Monday, November 07, 2005



What has Wal-Mart scared and Microsoft peddling hard to try to catch up? Answer, “Google”, the search engine giant. But it is not the search engine that has Wal-Mart scared. It is the potential for Google to provide shoppers with immediate, real-time information about better prices on merchandise at a neighboring store. Here is how is may work, according to a New York Times article from November 6, 2005, “Just Googling It is Striking Fear into Companies”[ii]

Ibrahim is out shopping for a TV set. Ibrahim is a careful and studious shopper. If Ibrahim had gone out shopping in 1995, here is what he may have done:

1995-Ibrahim goes to the library and reads Consumer Reports and some electronics magazines. He determines that the best TC, given his needs and budget, is the Sashimi 36” rear projection TV. He pulls all of the consumer electronics store ads from the Sunday paper, finds the best price, and buys the set at “Big Tent TV”. The Internet is up and running in 1995, but there is little information on the Internet in 1995 that Ibrahim could not find elsewhere.

2005-Ibrahim needs to upgrade the TV. He researches the TV models on line and determines that the Samsan 48” Plasma TV is the best deal. He goes on and other online retailers. The Samsan TV is a new model, however, and he finds that web discounters do not yet have the TV. So he goes to the websites of electronic retailers in his area and finds the best price. He finds the best price at “Big Box Mart” and buys it there.

2010- Ibrahim is happy with his TV but sees the complete box set DVD set of “Girls Gone Wild-The Lake Minnetonka Years” in “Big Zip Code Entertainment Café. He is out shopping for a video for his brother’s bachelor party. He sees that it is 24 euros. He pulls out his cell phone and swipes the DVD’s barcode. He then enters “GoogleCompare” and sees that Pete the Perennial Sophomore has the same DVD on sale at 19.95 euros. Wackamart has the video for 22.95 euros, and that he can get in online from Terazadon for 19.95 euros. Ibrahim has heard off the Pete the Perennial Sophomore store but has never been there. He Google maps it and gets directions from his current location.


The scenario for 2010 is what has Wal-Mart concerned. And it should have other retailers concerned. The pieces of the technology are already coming into place for this instant pricing scenario. Cell phones will contain a bar code reader that will upload the product data. Neighboring retailers will post their prices on their websites. Google compare will run a search using geographic parameters Ibrahim has preset and search nearby store websites. Google currently has a map and directions utility and that utility could locate and map the directions to the selected store.

And you can imagine how all of this might go further. Some stores might have a policy that they will meet or beat any other price. So Big Zip Code Entertainment Café might lower its price to match Pete’s. Or Big Zip Code could limit such discounts to frequent shoppers. Or people in affluent zip codes. It could search the volume of Ibrahim’s purchases to determine if he buys enough from the Big Zip Code to offer the discount. Some stores could allow Ibrahim to send his credit card information ahead to reserve an item while he is enroute to the store.


Some readers have heard the concept “disruptive technology”. A disruptive technology is one that puts it predecessor out of business. A common example would be the internal combustion engine that ended the horse and buggy. Or the telephone that took out the telegraph industry. Or the telegraph that ended the Pony Express.

In many retail markets, it is price that ultimately drives higher sales volume and ultimately competitive success. Wal-Mart is an extremely efficient organization that reduces costs and gains market share through lower costs and greater sales volume. It is a good economic success, but it has itself been a disruptive force. It has bulldozed the main streets of many American small towns. It has shifted production to China and lower cost countries through its large buying requirements. And it is able to restrain wage costs.

But economic efficiency is an inexorable thing. Unless constrained by political action, the efficiencies Wal-Mart amasses will drive sales volume its way.

Google and these point-of-purchase shopping functionalities may be one way for the market to turn back against Wal-Mart.


[i] No, the deadpan literalist comic Stephen Wright did not say this first. The Author, in researching this post, “Googled”, or used the search engine Google to search the term “google”. His results, on a fast connection, provided 759,000,000 [hits] for google. (0.12 seconds).
[ii], subscription probably required. But subscription is free.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home