Electronic Competition

Tuesday, March 08, 2011

Some time over the past week, I recall feeling minor irritation while reading some commentary about technology. Sadly, I don't recall anything else about the piece, so I can't link to it here. But that doesn't matter for the same reason I was annoyed with the piece: It breezily insinuated that "the productivity statistics" didn't reflect well on the decision by many businessmen to adopt computers back in the 1990s.

There was no way to ascertain from that context-less assertion what was being measured by these statistics or how well (if at all) any confounding variables were accounted for. The statement was thus completely meaningless. And, given that some businesses probably adopted technology for reasons consonant with their needs, while others did so for the wrong reasons, it's not clear to me what such statistics could even mean.

This morning, I ran across a couple of interesting uses of technology that demonstrate what I mean: a writeup by Farhad Manjoo about HelloFax, a startup he thinks can "kill your fax machine," and a news report about the woes of brick-and-mortar electronics retailer Best Buy.

Manjoo's good news for people who (like myself) hate fiddling with fax machines may well be an early warning to people in the business of making and selling them:

Here's how HelloFax works. First, you sign a blank piece of paper. Then you take a picture of your signature and send it to the site. Now you're free to sign and send documents that you've got stored digitally. (In other words, HelloFax is only for e-mailing and faxing files that you can find online or that people have e-mailed you; you can't use it to fax a physical document.) To begin, you upload your form to HelloFax. The system understands a wide range of file types, including PDFs, Word documents, and several more esoteric ones. HelloFax transforms the document into an image, and then it lets you add text to that image; this allows you to fill out your name, age, SSN, and other information on virtually any kind of form. Because HelloFax treats your document as an image, you do have to manually position the cursor in each box—in other words, you can't hit tab to go from field to field -- but I still found it pretty easy to do.

When you're done filling in your form, click "Add Signature" and HelloFax will pop in the scribble that you photographed earlier. (It has controls to let you move and scale your John Hancock to look just right.) Finally, enter the fax number or e-mail address of your recipient, and boom! You've just faxed something, and you didn't even have to leave your chair.
If, as Manjoo says earlier, "[t]he main reason faxing lives on, of course, is because of another ancient and mystifying custom: signing a piece of paper to make it official," this and other ways of circumventing fax machines means one thing to anyone in the business of making or selling them: adapt or perish.

I doubt that anyone would take the above story to mean that such businessmen should have fought digital technology tooth and nail. Furthermore, reduced profits by companies (or parts of companies) focused on fax machines would not necessarily reflect a "loss" of productivity: They would likely just be indirect evidence that many people have found a more productive (or less expensive, in terms of money or effort) way to transmit evidence of consent. (And furthermore, facsimile machines themselves have been improved through advances in digital technology.)

Certain brick-and-mortar retailers are similarly getting creamed by electronic competition. One of them is Best Buy, which, as Greg Melich of ISI Group notes, is being used by many consumers (including myself, sometimes) as "Amazon's 'showroom.'" Case in point: In '09, my wife wanted a netbook, so I went to Best Buy, where I found one that was just right for her -- except that I knew she wanted it in a certain color. I asked about its availability in that color and learned that, since it wasn't available at the store, I'd have to order it anyway. I left and ordered it (for less) from Amazon. (I don't know whether I would have had to return to the store for pick-up had I ordered through Best Buy, but I already knew I wouldn't have to if I ordered through Amazon. That is, as soon as I learned that Best Buy didn't have the right color in stock, buying through Amazon represented at most the same level of hassle.)

Best Buy is hardly obsolete: I wouldn't have so easily and quickly been able to make the call on which netbook to get my wife without the ability to compare models in person. But, either BestBuy will adapt to account for Amazon's strengths in pricing and delivery -- or someone else (perhaps Amazon itself or a brick-and-mortar partner) will take better advantage of Best Buy's customer service and value as a showroom.

It is undeniable that digital technology can make us much more productive. Measuring whether it does so (and by how much) for a business or industry is very difficult, and its very adoption anywhere in the economy can sometimes cloud such an analysis.

-- CAV


Dismuke said...

I think one of the things that will really hurt electronics retailers in the future is the fact that, the way things are going, cell phones are morphing into a replacement for not just old fashioned telephones but also mass market type mp3 players, camcorders, desktop/laptop computers, radios and eventually even televisions/home entertainment systems.

Basically, things are heading in the direction of people having a single, powerful pocket sized digital appliance that they carry with them and can connect to various sized monitors and interface tools (such as keyboards, mice, joysticks etc) depending on whether they would like to type a letter, play a game or watch a movie or what have you. That will knock off a whole lot of categories for electronics retailers. Standalone cameras, computers and such will still exist but primarily for advanced users who have specialized uses for them and thus the market for them will be relatively small.

That's good news for us - less things to have to buy and upgrade over time and the new portable "all in one" device will probably be far less expensive than the cost of all those items separately currently is. But that is bad news if you depend on selling a wide variety of electronic gadgets to a non specialized mass market.

And here is the other advantage that Amazon has over Best Buy: Remember when Amazon was primarily a book and CD retailer and did not sell much else? As the book and CD market declines, they are simply focusing on other things - including the digital replacement for books. If the market for a wide variety of electronic gadgets disappears, Amazon can much more easily switch its sales efforts to other product lines that are hot at the moment - including those that are completely unrelated to electronics. It is much more difficult for Best Buy to morph into something else (for example, selling clothing). That is what happened to record stores and is currently happening to Blockbuster and Borders. Those companies were very good at what they did - it is just that what they did became obsolete faster than they could remake themselves into something else.

Gus Van Horn said...

I seem to recall open source guru Eric Raymond saying something like what you just said about everyone carrying around with them a small, powerful device whose use will depend in part on perpherals like a keyboard or a screen.

In any event, you make two very good points -- on computing device convergence and brick-and-mortar specialization -- which indicate that Best Buy may well be doomed by a pincer-like combination of each trend.