Showing posts with label sellers. Show all posts
Showing posts with label sellers. Show all posts

Economic Theory No Longer Applies

For the first time economic theory is being challenged by the Internet. Economics has always put forward the premise that the consumer was all-knowing, in that the "going price" for products was known. Of course, in the past this has been a lie. The demand curve was absolutely false. Buyers did not know where they could get the best price.

Now, potential buyers can go to a store, try on a particular brand of clothing to find the correct size, then go and buy it on the Internet. Some shops are charging for such browsing. This will only drive consumers away to another store.

There isn't much doubt that there are too many stores in the market selling the same goods. This is a problem caused by local councils allowing shopping center development even when it is contrary to local planning laws. Councils are too easily influenced by cashed-up big business.

As chain stores move into populated centers of rural areas the future looks bleak for the corner store. The days of local monopolies of one grocery store, one fruit shop, a chemist and a fishmonger are well and truly gone. It is no wonder the majority of small startups fail.

We cannot turn back the clock. The consumer is currently very informed about price if not quality. Economics never did include quality into its theories. It cannot easily be defined.  With oligopolies taking over small rivals economics is no longer relevant. It cannot be applied any more. The idea that prices fall to clear the market of "surplus" products was never real world practice. Shops have always operated on a percentage mark-up.
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Economics
Australian Blog                        

Australian Busiesses Must Move to the Internet

Australian retailers are in a corner with people turning to the Internet to make purchases. With rents near zero for Internet sellers and high rents for retail shops the odds are stacked against local stores.

Travel agents are the ones hit the hardest. It is so easy to buy an airline ticket online. Next are bookshops. They cannot compete with Amazon, though some Australian bookshops are selling online as well. Pharmacists are up against large cut-price online sellers in the US. However, chemists can still rely on the highly subsidized cash cow called the Pharmaceutical Benefits Scheme.

Some Australian businesses are becoming paranoid. A woman was accused by a bookshop proprietor of making a list of books to buy on the Internet. A sports retailer asks for a deposit before customers try things on.

Things are changing so fast. Major stores in the US are allowing goods purchased online to be returned at city outlets. Australian businesses must make the move to the Internet now, or they will go to the wall.
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Internet