Economist’s eCommerce Survey

The Economist writes:

E+-commerce is already very big, and it is going to get much bigger. But the actual value of transactions currently concluded online is dwarfed by the extraordinary influence the internet is exerting over purchases carried out in the offline world. That influence is becoming an integral part of e-commerce.

To start with, the internet is profoundly changing consumer behaviour. One in five customers walking into a Sears department store in America to buy an electrical appliance will have researched their purchase onlineand most will know down to a dime what they intend to pay. More surprisingly, three out of four Americans start shopping for new cars online, even though most end up buying them from traditional dealers. The difference is that these customers come to the showroom armed with information about the car and the best available deals. Sometimes they even have computer print-outs identifying the particular vehicle from the dealer’s stock that they want to buy.

A company that neglects its website may be committing commercial suicide. A website is increasingly becoming the gateway to a company’s brand, products and serviceseven if the firm does not sell online. A useless website suggests a useless company, and a rival is only a mouse-click away. But even the coolest website will be lost in cyberspace if people cannot find it, so companies have to ensure that they appear high up in internet search results.

For many users, a search site is now their point of entry to the internet. The best-known search engine has already entered the lexicon: people say they have Googled a company, a product or their plumber. The search business has also developed one of the most effective forms of advertising on the internet. And it is already the best way to reach some consumers: teenagers and young men spend more time online than watching television. All this means that search is turning into the internet’s next big battleground as Google defends itself against challenges from Yahoo! and Microsoft.

The other way to get noticed online is to offer goods and services through one of the big sites that already get a lot of traffic. Ebay, Yahoo! and Amazon are becoming huge trading platforms for other companies. But to take part, a company’s products have to stand up to intense price competition. People check online prices, compare them with those in their local high street and may well take a peek at what customers in other countries are paying. Even if websites are prevented from shipping their goods abroad, there are plenty of web-based entrepreneurs ready to oblige.

What is going on here is arbitrage between different sales channels, says Mohanbir Sawhney, professor of technology at the Kellogg School of Management in Chicago. For instance, someone might use the internet to research digital cameras, but visit a photographic shop for a hands-on demonstration. I’ll think about it, they will tell the sales assistant. Back home, they will use a search engine to find the lowest price and buy online. In this way, consumers are deconstructing the purchasing process, says Professor Sawhney. They are unbundling product information from the transaction itself.

One of the biggest commercial advantages of the internet is a lowering of transaction costs, which usually translates directly into lower prices for the consumer. So, if the lowest prices can be found on the internet and people like the service they get, why would they buy anywhere else?

One reason may be convenience; another, concern about fraud, which poses the biggest threat to online trade. But as long as the internet continues to deliver price and product information quickly, cheaply and securely, e-commerce will continue to grow. Increasingly, companies will have to assume that customers will know exactly where to look for the best buy. This market has the potential to become as perfect as it gets.

Elections: More Comments

The feeling is sinking in. The stock market crashed 6% yesterday as it become apparent that the support for the Congress from the Left parties will come with many strings attached.

Writes Shekhar Gupta (Indian Express):

The politicians of the Left, quite similarly, do not know the markets, its style, temperament, sensitivities, swings, the thinness of its skin. It is time both learnt a little bit more about each other. This is a globalising India in a globalising world, so the Left cannot hide from the markets. Similarly, the presence of the Left in the power structure, the message of impatience from the voter in this election, is a reality the markets have to make provision for.

One thing you would say for the NDA is that while it had its Togadias and Swadeshis snapping at its heels, or generally hunting for headlines, it kept them in check, or at least mostly insulated them from its policy-making. As the dominant leader of this coalition, it is for the Congress now, as it recovers from the shock and awe of its unexpected victory, to restore sanity among its leftist partners as well as the equally sentimental bourses.

The Economist writes:

Bad for the credibility of almost every pundit and pollster; bad for political stability; even perhaps bad for economic reform. But the outcome of India’s election has been a triumph for democracy, and the ordinary voter’s refusal, after being subjected to months of self-congratulatory government propaganda about India Shining, to accept rhetoric over results.

The prospect of a period of political jockeying and potential instability will worry investors, who also fear that the election will be taken as a popular rejection of the liberalising reforms of the Indian economy, recently championed by the BJP. In two state-assembly elections held simultaneously, well-known reformist leaders have been ousted.

Congress, for its part, traditionally too proud for grubby coalition politics, had this time assembled an impressive haul of allies. But parliament will be hung, and to form a government it will still need the support of the left, and perhaps of one or two other uncommitted parties, of which the biggest are Samajwadi and the Bahujan Samaj, two lower-caste based parties with their strength in India’s largest state, Uttar Pradesh. Some of these potential partners may balk at supporting Mrs Gandhi as prime minister. One rumoured alternative from within Congress is Manmohan Singh, a respected former finance minister.

An unstable coalition government, relying on the support of the Communists, is unlikely to prove radical, and may be short-lived. But the presence of Mr Singh in Congressas a senior policymaker, at any rate, if not in the top jobis one reason for guarded optimism that the election result will not mean the stalling of economic reform. It was Mr Singh who launched the opening up and liberalisation of the economy in 1991. Congress’s manifesto commits it to a policy of sustaining and even accelerating current rates of economic growth. That will not be possible without more reform: cutting the fiscal deficit; continuing to foster competition; privatising more state-run enterprises.

There are other reasons for cheer. First, one of Mr Vajpayee’s dreams commands consensus support and will surely still be followed: building a lasting peace with Pakistan, a project dear to Congress the last time it was in power. Second, the electoral rebuke for the BJP from rural India might intensify efforts to spread some of the alleged shine to the gloomier parts of the countryside. Properly interpreted, it should not thwart reform, but spur it.

How TiVO Works

Reuben points to a visualisation in Technology Review. “When TiVos digital video recorder (DVR) hit the market in 1999, it transformed the way people watched television. No longer slaves to network schedules, viewers could watch any programs they wanted at any time of day, pause and rewind at will, andthe coup de gracefast-forward through commercials. At the heart of the system is a computer hard drive that stores television shows as digital files; a subscription-based service updates schedules and practically does the recording for you. The company has teamed up with satellite service provider DirecTV to produce both a satellite receiver integrated with a DVR and a DirecTV high-definition DVR, to be released in April. Other DVR offerings in the market include ReplayTV and services available through cable and satellite companies.”