Business Strategy

Growing irrelevance of location in the era of online commerce

Growing irrelevance of location in the era of online commerce
online commerce and location irrelevance

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As far as Internet is concerned, it was supposed to turn location irrelevant. Most of the world’s ground breaking dot-com entrepreneurs, along with a few investors, perceived the online platform as flat and brimming with endless customers. And obviously many of these dot-coms ended as dot-bombs.

Also Read : Brick and Mortar stores Vs their Online counterparts

During 2000, the Fed chairman Alan Greenspan considered “irrational exuberance” as the prime factor responsible for the bursting of Internet bubble. But, this is only one side of the story. The other fragments of the story i.e. the various other reasons that led to the Internet bust and should alarm anyone and everyone possessing great interest in online commerce are clustered together by the Xinmei Zhang and Yongge Dai, Professors at the Wharton School of the University of Pennsylvania,  in a new book named as David R. Bell. The book does not possess direct addressing to the bubble, but the readers can easily get an idea that boosted much of the exuberance in the second half of 1990s – the Internet is always a frictionless-free and flat marketplace.

Online business and research

David R. Bell, in his book, Location Is (Still) Everything: The Surprising Influence of the Real World on How We Search, Shop, and Sell in the Virtual One (New Harvest, 2014) sees the scenario as – “The virtual world is flat in terms of the opportunity it delivers to all of us, but it is not flat in the way that we use it. Because the way we use it to search, shop, and sell depends on where we live in the real world, which is anything but flat. ” To grasp his words better consider the following instance – the person who lives around 10 miles from a drug store and has to care for a baby is most likely to go online for purchasing diapers as compared to when there is a drug store nearby.

This is quite obvious, but as far as Bell’s thoughts are considered, very few online startups and businesses fully take geographic factors into account despite the fact that these factors possess the power to make or break them. The majors amongst these factors are vicinity, resistance, isolation and adjacency.

How important is location

Vicinity refers to the connection of customers from different communities that are not physically proximate. The Bell explains it as “The end result is the Spatial Long Tail in which the head is demand from customers connected through ‘proximity,’ and the tail is demand from customers connected by ‘similarity. And for flourishing businesses and profits, both are required.

Resistance is the degree of difficulty encountered by different customers as they go for purchasing products and services. It has got mainly two types – geographic frictions and search frictions. Geographic frictions deal with the questions regarding where you might purchase something. And search frictions are related to difficulties encountered by the customers while making purchase decisions. For example – furniture e-tailors encountered great difficulties at one point of time – it is like that the buyer wanted to sit on a couch and check out the comforts before purchasing one.

Beyond boundaries

Isolation, an extreme form of geographic friction, refers to the state when the preferences and interests of small minority of customers are not being satisfied locally. As a practical example, consider this – Bell is from New Zealand and lives in Philadelphia, says he cannot obtain Vegemite locally. This is what preference isolation is and online seller can make great profits from it.

Adjacency is the state when customers are in direct proximity to each other. This plays an important role because most of the population owns neighborhood, similar to them in many ways. Neighborhood acts as a great marketing tool as people come to know about many online and offline stores and their products from their neighbors only or they simply copy them.

Also Read : Online sales & delivery in the Beverage Industry

Undoubtedly, Location Is (Still) Everything is worth the read but it cannot be used as how-to guide for setting up a business plan. Bell describes deeply on how businesses can use location to multiply their profits but his thesis on how geographic factors play an important role in online business success is a better option to go for.

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