Wednesday, October 17, 2007

Will you buy potatoes on the Net ?

Once again we are hearing rumblings that online sales are killing brick-and-mortar sales. That story, if you remember, fueled the dotcom boom, which busted soon after.

Now many years later, people are more net savvy, there is a lot of stuff folks can buy online, but for a variety of reasons including technical and cultural, it may be again premature to talk about the imminent demise of the brick-and-mortar store.

Movie Gallery Inc., the second-largest U.S. video-rental chain, sought bankruptcy protection from creditors, citing increased competition from Blockbuster Inc. and Netflix Inc., according to a report from Bloomberg.

The point here is that Movie Gallery may have lost out to guys like Netflix, which save you the walk to a Movie Gallery store by letting you select online from a large repertoire. But the delivery of the DVDs is still done offline to the customer. So it is not a case of a brick-and-mortar play losing out to a pure online play.

A pure online play offering high quality, low-cost video downloads alone may not be as successful as Netflix, because that assumes large Internet bandwidth pipes to the home, which are not there yet across the US, and less so around the world.

In music too, don’t expect online music to wipe out the CD business. It is true that online music stores provide access to a much larger repertoire than a large brick-and mortar store can ever offer. But after the first flush of excitement over quick gratification, folks are going to take a long hard look at sound quality.

They will not only look at encoding bit rates, but at the encoding formats for downloaded music. These formats like MP3 are lossy, because to make files sizes smaller and manageable, they lop out a lot of music information that you would ordinarily find on CDs.

A lot of folks may go back to buying CDs if only because they offer better sound quality. A not-so-fringe benefit is that currently most CDs are not covered by DRM (digital rights management). I got back a week ago to buying CDs, after a downloading frenzy. The downloaded MP3 files were okay on a portable digital music player like an iPod, but the lossy character of the format really showed when the file was played on a home music system.

Finally, would folks buy potatoes and other groceries on the Net ?

I doubt it. Not a lot of folks buy vegetables without feeling them for solidity, consistency, and to spot out for those pernicious insects that tend to get to vegetables. They would rather go to the nearby store, or call up the store that has delivered reliably, quickly, and top quality stuff over the years. What is the buyer’s incentive to shift to buying online ?

Would folks buy art online, after taking a look at digitized images of a painting or sculpture ? Would die-hard shoppers give up the real-world shopping experience for clicks on a computer ?

Some categories like packed and branded products, we have bought and tried before, will most probably be purchased online. Coke cans for example, but certainly not designer wear, or furniture. Well known books by authors with impeccable credentials may be bought online if the store nearby does not stock it. Most people would still like to flick through the pages of a new book before they buy it.

Some of the conditions that proved the prophets of the online retail (etail) boom wrong in the late 1990s still hold good.

Related articles:
Radiohead: unwitting players in an imaginary revolution
Finding gold on the Net is a long shot

No comments: