A new rule has emerged from the collapse of the traditional retail business model.
Imagine this scenario. You drive your car to the local shopping mall and you park it in a pay zone. You go into a supermarket in the mall and every aisle is full of advertisements on screens as you make your way around the shop to buy food. You notice that the content on the screens changes for each customer depending on his or her gender, stylishness of clothing and age. You sense you are being targeted according to your profile.
When you reach the till, the staff member waves you through saying that the food is all for free because the whole store is funded by the advertising revenue obtained from the screens – please enjoy the rest of the day and come back soon. You would be stunned by the experience because you are accustomed to paying for the goods and services you consume. You also know that the total amount you shell out depends on the quantity and quality of the stuff purchased.
Now think about the internet. The capital you parted with on your car is the outlay on your computer/smartphone and the parking fee is the cost of gaining access to the internet, or many of the applications that support it. Thereafter, you can do virtually anything you like and it is absolutely free. Yes, there are sites where you pay to view but they are the exception rather than the rule.
Boom! The new rule is creating havoc across many traditional industries starting with printed newspapers. What business model can withstand the challenge of making people pay a considerable daily sum to read the latest news when the alternative is available for nothing on the internet? So, if you can’t beat it, join it. Most media organisations now have websites offering free or bargain-basement prices for articles and commentary with some making a plea for charitable donations so they can pay their reporters and editors a living wage.
The magical kingdom
Take Facebook. A recent survey indicated that if Facebook instituted a minimal fee for services rendered, a large chunk of its users would walk away. I am sure that would apply to most of the other big names too. People do not expect to be charged when they enter the magical kingdom of the World Wide Web. Neither cash nor credit cards are necessary for a transaction as no money changes hands once you are inside the kingdom.
Moreover, classical economic theory around supply and demand curves does not apply in cyberspace. The proposition that demand for a product will rise when its price falls simply goes out of the window if the price is zero. You cannot go below zero. On second thoughts, there may be some paradise in the universe where supermarkets pay aliens to take goods off their shelves. But it does not yet exist on Planet Earth unless I am mistaken.
Besides newspapers, so many other areas of commerce are being disrupted by this new free-for-all rule. Banking, travel and real estate agencies, cinemas, books, communication, high street trade (when your orders can be delivered free to your house so there is no cost of petrol and parking) are just a few examples. Restauranteurs must be on their knees thanking the heavens that you can’t eat an electronic steak.
As I said in my last article, a new rule can destroy you if you do not recognise that it is a clockwork flag demanding that you change your behaviour and strategy. Hence, the need to turn young and old alike into foxes with sufficiently bright eyes to spot the flag before it rises too far; and with the agility to respond in an appropriate manner before it is too late.
Originally published on News24, 16 May 2018