The Times reports this morning on smart retailer Nordstrom making its inventory in warehouses and in stores transparent so a buyer who’s dying for a purse can find it nearby (for immediate gratification), or from the warehouse (for convenience), or at the last store that has it (which will ship to her).
The earlier rendition of this was BestBuy or B&N making it possible for customers to find whether an individual store had an individual item via their web sites; that’s not quite as easy as saying, “wherever it is, just get it to me,” but it was an important step in this direction.
The next rendition of this will be, I think, enabling the customer to search across multiple retailers and order. That will give us what Dave Winer tweeted this morning that he wants: “I wish there was an Amazon store in midtown Manhattan, where I could buy anything that is available for same-day delivery. I’d go there now.”
Well, if Amazon did that, it would be gigantic, expensive, capital-intensive, inventory-filled Wal-Marts peppered all across the country; it would be expensive to build and it wold lose the efficiency and profitabliy that Amazon enables.
But the virtual version of what Dave wants is possible with transparent — and open — inventory, enabling customers to ask, “Who has this item nearest me at the best price? Then I’ll go get it or get it delivered to me today.”
Ah, price. There’s the rub, of course. Such a network would make pricing transparent. It pretty much already is. We can search across individual retailers or use the likes of Froogle and get the lowest prices. There lies the downfall of retail’s margins, taking out the ability to arbitrage opacity in pricing. Now add transparent inventory and the ability to get the item at the lowest price now and the value of retail brands sinks as does its profitability — in an already tough-margin business.
I could imagine a new service — from Amazon or an entrepreneur — that says: Tell me what you want, Dave, and I will tell you where you can find it or I’ll get it to you. That’s the new value-add for those who want to touch an item or get it immediately. The other value-add is support and service (see: Best Buy’s Geek Squad). Putting boxes and shelves and waiting for people to buy them while carrying the cost? That no longer adds value; it only increases risk.
Retail is going to get ever-more efficient. Independent bookstores were killed by the more-efficient box stores. Box stores were wounded by Amazon and the internet. Amazon could be injured by a local value-added retail search-and-delivery service. All this is fine for the customer: more choice more quickly at lower prices.
But I think retail could be headed the way of newspapers: into a pool of endless pain. All over America, I see empty retail shells: the former Circuit City, the closed book box, the folded mom-and-pop. I think there’s much more of that to come.
This is what transparency — in price and inventory — can do to a market.
