Why Using ShopSavvy Might Not Be So Savvy

Reading this morning’s New York Times story, Mobile Phones Become Essential Tools for Holiday Shopping, I was reminded again of the fundamental shortsightedness of so many of our economic decisions, that flaw in human nature that makes us seize on temporary advantage without thinking of the long-term consequences.

The article focuses on the use of applications like ShopSavvy and RedLaser to do comparison price checking while in the store. On the surface, these are great tools for consumers (and there are other applications besides price comparison.) But remember, cutthroat pursuit of the lowest price will hasten the demise of many retailers, while strengthening others (usually, the biggest and most efficient, who can make money on the slenderest margins.) But what happens once those mega-retailers are the last one standing? Prices are likely to go up.

Particularly troubling is the trend to shop in the store, but then to buy online. From the Times article:

Matthew Tractenberg, for example, was recently shopping in a Silicon Valley bookstore, where he picked out five books for a total of $80. Before taking them to the counter, he typed the titles into the Amazon app on his BlackBerry Curve. Amazon had the books for $50 and would not charge sales tax or shipping. He placed the order on the spot and left his small pile of books in the store.

I wrote about this problem in a 2003 piece entitled Buy Where You Shop:

A few months ago, I was talking with one of my most loyal retail customers, a specialty computer bookstore in Massachusetts. “We survived the chains, and we survived Amazon,” he said, “but I don’t know if we’re going to survive the online discounters. People come in here all the time, browse through the books on display, and then tell me as they leave that they can get a better price online.”

Now, you might say, as the Hawaiian proverb notes, no one promised us tomorrow. Businesses, like individuals and species, must adapt or die. And if the Internet is bad for small, local retailers, it’s good for the online resellers and it’s good for customers, right?

But think a little more deeply, and you realize that my friend wasn’t complaining that people were buying books elsewhere. He was complaining that people were taking a service from him–browsing the books in his store–and then buying elsewhere. There’s a world of difference between those two statements. Online shopping is terrific: you can get detailed product information, recommendations from other customers, make a choice, and have the product delivered right to your door. But if you aren’t satisfied with the online shopping experience, you want to look at the physical product, for example browsing through a book in the store, you owe it to the retailer–and to yourself–to buy it there, rather than going home and saving a few dollars by ordering it online.

Think about it for a minute: the retailer pays rent, orders and stocks the product, pays salespeople. You take advantage of all those services, and then give your money to someone else who can give you a better price because they don’t incur the cost of those services you just used. Not only is this unfair; it’s short-sighted, because it will only be so long before that retailer closes his or her doors, and you can no longer make use of those services you enjoy.

The piece struck a chord with booksellers. Many laminated it and hung it by the shelves in their stores. But it didn’t make much difference. The store owner who inspired the piece did end up shuttering the business.

Maybe it’s all for the best, part of the creative destruction of capitalism. But as a consumer, it’s wise to realize the long-term implications of your choices. Shop at the big box store for the better price, and lose the small local store that was so convenient; browse the shelves or racks in a brick and mortar store, then buy online? How long do you think you’ll be able to do that?

My advice remains the same as it was in 2003: Buy where you shop. If you discover a product online, buy it there. But if you discover it in a store, buy it there. Don’t save a few dollars now, and lose the opportunity to shop at a local merchant in the future.

Of course, if you’re happy to lose local bricks-and-mortar merchants, that’s your choice. I’ve never been much of a physical shopper – I do most of my shopping online, and I love the convenience. But when I do go to local stores to browse physical products, I make sure to buy there, even if there’s a better price online. I’m paying a little extra for that right to walk up and touch the product before I buy it.

tags:
  • Jacem Yorob

    Is it possible that the product and the service of providing the opportunity to examine the product might be decoupled? I’m envisioning ‘product experience centers’ where people would pay a small fee in exchange for the chance to get their hands on a product, and then a computer system would automatically find the best price available, whether online or off.

  • Michael R. Bernstein

    There probably isn’t much to be done for brick-and-mortar stores except to emphasize the possibility of walking out of the store with the product *right now*, as opposed to waiting for a delivery, but that requires more emphasis on books and other merchandise as desirable physical objects.

    Because when you toss ebooks and other non-physically-embodied formats into the mix, even that slim advantage goes away, and you can get immediate electronic delivery.

    We’re already seeing moves in this direction such as ‘avit: http://avitapp.com/

    Now, ‘avit is interesting because it tries to point the user to an electronic copy that the user (or their employer) have already paid for (via a Safari subscription), rather than trying to drive a new ebook purchase, but if Safari doesn’t have the book in question, it does redirect you to Google Product Search.

    So, as far as anything that has an electronic substitute is concerned, I expect things to get considerably worse.

    For other purchases (for example clothing), we may see an increase in items that are exclusive to a retailer, whether because the retailer *is* the brand (and this doesn’t care if the purchase is made online), or through retailers demanding exclusivity deals.

  • Jonah Horowitz

    I agree with this, but with the exception of chain retailers – I have no moral problems with looking at something in a Williams Sonoma store and then going to buy that same item somewhere online. If it’s a local retailer, I’m happy to reward them with my business.

  • Ben

    How about a hybrid approach based on quality.

    I’ve been disappointed several times by products that look and feel great, but actually operate horribly.

    1) Feel free to compare online for quality
    2) If there is an acceptable product in the store, buy that
    3) If there is not, then feel free to buy online.

    Thus some fraction of the value (physically holding, skimming, etc) is derived from the store, some from online (reviews), and each place is compensated by a fraction of the sales.

  • Mr. C

    Jonah, I fail to see the difference in your distinction — both have fixed “brick and mortar” costs they need to cover.

    This feels like a micro version of the macro global outsourcing / “free trade” problem — if price is the only (or primarily determining) influencer or purchasing decisions, “local community” quality of life is almost doomed to suffer in some ways.

    People complain about their own wages, and then essentially haggle the heck out of merchants with their own purchases.

    What comes around, goes around.

  • Patrick

    Of course, then you have the big box stores that somehow think it is smart to trash the hands-on advantage they have and only have empty shells to look at. Try to look at cell phones at big box stores. “Have any working models?” “No, sorry.” “Can this appliance be plugged in?” “No, sorry.” Always makes me wonder why I’d need a brick-and-mortar store.

    So, I can look at the shape of the thing but am not allowed to see the most important aspect, which is how it works. If I’d be able to do that, I might be so enthralled that I want to have it, right then and there.

    Stores like that are making themselves obsolete. If I go online, I can just as well look at the thing, and I can get actual specifications instead of having to rely on a store clerk that knows nothing but is too proud to admit it and just tells you nonsense instead. And I can see what other people who own the thing thought about it.

    Retail stores should understand that and take advantage of the one thing they have left: the ability to satisfy instant gratification.

  • Alex Tolley

    I think Tim is indulging in some fine nostalgia for the past. It feels all warm and fuzzy for a few minutes and then reality sets in. Take books as an easy case. At some point bandwidth will allow Amazon to provide the virtual bookstore experience, with a real “look inside” capability. Couple that with either eBooks or print on demand, and then what do brick and mortar book stores become? Places to smell used books and browse the small, random selections of books the store has. Does the owner’s knowledge and experience even compare to the reviewers? I’m not that convinced that the loss is all that great.

    In the wider scope, who even buys local gifts for friends when traveling any more? Why schlep stuff thousands of miles when the same items can be shipped cheaply from anywhere to anywhere? Farmers markets growth to the contrary, localized retailing is dying.

    I sympathize with Tim in that the face of local towns will change. High street retailing will eventually largely disappear, being replaced with establishments that serve what you need now, not in a few days – restaurants and bars. (That seems to be very obviously happening to London). Pretty seaside towns will lose a lot of what we think of as their old character. But a few generations hence, doubt that most people will even care or realize what the ‘old days” were like.

    I do accept the premise that Amazon and its ilk could become a dangerous monopoly, but I think the solution is to ensure competition in the online space, not put up false barriers to the approach.

  • Mark Sigal

    Tim,

    One of the toughest lessons I’ve learned from watching consumer behavior over the years (relative to retail – my career before tech) is that customers will repeatedly cut their noses off to spite their face in the LONG RUN if they can gain some tangible perceived benefit in the SHORT RUN.

    This has obviously played disturbingly well with the race to the bottom that you speak of, and is a real paradox for businesses dealing in (largely) commoditized products.

    The key, I believe, is for these same retail businesses to “solve a different problem” than Amazon, et al that either rewards loyalty or captures dollars that can be unbundled from the product purchase (as another commenter suggested); no easy or obvious task, to be sure.

    Regards,

    Mark

  • R. Moose

    While it isn’t the same as buying books, I do like SEARS approach in some of their stores in regards to shopping for applicances where they have the a computer to ‘shop’ onlina and even let a friend use a phone to do some price comparisons.

    The salesperson stressed SEARS strengths in comparison to their competition and was decent in handing price differences.

    On the other hand, PROGRESSIVE has been dealing with price and competition by doing a similar thing.

    Considering that REDLASER (from what I understand) is getting affiliate kickbacks on some purchases, I would like to set up a price comparison Kiosk in some bookstores (and other retailers) where you scan your item and get the price, but it also gets your ‘competitions’ price AND lets you order it on the spot if you want. Some people will want instant gratification, others want to save $but you can pick off 5-15% of the sale using a rather fixed cost KIOSK.

  • Jeremy Geiger

    Good post.

    I envision Virtual Assistants evolving to be of true value to consumers. Imagine being able to define the value you place on your personal time (i.e. $50 per hour), the weight you give to other attributes (how green is the product or retailer, parking availability, etc.), the urgency to have the product, etc. and then getting a personalized recommendation of where to buy?

    The results might surprisingly drive a lot of foot traffic to local retailers. Assuming $5 for shipping, buying online might not make sense for products less than about $10. Also for heavy objects (think home remodelling) with high shipping costs, products that you need to see and feel (i.e. clothing although Gilt seems to be changing that a bit), products you need urgently (i.e. cough syrup for you child), etc.

  • Saidimu Apale

    you owe it to the retailer–and to yourself–to buy it there

    What a disappointing article from Tim. As a previous commenter noted, this seems to be more about nostalgia than about the dangers of ShopSavvy and the like.

    Whatever customers will miss tomorrow, because of store closures today, will be an opportunity for entrepreneurs of tomorrow to offer similar services in the altered landscape.

    The indefatigable logic of capitalism, and the numbers of the “consuming masses”, ensure that consumer choices are rarely short-sighted. An entrepreneur somewhere is always willing to shield consumers from “short-sighted” choices of yesterday.

  • Jeremy Geiger, RetaiLigence

    Retailers just need to get over the psychological barrier of sharing their data, to make those concepts I noted above, a reality. But if local retailers don’t share data, those local retailers will increasingly be marginalized as Virtual Assistants, bar-code scanning apps and image recognition apps, simply ignore their existence.

  • Tim O'Reilly

    Alex, Saidimu -

    You’re not very good at reading closely. I said “if you value the local experience…” IF. If you don’t, no problem.

    And it seems to me that if you’ve gone to the trouble to shop in a physical store (rather than just searching online) you do in fact value that experience. But you’re willing to rip off the retailer for the cost of that experience, figuring some other schlep will make up the difference.

    That’s why I said “buy where you shop.” If you shop online, buy online. But if you shop (i.e. search for products, decide what you want) by going to a physical store, you need to realize that there are costs for providing that experience. If they aren’t worth enough for you to pay the difference, eventually those retailers will go away.

    FWIW, I do most of my non-consumable shopping online, and I buy online, so I’m not hankering for the local store. No nostalgia there. But I do find it disappointing that people who clearly are using the services of a physical store to discover products or to decide what they want to buy aren’t thinking through the consequences of buying elsewhere.

  • Alexander Muse

    I was driving to Nacogodoches (network coverage is spotty at best on Highway 175) when I saw a Google alert for this article. When I tried to click on the article to read it while driving down the road (I don’t recommend driving while reading, but I couldn’t resist) I went through a zone without AT&T Edge or 3G coverage (too bad I didn’t have my Verizon Droid). For the next 35 minutes I imagined what you had written – driving down the highway in East Texas waiting impatiently for my iPhone to switch from ‘Searching’ to Edge or 3G. When I finally got enough service to load your post I was surprised.

    You wrote that ShopSavvy reminded him of “the fundamental shortsightedness of so many of our economic decisions, that flaw in human nature that makes us seize on temporary advantage without thinking of the long-term consequences.“ He suggested that pursuit of the lowest price will ‘hasten the demise of many retailers’ and ultimately result in increased prices.

    First, I think your premise is flawed. Eliminating mega-retailers won’t increase prices – the internet will make sure of that. Second, to suggest that applications like ShopSavvy are somehow to blame for the demise of mega-retailers is sort of silly. If mega-retailers are on the way out it won’t be the fault of applications written by a tiny company in Dallas, Texas. Why did Circuit City fail? Circuit City did not lose to the internet, it lost to Best Buy. Best Buy stores were better stocked, easier to navigate, staffed by employees who seem to care and often have great deals. For every purchase I make online I make four in a local retailer like Best Buy. If Tim is worried that ShopSavvy somehow takes away from mega-retailers I think he should realize that the real culprit is the internet itself.

    The moment the internet was created retail shopping was forever changed. The internet made information about products and pricing available to anyone with a computer and more recently anyone with a smartphone. Savvy shoppers have been checking online retail prices from the very start (see Amazon.com). I wish your article had been titled, “Why using the internet to shop might not be so savvy.” Ironically ShopSavvy can provide a retailer with the ability to understand and respond to a shopper’s behavior. Shoppers who just use the internet are simply lost from the retailers perspective. I would argue applications like ShopSavvy might be the BEST thing to happen to local retail in a long time.

    At the end of the day I don’t agree with your premise, but I could respect it more if it called out the real culprit. You explain that you rarely shops in physical stores, “I do most of my shopping online, and I love the convenience. But when I do go to local stores to browse physical products, I make sure to buy there, even if there’s a better price online. I’m paying a little extra for that right to walk up and touch the product before I buy it.”

    I have a dirty little secret I would like to share with you: 100% of retail shoppers know that they can buy everything cheaper online. They don’t need ShopSavvy to explain this to them. ShopSavvy organizes information (reviews, pricing and inventory) about the products our users are interested in buying. Ironically, the most compelling part of ShopSavvy is how it helps users discover local prices and inventory. Our data shows that users spend 75% more time clicking on local prices than online prices. They want to know that the store next door sells the same item for less AND has it in inventory. If shoppers were to follow your advice they would be compelled to buy an item regardless of price. If I was a retailer and saw you coming into my store I would mark everything up 500% knowing he would pay the markup.

    I suspect mega-retailers would prefer that you do more of your shopping in their stores even if he continued to buy most everything online. I don’t think they would be offended at all. If you shopped in Best Buy you might be surprised that Best Buy would match online retailers like Amazon.com. Mega-retailers like Walmart, Target and Best Buy all focus on price. They claim to have the best prices, they price match and they offer in-store deals all of the time. Some retailers like Nordstrom focus on service – I buy clothes at Nordstrom because they help me buy clothes – I do not buy clothes at Macy’s because they focus on price. Retail is changing – the internet started it. ShopSavvy won’t be the demise of retail. Anyway, thanks for the mention Tim (surely we will get a few more downloads because of it).

  • todd Daniel

    Quality and Price(margins) competitiveness is a hallmark of business and sales. Who cares if one place(whether cyber or Brick & Mortar) has something made in China cheaper than the other place? If it is a competing product made in the U.S.(or even outsourced production from) then it is either something China does not make(or knocked off) yet and or it is going to have to be competitively made and distributed as well. If we ever have a manufacturing sector again it will need to be lean and mean and employ price competitive components and likely have just-in-time production and logistics systems too.

    American consumers do not have to pay through the nose for shoddy quality or inefficient pricing structures just to keep mega-retailers brick and mortar/internet operations in business. They have run main street mom&pop into the ground with cutthroat pursuit of the lowest price point. If they have to rethink their strategy now and get some new competition from low overhead mom&pop with internet storefronts now, who cares? Wallstreet investors in mega-retailers?

    Informed decision about purchases whether price-centric, quality and about feature and benefits; Is “Where its At”! This is how people who lived through the last Great Depression used to shop, albeit without the internet.(my grandma{saved and had plenty of money} would call every retailer within a hundred miles and ask them to hold the one she choose before getting into the car to go make the purchase.) Back to basics, something very integral is missing in this argument I think. We don’t owe Retailers and manufacturers anything. Our patronage or purchases, will revolve around our own criteria and perhaps their new ways of thinking about quality, efficiency , production and delivery cost to consumers. Did I miss something?

  • Tim O'Reilly

    Alexander -

    I think you miss my point. Finding the best price is not a bad thing, if you already know what you want and are simply shopping for the best price. But if you are in a store and discover something there, they have provided a “discovery” service for you that you should be willing to pay for. If you don’t pay for it, it won’t be available any more. What I was trying to point out was the danger of optimizing only the price.

    I actually love the idea of shopsavvy and redlaser – the ability to learn more about things as you encounter them is the wave of the future – but I think it’s a mistake to focus only only the “lowest price” aspect. The end game of that business model is that everyone has to offer the same price (or go out of business.

    I’m mainly making a point about the fact that people miss externalities. It’s the same short term economic calculus that makes it so hard for us to deal with climate change, for instance.

    Todd -

    I totally agree that we don’t owe retailers or manufacturers anything. But we do owe ourselves an understanding of the consequences of our actions.

    In the end, these dynamics will play out in the marketplace, and we’ll evolve new equilibria. I’m not crying doom and gloom – the capitalist system is quite robust over the long term. But I do think that people don’t always think through the consequences of their choices.

  • Alex Tolley

    @Tim: ‘”You’re not very good at reading closely. I said “if you value the local experience…”‘

    I think I read your article OK. No fair, you quote a phrase that you don’t actually use…

    The argument you are making is the same one that has been made for as long as I’ve been alive. Buy from the city corner store, not the grocery store located on the edge of town. The arguments for expensive local stores have always been convenience, a more personal shopping experience, a wider selection, etc. Now the online stores are besting the bricks and mortar stores and the lobbyists are out demanding that state sales taxes be paid by all online stores to try to ‘level the playing field’.

    But let’s look at the other side of the equation. Bricks and mortar stores, especially the larger ones, have used their muscle to displace homeowners to site their big box stores and extracted local tax concessions. They can be a blight on the local economy. Local high street stores in most US cities are not close to where people actually live any more, so this means driving and parking in towns, requiring parking structures and spoiling the small town and city center experience with traffic congestion and gasoline fumes. I think there is a good, if extreme, case to be made for shopping online – it is more efficient to transport goods bundled in trucks with efficient routes than driving a personal truck or car from home to store[s] and back.

    I for one would like towns to be far more pedestrian friendly, with clean air so that I can eat at local restaurants, outside on a piazza, like the southern European model. Making shopping work without needing a car might go a long way to reducing the city congestion and making cities and towns more livable again.

    Sorry for the rant, but the vision of what you are suggesting is desirable, is IMO, one seen through a rather cloudy lens. I will however note in passing the irony of my position in having lamented the loss of bookstores in malls in Silicon valley (but I am getting over it).

    Happy holidays to everyone!

  • DANIEL maina

    Tim O
    As much as you trying to rationalize the whole idea of buy where you shop, at the end of day, we like bargains, so my advice to retail shop, if history has taught as anything, for one to thrive adaptability is envitable, so let them style up, be a bit flexible.

  • Srinagesh Eranki

    I don’t see what there is to misunderstand here. Tim is not denying your right to spend your money where you see fit. Nor is he siding with one format over another.

    We all need to be aware of the consequences of our actions, however trivial they may be. The march of capitalism will take its toll. We need to be mindful of our role in that. Whether we choose to pay heed or not, is entirely up to us.

  • John H

    I have did exactly this when buying Xmas gifts. I found a £30 (US$48) book attractively displayed in a bricks and mortar shop, then decided look for it on Amazon.

    Amazon had it for £17. A whole £13 (US$20) saved.

    I could bear paying, say, £5 for the service of having the book presented to me. Indeed, I wouldn’t have found it otherwise. But not £13.

    Physical shops don’t necessarily need to be as cheap as online shops. But they do need to come close.

  • Benoit Maison

    @John H

    I think you make a good point. Some feedback we get from the pic2shop users is that they use it as a sanity check.

    Of course, everybody knows that it is often cheaper online (but not always!). People want to be reassured that they are not paying a lot more in a brick-and-mortar store.

  • Tim O'Reilly

    Alex -

    Just to be clear, I agree with you that big box stores have had, on the whole, negative impacts on our society. They are part of the rush to the bottom that has made the US a debtor nation. We want our stuff as cheap as possible, so get it made by sweatshop labor. I’m not suggesting that customers protect the big box stores – or protect anyone, for that matter. I’m simply suggesting that consumers be aware of the long term effect of their choices.

    Alexander -

    I don’t think that “the internet will take care” of always providing low prices. Markets go through an evolution. In early stages, barriers to entry are low, and there are lots of providers. Later on, the big get bigger on the internet, just as they do in the physical world. And the big have different motivations once they get bigger.

    Consider the case of Microsoft. They were part of a revolution that brought down the price of computers by orders of magnitude. They made that revolution happen. Yet over time, by doing so, they became so dominant that they made it impossible for other PC software vendors to thrive.

    Sure, the internet came along and leveled the playing field again, but it took quite a while, and in the meantime, choice was reduced and costs were higher than they’d otherwise been.

    We’re seeing that play out right now in online retail. There’s a war on, with price competition one of the weapons. But once the war has been won, no more need for price competition, and the winner will reap the rewards of their victory.

    The reason is that the winners get economies of scale. Their costs become lower, and the new entrants can’t compete.

    Now, if the top-of-the-heapers get complacent, competition eventually comes back.

    But I guess overall, I do have to agree that I am being nostalgic – but not for an era of small retail, or for bricks and mortar over online – but for a world that had other values than “the best deal.”

  • Tim O'Reilly

    Alexander -

    I do owe you a bit of an apology – I used ShopSavvy in the title because it made for a catchy headline. (As you point out, though, the added attention will likely get you more downloads). My article was primarily reacting to the story of the guy who found his books in the bookstore, then gleefully dumped them and went to buy them online. Why didn’t he shop there in the first place? Because the tools to find them weren’t as good. So he really was taking a service from the local store, and not paying for it.

    I totally agree with you that the internet is a boon as an information resource for shoppers, and that a tool like ShopSavvy can bring to the offline world the kind of in-depth research that you can do when you’re looking at a specific product online. Anyone who doesn’t have ShopSavvy, RedLaser, or a similar product, on their phone is depriving themselves of a valuable tool.

    I’m sure that I will find times when I will use ShopSavvy myself – I totally see its value. If I know what I’m looking for, and I’m trying to find the best place to buy it, or I’m trying to choose between multiple products and I want to know which one is most highly recommended, or what the price spread is, then more information is better.

    I’m purely addressing the case in which someone uses a retail location for product *discovery* but then buys somewhere else for a lower price. That may even be OK if you’re confident that the other place will offer you the same product discovery options. It’s short-sighted if you end up killing the service you really liked (i.e. the ability to shop for things that catch your eye, curated and displayed by the retailer) just to save a few dollars.

  • Tim O'Reilly

    John H and Benoit -

    You make a really good case. Price verification – the spread between the local purchase and an online purchase (or a cross-town purchase) is a fabulous use for these tools. They help you to quantify (even if only by gut-check) the value of the local shopping experience.

  • Jim Stogdill

    There is a local camera store where I regularly shop. The staff is knowledgeable and often they have things in stock that I can’t wait for – although this is becoming less true as they carry fewer silver based materials.

    Their prices are significantly higher for photographic equipment than what I can find online, but when I have bought from them they’ve stood behind the product and dealt with the manufacturers on my behalf when there has been a problem.

    I’ve always been disturbed at the sight of someone coming in on a busy holiday shopping day, spending 20 or even 30 minutes with a sales clerk to figure out what camera works best for them, and then leaving the store empty handed. I’m just flabbergasted when they regularly end the conversation by telling the commissioned sales person, “thanks for your help, I’m going to go home and order it online because it will be quite a bit cheaper.”

    My rule may seem old fashioned, but if I don’t need help and the local price premium is high, I buy it online where it is cheaper. However, if I need the help of a knowledgeable person at the shop, I pay the premium and buy it there. I value the local knowledge.

    Also, regarding the collapse of local retail into the big box, prices aren’t the only thing to change once they have achieved local hegemony. Choice is damaged as well as our retail experience is homogenized. Even the most well stocked big box will never carry as much variety as a thriving eco-system of local businesses.

    Yep, i’m openly nostalgic. I can’t help it. I like people and the relationships I develop over time with local businesses are meaningful to me.

  • Jeffrey Yu

    “But if you are in a store and discover something there, they have provided a “discovery” service for you that you should be willing to pay for. If you don’t pay for it, it won’t be available any more.”

    Isn’t it the store’s responsibility to set a price for a service that keeps it profitable? If the price for “discovery” is zero, then the presumption has to be that the store made a decision to price the service at zero because of the advantages it offers the store (more buyers). I think it’s safe to say that the marginal cost of providing this service to one more person is close to zero.

    Whether the store remains a viable business depends on the number of customers who value immediate satisfaction over lower prices. If that number is insufficient to cover the store’s fixed costs, then the store will close. The way it is now, stores bundle the price for the discovery service in with the price for the immediate satisfaction service. They overcharge customers who don’t need the immediate satisfaction service while at the same time making that charge optional. There’s little wonder, then, that those customers choose to avoid the overcharge. The store would be better off attracting more customers who don’t have the ability/motivation to wait or finding some way to charge only the discovery price to customers who can wait.

  • Anthony Qaiyum

    As a small but thriving retailer who has two brick and mortar stores in Chicago (Merz Apothecary – established in 1875) and an ecommerce business for the same products (Smallflower.com), I have to say that I think Tim makes some great points and I will always have a place in my heart for local retail, but I also understand many of the comments of those who disagree with him.

    We specialize in hard to find items from around the world, which is much different than books or electronics. I bring this up not just to talk about my business, but because I think it holds a clue to the middle ground between the nostalgic local retail model that some yearn for while others seem to detest and this vision of a total lack of local retail that many fear. We’re lucky to have our flagship store in Lincoln Square, which is a very European-flavored Chicago neighborhood that is considered one of the most livable in the country. We are lucky for that. We also have very few chain stores, yet for the most part retail is thriving here. Yes, much of it is dining. But here are some of the thriving retailers on our block: my store, Merz Apothecary – a 134 year old European pharmacy and personal care shop; Gene’s Sausage Shop – a just opened multimillion $ European delicatessen; a guitar repair shop; Timeless Toys – a phenomenal toy store specializing high quality, non-mass market toys; Marbles the Brain Store – a store focused on products that improve mental dexterity and memory; The Chopping Block – a high end kitchen store and cooking school with multiple demo kitchens and daily classes and parties; Salamander Shoes – the famous European shoe brand; and The Book Cellar, a book store and wine bar/cafe with a high number of readings and events. There are even more that I could mention but I think you get the picture.

    Yes, we are very fortunate, and I know such a retail selection is by far the exception rather than the rule. But I notice there are predominantly men commenting on this post and the majority of comments have been about books and electronics/cameras. For the most part, these are not products that require local retail anymore. That is sometimes sad to me. And often it is great because I can discover books or certain electronics that I might not have done in the limited selection of the store. Also, for electronics, the price point is often high enough and the knowledge base online is often strong enough that I don’t have to even think about wasting a retailers time and then go buy it online. (As a consumer, that is just the lamest thing you can do. I agree with Tim 100% on that.)

    But the things that are thriving in our neighborhood are products and categories where the experience is not just limited to knowledge needed before making a decision. So far there is no replacement for smelling and testing that unique French fragrance, or sniffing that bar of Saffron Soap from India. You are also unlikely to talk to our pharmacist about a natural remedy for your toddler’s persistent cough and then decide to go see if you can save $2 and wait 5 days by buying it online. A digital picture of a great sausage with a good description online is no replacement for looking at a case filled with handmade sausages and trying a few of the samples on the counter while you decide. If you have a guitar that needs repair you probably want to take your “baby” in to someone personally and describe exactly what is wrong, and then pick it up yourself. You get my point.

    The Internet has taught my company a great deal about where we think local retail is going. My father had no price competition for the first 33 years he owned the business (since 1972). That’s not the case now. We’ve lowered many prices. We’ve tried to keep finding new unique products that others don’t have. It’s changing for sure. To be honest, it’s made us better more nimble retailers. But I am very thankful that we are in a category where the experience of the products is so integral to the shopping experience. I think that will be the face of local retail to come. And I think if more shopping were a pleasurable experience for the senses, less of us would say we don’t really enjoy physical shopping.

    Look, don’t shop for things in stores if you don’t care about them being in stores. But I think Tim’s point was to think about what you would miss and do care about having locally and then use your dollars to make sure that they stay around. And if you think the price disparity is too high, go into your local retailer and say: “Hey, I’m really glad you’re here and I want to buy from you, but I can get this so much cheaper online. I don’t mind paying you something more because I appreciate being able to come here, but is there anyway you can bring your prices down a bit?” As a retailer, I can tell you that would be a lot better than you never saying anything and going online without telling me. Just a thought.

  • Tim O'Reilly

    Anthony,

    Your insightful comments have made this whole thread worthwhile. I really like your point about the lessons here for local retailers. As well as your understanding of the message I was trying to get across.

  • Alex Tolley

    As Robert Heinlein once said, if you want people to do something, don’t appeal to their finer instincts, appeal to their baser ones.

    Retailers should understand that price is important (that’s why they have buying departments to get the lowest price from suppliers) and that online retailing will remove a segment of the market that is both price sensitive and does not need immediate gratification.

    Local, brick and mortar retailers can respond by:

    1. Catering to immediacy. If I need that umbrella now, because it’s raining, then there is a role to play. As Anthony says, you are not likely to run around price shopping for that cough remedy for your children.
    The largest category that fulfills the immediacy need is restaurants. So expect them to expand relative to other retailers.

    2. Uniqueness. I don’t think it is a coincidence that craft and local gift shops are doing relatively well. Anthony makes the point that you cannot smell the fragrance online. But more important is that scented soap or candle that is made in limited quantities and not available online. Clothes designers can do well in this market, and local boutiques will remain important as distribution channels in this regard.
    Unique offerings need to be inspected at first hand, whether clothes, scented products or services and the knowledge cannot be transferred to the online world. Used books sometimes fall into that category because they are not as uniform as new books and the current granularity of used book descriptions is poor.

    3. Custom services. If I need tailoring or alterations, I cannot get that (easily) from an online retailer. This ensures a role to play for the local retailer that offers those services in addition to the physical goods.

    4. Low value goods where mail charges erode savings or returns are common. Also, nothing is more annoying than needing to spend money returning a product, or dealing with remote, indifferent retailers to return requests and credits.

    5. Locality. Services that must be done to a physical object and locally cannot be done online or even by mail. Installing automobile components and repairs fall into that category, as do the host of service businesses that cater to consumers.

    In other words, I expect that the mix of retailing categories will change. And this might even bring about more diversity of retailing. If some retailers abandon the high street or the mall, this opens up slots for new retailers and might reduce rents to allow a more eclectic mix of retailers to emerge. I think that might be a lot better than trying to protect existing retailers.

    Anthony, I take your last point about telling the local retailer about his pricing seriously. I had assumed the retailer already understood this, but perhaps I was wrong and that communication might change this. I’ve just been jaded by the “if you don’t like the price, go somewhere else” attitude that has been my lifetime experience.

  • Jim Stogdill

    One more comment. It’s important to realize that local stores don’t charge more because they are dumb, they frequently charge more because their suppliers charge them more. I’ve had many conversation about this with my local camera shop. Their prices seem absurd until you realize that the manufacturers charge them a much higher wholesale price than they charge volume online retailers like B&H.

  • Dan Thornton

    My purchase decisions are based on two things, which are the price and the quality of the experience (whether that’s great service, an interesting experience, etc).

    Bricks and Mortar retailers can’t compete on price, and shouldn’t try (Although the major bricks and mortar chains will survive for a long while yet). But the survival of small local shops is in providing something which is memorable. I bought my last television offline because I received amazing service, and I often split grocery shopping between a few local retailers who each provide an amazing service for specific items.

    At the same time, my book shopping is entirely on Amazon, because there are no decent bookshops in my hometown and I don’t often get the chance to browse when I’m at work.

  • DaveC

    Jim, you make a good point about what the small retailers are fighting. I was talking with the manager of a small music shop — he showed me a popular mic for vocals and said: “My wholesale price on this is $1 less than the on line price at Musician’s Friend.”

    Different sub-topic: My favorite peeve for brick-and-mortar shopping now is going into the shop and either not getting any service or not getting knowledgeable staff. Why am I there in the first place, then? My second peeve is when the brick-and-mortar shops churn the SKU’s they carry so much that I can’t find things I used to buy there. Both of these peeves are different aspects of reliability. I must know that driving over there won’t be a waste of time.

  • Sarah Schacht

    Interesting that all the comments here are from men (with the possible exception of Alex). I point this out because men are, frankly, less likely to shop for quality or experience, or because they are looking for something in particular. The important nuances of shopping are largely lost on your gender, and boiled down to simple, seemingly rational arguments of time, money, connivence.

    Clearly, none of you have had to shop for a pair of woman’s jeans.

    Or had to carefully select a quality pearl necklace.

    Or discern, from a sea of home medical accouterments, which type of food-thickening powder would be appropriate to mix into a particular type of food for a grandparent with a particular swallowing challenge.

    Sure, I’m sure you can make those choices online. But there’s a level of risk–even with lots of reviews and stars and Roman Crowd Technology–that you’ll pick the wrong one because it isn’t the *exactly* right item for *your* particular needs.

    That’s where a good, trained, helpful, knowledgeable sales person or pharmacist, or jeweler comes in. Recommendations, deep brand knowledge, or ability to apply research is immensely helpful to shoppers——–and as much as Amazon.com wants to select another Christina Aguilera CD for me— it will never know what I will want to listen to on a cold winter’s night.

    But that indie/hipster record sales guy (who’s bassist in a local band), standing Sonic Boom’s counter? He’s gonna find me my new favorite song.

  • KDT

    One related point not yet been mentioned is the sales tax generated by bricks-and-mortar transactions–the very taxes that help support (in part) police, fire, parks, education, and many other activities of state and local govt. On the short-term/long-term calculation, the decision to avoid local sales tax has financial *and civic* ramifications for that consumer (and for the rest of us). It’s just something additional to consider, along with local employment and the jobs, income, and taxes that employment generates. Consumer activity is the primary engine that drives much of our local and national economy; we all will pay, it is just a matter of now or later and what that tax is called. Personally, I think we could help solve this by instituting a natl sales tax that accrued back in part to the state/locality of the consumer. The “waiver” on collecting internet sales tax was rationalized way back when as a way to jump-start online commerce; surely we can all agree that that special dispensations have fulfilled that purpose.

  • streetstylz

    Regarding ShopSavvy & RedLaser:

    It should be noted that NeoMedia Technologies grandfathered this technology back in the mid 90’s and have been doing mobile code scanning and comparison shopping via barcodes long before any other company in this space.

    NeoMedia on ABC & NBC News circa 2004:
    http://www.qode.com/videos/PaperClickOnAbc7.wmv
    http://www.qode.com/videos/PaperClickOnNbc8.wmv

    NeoMedia has a rich patent portfolio that covers scanning barcodes with a camera enabled mobile device to connect to the Internet, comparison shop, and/or retrieve online content.

    http://www.qode.com/en/patents.jsp

    Alexander Muse and the creators of ShopSavvy are trying to cash in on an idea that was patented by NeoMedia more than a decade ago.

  • todd Daniel

    http://online.wsj.com/video/news-hub-comparison-shopping-with-new-apps/21D266B5-C929-4779-82FE-08ABFE1F5407.html

    Srinagesh, Example: In the late 70’s and 80’s in this capitalist country their were dealership boycotts against Japanese auto imports even events to pay to smash an import from Japan with a sledge hammer. The argument was the import were taking away union jobs in Detroit and elsewhere, and that the vehicles were dumped unfairly from across the Pacific in our Domestic market. The Japanese were not unionized. This anger sentiment directed at Japanese(actually at Quality and value) did not change anything in the long run. The Japanese started factories here domestically, hired Americans and taught the quality Mfg. techniques. They also invested in and established their own dealerships and networks well. In short they competed full court and continue to do so.

    It is a pity G.M. and other car makers prestige and market share world wide had suffered and been overtaken by Toyota/Lexus. Toyota still has parts available for 1970 Land-cruisers on the job in Africa and in the Australian Outback. The Irony is that, the U.S. Auto industry (and many other industries) generally(except Ford) did not pay attention or continue to follow one of their own best strategist; William Edwards Deming

    The current retailers de-lima is not about showroom overheads most have online sales as well too. They just need to be re-reviewing Deming’s 14 points(from the book Out of the Crisis. (p. 23-24)) and implementing Demming’s; System of Profound Knowledge, consisting of four parts:
    -Appreciation of a system: understanding the overall processes involving suppliers, producers, and customers (or recipients) of goods and services (explained below);
    -Knowledge of variation: the range and causes of variation in quality, and use of statistical sampling in measurements;
    -Theory of knowledge: the concepts explaining knowledge and the limits of what can be known (see also: epistemology);
    -Knowledge of psychology: concepts of human nature.

    That is “back to the basics” from my perspective. The way forward, we’ve forgotten.

  • todd Daniel

    http://online.wsj.com/video/news-hub-comparison-shopping-with-new-apps/21D266B5-C929-4779-82FE-08ABFE1F5407.html

    Srinagesh, Example: In the late 70’s and 80’s in this capitalist country their were dealership boycotts against Japanese auto imports even events to pay to smash an import from Japan with a sledge hammer. The argument was the import were taking away union jobs in Detroit and elsewhere, and that the vehicles were dumped unfairly from across the Pacific in our Domestic market. The Japanese were not unionized. This anger sentiment directed at Japanese(actually at Quality and value) did not change anything in the long run. The Japanese started factories here domestically, hired Americans and taught the quality Mfg. techniques. They also invested in and established their own dealerships and networks well. In short they competed full court and continue to do so.

    It is a pity G.M. and other car makers prestige and market share world wide had suffered and been overtaken by Toyota/Lexus. Toyota still has parts available for 1970 Land-cruisers on the job in Africa and in the Australian Outback. The Irony is that, the U.S. Auto industry (and many other industries) generally(except Ford) did not pay attention or continue to follow one of their own best strategist; William Edwards Deming

    The current retailers de-lima is not about showroom overheads most have online sales as well too. They just need to be re-reviewing Deming’s 14 points(from the book Out of the Crisis. (p. 23-24)) and implementing Demming’s; System of Profound Knowledge, consisting of four parts:
    -Appreciation of a system: understanding the overall processes involving suppliers, producers, and customers (or recipients) of goods and services (explained below);
    -Knowledge of variation: the range and causes of variation in quality, and use of statistical sampling in measurements;
    -Theory of knowledge: the concepts explaining knowledge and the limits of what can be known (see also: epistemology);
    -Knowledge of psychology: concepts of human nature.

    That is “back to the basics” from my perspective. The way forward, we’ve forgotten.

  • Evelyn Wood

    There is a whole boatload of subjective drivel going on here. Even if one has some intention to buy where they shop, they are not going to shop without limitation on price. So, the real issue is whether the price in the store is close enough to the price online to make it worth the difference. The solution is for the brick and mortar retailers to offer a better price. Lots of retailers match prices. Why not book retailers.

    Why not indeed.

    We already know they get the books and magazines on consignment. The magazines get read either way and the advertisers are happy.

    You may as well wish to eliminate public libraries. Try buying there.

    Anyway, the point is, the retail booksellers need to offer something unique. They currently are the best place to browse. Maybe they need to charge an entrance fee.

  • Kishore Balakrishnan

    Very useful post and comments.. aka the subtle difference between being savvy and schlep online and offline..

    Should Amazon (et al) make it easier for associates to mark such finds at indie bookstores when posting a link on the web… so that there is a possibility to forward a share of online buys via such links to the indie bookstore

    This thought came about after the post http://www.mindbodygreen.com/0-117/MBG-Bookshelf-Laird-Hamiltons-Force-of-Nature.html – if short of time.. read the first and last 2 paragraphs..

  • Mark Drapeau

    Was in a “small” NYC bookstore yesterday and kept this article in mind. Bought the three books I truly discovered there and carried them; will order two I “re-discovered” from Amazon.

  • Roro

    You seem to have spare cash.

  • Tim O'Reilly

    Roro -

    If you take service from a merchant (examining the goods in their store) and then pay someone else for a better price, eventually you lose the ability to do that shopping. That’s what’s called “penny wise and pound foolish.” (That’s British Pounds Sterling, by the way.) You save the pennies, but eventually lose way more than you saved.

  • Kim Mason

    Things that can be evaluated over the internet (such as small electronics, books, music, movies) are moving to a complete online model. The reason is that the bricks and mortar stores add no value for the consumer. I can browse books online better than in a bookshop. I can see other customer reviews. There are online recommendation systems that work far better than an underpaid disinterested store-clerk. And, it’s cheaper.

    Things that need follow-up service or actual specialist knowledge, such as some specialist sporting equipment, and specialist tools will stay in physical stores.

    Anything where you need to inspect the good first, such as most clothing, and some gifts, will stay in physical stores.

    And of course all service will stay physical. You can’t see live music or eat at an ambient restaurant at home.

    So really, all online stores will kill are bookshops (no loss in my opinion), CD/DVD shops (ditto), camera and small electronic shops, and a few others. No great loss. I don’t value what these shops provide, and I won’t miss them at all.

  • Tim O'Reilly

    Kim -

    You miss my point. Apps like Shopsavvy are aimed at people who ARE shopping in physical stores. They take a snap of the bar code on a product you’re holding in your hand, and find it for you online. If the online shopping experience were so much better, why would you be in the physical store in the first place?

    My point is that having goods at a location where you can hold them in your hands is a service. If you value that service (and if you’re “shopping” there – that is, trying to make a buying decision, you clearly do value it), you’ll pay for it by buying there, or in future, it will no longer be there for you to enjoy.

    I’m not arguing that any retailer should be supported “just because.” I’m suggesting that using a service that you value and then not paying for it is a good way to lose it.

  • Doug

    Consumers who enjoy physical shopping do themselves a disfavor by comparing in store and shopiing online. But the notion that this will eventually result in monopolies and high-costs is itself, very shortsighted, because if they can not provide competitive prices versus what can be found online they too will go out of business.

    If physical brick-and-mortar retail fails, business will move to the online domain. There will be the same number of competing business, and in fact possibly many more since the cost of maintaining a physical property is prohibitive to many would-be business owners.

  • Noah

    Pricing is determined by supply and demand.

    It is not determined by the composition of vendors in the market.

    If the vendors are all local shops, the price will be the market price. If the vendors are all big-box retailers, the price will be the market price. If the vendors are local shops and big box retailers, the price will be the market price.

    If a vendor’s costs are greater than the market price, they go out of business, the particular causes thereof, or any individual’s personal sentiments, are immaterial.

    Shopping local will only survive if the benefit of shopping locally outweighs the additional cost of doing so.

    Either way the *price* of goods will not change because of this. The price of goods will only change if:

    1. There is a temporary excess of suppliers, in which case the marginal suppliers will go out of business, leaving only profitable enterprises at the market price.

    2. There is a change in customer preference for any given item.

    I can’t reiterate enough that this “put small locals out of business and then the big box retailers will drive up the price” logic is simply not true. There is no “big box vs. locals” axis or line on the supply and demand curve:

    http://en.wikipedia.org/wiki/Supply_demand_curve

  • http://www.eonlinecasino.org/swiss-casino-review Swiss Cas

    I’m reminded of (I think) Bill Gates’ comment – the object of competition is monopoly.