Remember When the Internet Was Going to Wipe Out Retail Business?

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Posted by: briansittley Comments: 0 0 Post Date: November 13, 2014

internet_dogYou may also remember when… cars were going to fly… razors would eliminate beards… and automation would deliver us all into the lap of leisure.  In a recent article in The Economist (Oct 18, 2014) the editors make the point that the internet is no exception to missed prognostications and overblown predictions.
“On the internet, nobody knows you’re a dog” went a famous New Yorker caption back in the Net’s early days.  Now, truth is, Google and Facebook and other means of surveillance know a lot more than that about you (or as The Economist jokes: “whether you have fleas and which meaty chunks you prefer”).  While a “flat” economy was predicted, along with “the death of distance,” the reality is that recently Amazon – viewed by many as the ultimate destroyer of retail — announced plans to open a genuine brick and mortar store.
While the impact of the internet on certain industries is undeniable (think: books, music) there are a lot of e-commerce firms opening physical stores, including Bonobos and Screwfix.  Supporting the logic, research has shown that for every 1% increase in the distance between the country you live in and a foreign country, there’s a 2% decrease in the chance you’ll visit a website in that country.  In other words, location still matters.  Research has also shown that online products’ popularity first spreads by physical proximity, from one zip-code area to nearby ones.  We still show our friends, even on our phones, what we like and they in turn to tend to shop there.
Indeed, the article points out, “companies are increasingly treating the physical and virtual worlds as complements rather than alternatives.”  We may compare prices in the virtual world – thus helping to level the playing field across geographies – but many people still want to touch before they buy.  One new trend that has resulted from this is called BOPS (buy online, pick up in-store).  Macy’s is spending $400 million to digitize its flagship New York store to allow mobile app guides and provide custom information to in-store shoppers.
In other areas, like insurance and newspapers, these companies are still around, only now they have channels allowing customers to connect directly with the company or publisher.  And middlemen and wholesalers still have a place helping people otherwise confused by the internet’s overwhelming choices and glut of user reviews.  People still need trustworthy guides.  (Maybe dogs, too?)
The death of brick & mortar (and a lot of other non-retail businesses too), like so many dire and outrageous predictions before and since, must be taken with a grain of salt.  Technology does have the capacity to shrink supply chains, offer diversity of choice and cut costs.  But incumbents in all forms of business have a way of adapting to change, integrating the digital with the old-style ‘analog’ and using tech as a springboard to improving the customer experience.
As the article concludes: “There is a world of difference between disruption and destruction.”

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