undercutting them just a mile ahead down the road – or that they are missing out on extra profits because their own price is too low. When wholesalers and retailers can experience a near real time stream of almost perfect price information - what incentive will a retailer have to drop their price - when they know everyone will respond almost instantaneously? Would gas stations “out in the fringes” simple settle into a lower price just equal to what their location offers for convenience (or lack of) - and those gas station in high traffic areas, a little more (relative to the convenience offered by their location?

    The real benefit may simply be the resources freed up from everyone having to worry about being “had” :)