Saturday, April 24, 2004

Internet Shopping

Traditional shopping at stores is down and internet shopping is up, just as we would expect despite all of the tut-tutting by "bubble" schadenfreude enthusiasts. It is only the beginning because people comfortable with electronics are replacing older people with little or no experience with them -- and this is happening worldwide. So, keep buying those internet stocks. Even better, figure out which the next eBay will be.

Virginia Postrel's NY Times discussion of recent MIT research makes the point that it is the huge increase in choice, not just more price competition, that is the real draw. Just looking at some of Amazon's sales, the researchers found that shoppers' consumer surplus (the difference between the maximum that people would have paid rather than do without and what they actually paid) was augmented by variety as well as lower prices. But, it was mostly variety. Postrel noted that Amazon's tag line is "world's biggest bookstore", not world's lowest prices.

No one is predicting the end of traditional shopping. Traditional bookstores are still a good place to browse, have coffee, and feel civilized and social. Many bookstores have wisely added a coffee bar and will evolve in other ways to stay in the game.

It is a near certainty that almost everyone on the planet gets it and wants to live in a market economy. Many are not given the option because they are oppressed by kleptocrats and worse. Others are blinded by ideologies (and hatreds) that wrongly stress that it's a zero-sum world.