Virginia Postrel writes in the NY Times that the big deal about Internet commerce is not the lower prices. It’s the selection. The Internet offers variety that is simply impossible in traditional stores:
When I wanted a contemporary light fixture in copper, I used Google to find a specialty retailer that had one I liked. I recently did the same thing to find a particular brand of Velcro-sealed envelope that I use for receipts when I travel. I regularly turn to Amazon.com and Alibris for books I cannot find in local bookstores or even libraries.Online shoppers are not just buying the same stuff for less money. They are buying different stuff. And they are much more likely to be getting exactly what they want than are off-line shoppers. Wal-Mart has low prices, but Walmart.com carries six times as many items as the largest Wal-Mart store, the article says. “Amazon’s slogan is world’s biggest selection, not world’s cheapest prices,” said Professor Brynjolfsson, who has done pioneering research on information technology and productivity.
All this variety could be overwhelming. But consumers do not have to sort through item by item. Online shopping includes tools like search engines and customer review sites, or Amazon’s many referral services.
You are not only more likely to find what you are looking for online. You are more likely to discover something you like that you did not already know about, Professor Brynjolfsson said. Partly through links and referrals, the Internet increases sales of obscure products. In 1997 and 1998, in the early days of Internet commerce, The MIT Press reported 12 percent annual increases in sales of backlist books, thanks to Internet retailers.
“In effect, the emergence of online retailers places a specialty store and a personalized shopping assistant at every shopper’s desk,” write Professor Brynjolfsson, Yu Hu, and Michael D. Smith in a November 2003 article in Management Science. “This improves the welfare of these consumers by allowing them to locate and buy specialty products they otherwise would not have purchased due to high transaction costs or low product awareness.” (The article, “Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers,” is available at http://ebusiness.mit.edu/erik/.)
Like a greater selection of products, a larger number of small businesses can excel because of the Internet. It doesn’t matter if every entrepreneur in a small town of five thousand is selling the same products, as long as they can differentiate their offerings and sell to a global Internet enabled marketplace.
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