Steven Sinofsky@stevesi3d ago

I'm always a bit perplexed when people think that retail will quickly devolve into "just get me the lowest price and buy it." There are so many forces at work from buyers, sellers, suppliers, wholesalers that work against buying by only low price, competing only on price, or even just searching for a combination of specs. While it is definitely the case that the 1999-2000 web brought many low priced "shop bot" like products (Nextag was my fav) they all hit the same set of problems and challenges. There are many. Here's just one. The addressable market is not the whole market and generally represents the least valuable part of the market. When the least valuable customers want something it is not worth the effort of the supply side to find ways to reach them. Travel always seems to be the example, but out of the gate in the US just over half the $550B hotel rooms+ miles are paid for by business. As we all know these are preferred airlines with elaborate rebate and purchase programs. The reason these are offered is because of the spillover of these customers to leisure. Estimates are that up to 2/3rds of travel brand choice is dictated by those either using or compounding travel bonuses (miles, status, points, etc.) The remaining travelers are a big business but not the customers that these same air/hotel partners aim for. That's the tiering of supply that we all see. But most people opining here might not recognize that Southwest, Clarion/Comfort, etc. follow these same patterns. There are many price sensitive or price-exclusive purchases in all of retail. Many of these work both ways—for higher prices and convenience and bulk buying for discounts. When I need Oreos now I will pay more at 7-11. When I buy paper towels a few times a year I leverage my Costco membership and save 50%. When I want to load up on preferred brands of health things I buy lots at Walmart in hopes of not having to buy a one-off some night at Safeway for 2x as much. Everyone does this, regardless of income level. At another end, some people just buy everything by loyalty or convenience—if it's not at Costco we don't need it, or we have no problem buying everything at Safeway or Erewhan (never been.) Many suppliers have no interest in consumers experiencing their product at wildly varying prices. They invest in brand, proprietary product advantages, certain product warranty or support policies, etc. These products actively cut off suppliers who undercut their pricing. They fiercely defend everyday "high" prices. This isn't just luxury goods but up and down price points and across categories. The argument tech always makes is that technology can make the lowest price available and no one wants to lose the sale. Except businesses work of the 4Ps, and price is only one of them. Product (assortment), Price (bundles, discounting), Place (geo, service, loyalty), and Promotion (brand) and so on are all attributes. You might always want the lowest price but vendors are just not motivated to offer that. Every major tech change brings with it disruptive forces in retail. It isn't surprising but often the tech change isn't what undoes a retailer but it is more often consumer preference and all the complexities of retail itself that prove too constraining for retailers to change. Depending on the year, Amazon was going to destroy WalMart or WalMart didn't stand a chance against Amazon. The arguments were about price, supplier relationships, feasibility of delivery, same-day, loyalty, convenience, and more. Here we are today with two mega retailers. There are patterns here worth noting. I wrote this ages ago when I can't even remember whether Amazon was doomed or thriving. https://medium.learningbyshipping.com/amazon-4648bdf511c