E-Commerce - Level Playing Field? Maybe

It has been written in countless textbooks, articles and journals about how the internet levels the playing field for the little guy. After all, how can a consumer know whether the firm from which they just purchased a “doohickey X5000” online is a mega-retailer or some mom and pop shop in the middle of nowhere. It is true that the internet has opened up the retail highway for the masses of aspiring entrepreneurs and we cannot ignore the fact that the playing field has been leveled, somewhat, for retailers and the consumer as well. There are far more sources offering the same products and all competing for the consumer’s hard earned cash. All of this fierce competition usually leads to lower prices and happier consumers, no?

The little guy is going to show the big time retailers what for! After all, the small operator has lower overhead than the large retailers. They are the nimble entrepreneurs and the big box stores are lumbering giants who embrace change slowly and are weighed down by their own bureaucracy and the fact that many of these larger firms have to answer to shareholders. The little guy has the edge. Right? Often the answer to that question is yes but just as often if not more so the answer is no
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Though the overhead is lower for the smaller retailer the larger firms enjoy greater volume discounts. So, a small shop may be able to win on an item or two or ten but the larger retailer will get the benefits of economies of scale in the long run. There is also the shopping experience itself where the battle can be won or lost. This depends greatly on the product itself. We need to remember, most of the major retailers have a brick and mortar store to go along with their online retail operation and many larger retailers offer a hybrid shopping method wherein a consumer can research, price and purchase a product and pick it up in the store. There are a few advantages over the online mom and pop operator. The consumer is able to see their product in person and if they don’t like it they can return it right away. Now most online retailers offer return policies but being able to return it locally, get your money back and “Hey! While we’re here let’s go look at the LCD TV’s.” Advantage: Big retailers. Now, it’s not all dark clouds and rainstorms for the small online retailer. Many do very well for themselves especially when the product is a niche item or when lowest possible price is the driving factor. Take razor blade replacement heads, for example. The consumer knows what he wants and knows that he can get a much better deal buying them online. This definitely is not the type of product one needs to touch before purchasing. The field here is definitely level and it is like this for thousands of products from electronics to toys and much, much more.

But the idea that the little guy has an advantage over the large retailer is a fleeting one at best. Why? Money! The large retailers can spend millions on marketing and advertising. They can devote entire departments whose sole purpose is to drive consumers to their online site. Another advantage might be simple a matter of perception and perception is a mighty powerful motivator. True or not, consumers tend to do business with someone they already know. This familiarity could stem from knowing the name of the store since birth, seeing the signs and visiting the stores year after year. This same familiarity, whether fair or not, leads many consumers to believe that their online transaction is more secure. True or not, many consumers can’t imagine that a small, online retailer has the IT infrastructure to protect them from credit card scams or identity theft even though the software and infrastructure for the small online retailer exists and is in place and easily matches any in-house operations of a large retailer. Perception can be a killer.

The playing field for the retailer and the consumer is more crowded, more exciting and opportunities abound but, as for the field being level, one might need to prop a few beer coasters under the leg of the table to fool oneself that the field is truly level.