Sunday, January 29, 2006

Onward and Upward

Seems like the topic of the impact of the new local on business has played out. Next step is to discuss the impact of the new local on consumers. What does this mean?

8 comments:

Trevor Gay said...

Trevor ramblings to kick us off .....

Wow Walter – where do we start with this one?

I cannot see any area of everyday life for the consumer that is not affected by the new local. Business, religion, sport, service industry, manufacturing – you name it everything is touched.

I use the following sorry quite a lot in talks. Imagine you have 100 dollars (you see I am even becoming American!) and you want a piece of IT equipment. You go to three shops in the high street and all three have the same product with the identical specification. Each shop has the product at the same price. The thing that will swing your decision is likely to be how you are ‘treated’ by the staff and whether you as the customer are made to feel ‘special’ in some way. That is the only variable left – everything works these days. However there is now another option. You do not even need to leave the comfort of your front room. You order the item online and you do not have to travel to the town centre –pay for parking and load the piece of equipment in your car if you are lucky enough to park somewhere nearby the shop. The item is delivered to your door. Not only that you probably get the product cheaper than the three high street shops. What incentive is there to leave the comfort of your front room?

When I had haircut about 18 months ago the young lady cutting my hair (what little there is of it) advised me she had done all her Christmas shopping. This was about September. She went on to explain she had done it all on line.

Annie and I had some photographs printed by TruPrint after we electronically uploading digital snaps to their server and they sent the hard copies to my daughter 200 miles away. Nadine received the prints within 36 hours of the photos being taken.

All of these examples and millions others you guys could quote show me that nothing is untouched.

I attended a great seminar recently where Professor Gary Hamel spoke and he said there is a company in the States that has a database of 50,000 typical divorce settlements online so that potential divorces can consult that database and see how they are likely to come out of their divorce proceedings. This means they will spend less on expensive lawyer time.

Why have I not been inside my Bank for a discussion with anyone for the last twelve months – Answer - because I now have everything online. Why would I need to go to the Bank?

Your question opens a can of worms Walter and we could write an entire book on this particular section but I have given my views about the implications of the new local on the consumer – In a nutshell – NOTHING IS SACRED

The new local has created the high street on our pc screen – simple as that

Mark JF said...

Impact of the new local on consumers?

It's evident in certain obvious ways: price transparency between local competitors; greater awareness that most everything is cheaper in the US than in the UK (if it's $100 in Birmingham, Kentucky it's £100 in Birmingham, England); greater choice of many things but at the same time massive homogenisation of just about everything (“We've gotta have a consistent brand, fella's”).

I thinks it's also creating an effect where businesses are either massive or niche. There just isn't much middle ground nowadays.

It's also contributing to a “must have it now” attitude and a rapid turnover in model revamps and upgrades. Much quicker obsolescence and less robust products: very little gets repaired, it just gets thrown out.

It's also destroying old bricks and mortar retailers. I'm thinking of buying a new digital camera and I fancy a Canon S80. This would be about £500 from Jessops or John Lewis – two very reputable retailers who'd let me pick one up, handle it, get a feel for it, see how the menu layout looks, how quick it is to access software features, give me a brochure etc. Or I could buy it sight unseen from a number of e-tailers for £299 - £350. Of course, I could go into the traditional retailer, make my mind up and then buy it from an e-tailer. So I get the service from someone who doesn't benefit from the eventual purchase while a low cost, no frills, specialist e-tailer – who requires very little specialist knowledge, just a good electronic trading modus operandi – gets the sale.

It concerns me that specialist sales like this are becoming tougher. I don't want to spend £300 sight unseen. I want to touch the thing before I buy it. But I want to pay as little as possible: it's a quandry. Likewise, I'm not going to buy a TV, car or whatever without trying it out first. Personally, I don't like buying clothes online either. Lands End probably come closest to doing this well with a mail order / e-tailer hybrid, although I had some lousy service from them and have given up. Maybe shops will become showrooms where you can handle a sample but you then order it for home delivery?

(Another thought: it worries me that as people buy online, sight unseen, there's a herd mentality evolving. Consumers look at a headline spec and assess this as a value-for-money proposition. Whether the kit is any good or durable or has some reason for paying a premium for get lost. It becomes, “It's a 7 megapixel model and this e-tailer (who of course would never lie just to shift stock) reckons it's his best selling line so it must be a good buy.” It's like the, “no one ever got fired for buying IBM” shtick you used to see.)

It does work with other things, though. Take another love: music. There's so much of it available that unless you're a flagship store in Leicester Square, the economics of it mean you aren't going to stock that 1971 Judee Sill re-issue that maybe 42 people in the entire UK will want. And if you do, or you order it in, it's going to be a full price, £15 purchase. And when it comes to prices, the big grocery chains flog top 50 CD's for under £10 basically on the, “Anything you want as long as it's Top 50, pile 'em high, flog 'em cheap” principle like the camera e-tailers. (I loathe this principle so don't buy CD's from grocers on principle!) Specialist music stores can't cope with that sort of pricing and then they're not only undercut but also out-ranged by Amazon or iTunes. BUT there's a difference, especially with iTunes: I can preview my purchase. And better still, with iTunes I can decide that absolutely the only Divinyls song I need is, “I Touch Myself” and download that for 79p: I don't have to buy a CD with 14 songs I don't want. Marvellous.

I think Amazon and iTunes provide good examples of the New Local. Look at the communities they've built. You can treat it as a pure and simple transaction. Or you can post a review, buy special offers, create a wish list, send gift certificates, read their “special editor” pieces. These guys – especially iTunes – have created an experience and a community.

hajush said...

Wow, lots of great thinking. Sorry to be late to the party. My "new local" job 1000 miles from my has been demanding nearly all my waking hours recently.

Could it be that the very concept of "consumer" will be rearranged? Our current notion of a pure division between consumer and producer is really less than 100 years old. Not too long ago, most people consumed what they produced (or grew) themselves. There wasn't such a clear division. Everyone produced and consumed. But most folks these days divide things up between workers/consumers versus corporations/producers. The "new local" is changing that. And it's only just gotten started.

Increasingly, it will be more along the lines of participation. Trevor is right about the wide ranging impact. Nothing indeed will be sacred. Paul's writing really inspired me as pointing to where things will go, or at least raising the interesting questions. What would an "open source religion" look like? What would a truly transparent participatory democracy look like? We've not really touched on government yet, but that will perhaps be one of the biggest impacts for consumers, but let's rethink it.

If a citizen of "the new local" truly is able to participate in governance, are they really just a consumer of it? What about open source laws? A wiki constitution? An ebay lobby effort?

The concept of "impact on consumer" brings up that wall Paul speaks about, the wall between the consumer and the producers. But what if the
participation age
Jonathan Schwartz at Sun Microsystems refers to a lot is even more of a big deal than many in the industry believe it is? Imagine if most people were participants sitting on the creative boards of several companies, some small, some large. What if people felt integrated as producers and users of the technologies they were participating in birthing?

I've seen it listed as a marketing tool, but it's more than that. Making your customers your best evangelists. What if your products were so great, they became a cause?

Look at how many people are fanatical about their Apple products. Look at all the people who are happy spending their free time contributing to open source projects. Isn't that a more fun cool place to be than just being a consumer? As a producer and fellow participant, I'd rather feel like my customers were compatriots in a cause, and I imagine it would be much more lucrative than disloyal fickle price minimizing Wall Mart "consumers".

Mark's writing about price wars points out the demise of the old commodity/consumer model. There's only so long the Third World cheap labor is going to be cheap. Keeping a good margin is going to require massive creativity, collaboration, and inspiration. And you don't get that from slaves, indentured slaves or wage slaves. And these days, it's not enough just to be getting your inspiration and creativity from the people on your payroll. You have to get it from your customers, clients, and other stake holders too. So forget about getting your margins from monopolies or "vendor lock in".

"The New Local" is a growing network of mutual association, based on freedom, and it's going to rock our world to its foundations. The only way to win is to play the new game and play it well, and have fun at it.

Walter White said...

Interesting and thought-provoking comments all. In my opinion, the impact on the consumer is perhaps the the most dramatic shift we see in the "new local."

The local marketplace is truly global in nature today. I used to be limited to what was available in my local area for most goods. Today, I literally have the option to shop all over the world for the same item in the blink of an eye. A quick search and I can see 100 retailers of the product I am seeking. This listing also shows prices, terms, and guarantees and often shows ratings by various consumers who rate their service.

It used to be that if I wanted to special order something outside my local area it would take several days or weeks to arrive. Today, with vastly improved distribution and logistical systems, almost anything can arrive overnight - even if the origin is on another continent.

And I no longer have to buy new items only. I can go to Amazon.com and buy both used and new copies of the same book. I can go to ebay and do the same with almost any item.

The efficiencies of marketing and distribution have created a consumer environment where fulfillment is key. The key to reaching a a new local consumer being in the best position to provide fulfillment at the point of need.

Google is perhaps the definitive example of this. Prior search engines functioned according to many algorithms - many based upon advertising and including advertising in the form of banners and flashing icons. Google created a superior search capability that simply did the best job of returning relevant search results. When someone wanted good searches in a hurry they started turning to google because of the quality of the searches. It was only after google had created a superior search capability that they began to include advertisements. Yet even now the advertisements are clearly delineated from the pure search results. When you decide you want to buy something online where do you go? My local storefront is google, is ebay, or amazon.com. What is yours?

hajush said...

Sounds like we've hit paydirt here. The question is, when you've got instant gratification of all your material needs, what's left?

People will want, will need, to be a part of the bigger picture. They'll want to be fulfilled, not just gratified. And true fulfillment means more than products. It means being part of a cause for good, it means being a contributing member of a community. The new local offers that in spades - but it takes action, initiative.

My storefronts Amazon, Google, Froogal, but they're increasingly blogspot and typepad -- not where I shop, but where I participate.

What will commerce look like when it's participatory?

Walter White said...

Harold - in a world where markets are so efficient as to be able to supply most or all of our material needs there does seem to be an opportunity for more altruistic endeavors. It will be interesting to see what happens should we ever reach that nexxus.

In the meantime, how do we as consumers shop in a global "local" market? If you can buy the same item almost anywhere for approximately the same cost how will you make your decision? My own belief is that people will start to spend their money with companies that are aligned with causes or projects or offer some sort of cooperative rebate. Consider examples like:

Patagonia - a long time merchant of outdoor gear with a corporate philosophy of contributing a certain percentage of profits toward groups with an outdoor conservation focus. At one point I know that they even asked they customers for feedback on what environmental organizations and projects should be part of the group of organizations supported.

Office Depot - lets you contribute to your local school when you make purchases

Upromise - not a product but a service that negotiates rebates from businesses in the form of discounts that are deposited into college savings accounts (for your own kids, relatives, or anyone you choose). If you have the choice to buy your clothes at Lands End with 5% of your purchase price going into a college account which can be set up as a tax deferred 529 savings plan or paying the same amount for similar clothes at the Gap which would you choose?

Too, I think you will see purchasing evolve to the point of something similar to what is often termed socially responsible investing. Those special funds that might only invest in companies that use organic and sustainable practices or do not create pollution, etc. Imagine what would happen if your local school received 3 cents for every gallon of "NewLocal" Milk.

You can imagine the possibilities of this type of spending. In a sense, people would truly vote with the pocketbooks on social issues. Such consumer behavior might have more far reaching influence on issues than politicians and government.

hajush said...

Very good points, Walter. It's amazing how limited language can be, as a far distant nexxus where altruism could reign is clearly evoked by my message, but it wasn't what I was thinking at all.

The nexxus ahead is one where the line between consumer and producer blurs. Imagine not just having part of your purchase price go to good causes -- but where the places you buy (and sell) are good causes in and of themselve.

Or at least they feel that way to the people in them. THAT leads to fulfillment.

For example, imagine being a participant ... at Google or eBay for example (but it can be true for many other for-profit companies around today.) You feel you're a part of their cause, in that you believe in the difference they're making. You love their stuff. You even profit from it either directly (for example through AdSense or eBay sales), or indirectly as a result of the positive difference the technology or service you use makes to your bottom line. And you as a participant/consumer actively engage with the developers of the service to make it better. Many people already do this today... which is why blogs become so vital as a marketing tool. Open Source is a great model as well, where people can contribute directly to projects that they are interested in.

If your supplier is an active participant in your bottom line, a decent relationship might be useful. Social Software is enabling that. So is Web 2.0, and all the other over (or under) hyped aspects of a bigger phenomenon that transcends all the mini and maxi bubbles or booms that occur as our world becomes smaller and our horizons bigger through accelerated technological change.

Walter White said...

Harold:

Excellent point about the participant relationship. I see that in the Scion line of vehicle by Toyota. You walk into the dealership and they basically have a design lab where you custom order your vehicle. I am also aware that FedEx collaborated with Airbus to design airbus aircraft that would be specific to the air cargo industry. They didn't just send specs - the airbus engineers came on site and stayed - learning about how the air carrier operated. In the end - a fully customized plane.