Where should we draw the line?
December 18, 2009
I was driving to Nacogodoches (network coverage is spotty at best on Highway 175) when I saw a Google alert for ShopSavvy (our barcode scanning price comparison application). One of my heroes, Tim O’Reilly, had written an article titled ‘Why Using ShopSavvy Might Not be So Savvy.” 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 Tim 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 his post I was surprised.
Tim 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 Tim’s 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 Tim’s 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 Tim’s premise, but I could respect it more if it called out the real culprit. Tim explains that he 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 Tim: 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 Tim’s advice they would be compelled to buy an item regardless of price. If I was a retailer and saw Tim coming into my store I would mark everything up 500% knowing he would pay the markup.
I suspect mega-retailers would prefer that Tim do more of his shopping in their stores even if he continued to buy most everything online. I don’t think they would be offended at all. If he shopped in Best Buy he 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).
