Buyer Behavior Finally Affects Mainstream Retail
Internet Displaces Former Consumption and Purchase Models
By Roger L. Kay
A couple of trends showing up in pre-holiday shopping stats seem to indicate that a shift
underway for some years now has finally gained sufficient momentum to be visible to pretty much
anyone.
Both are evident in the drop-off in sales at Best Buy. What’s interesting about this decline is not
the overall figure, but the detail by category. The weakest area was not computers (up 4.8% y/y for
3Q10), but “soft” goods like DVDs and videogames (down 13.9%). Another category under stress
is consumer electronics, led by TVs (down 10.6%). In a Reuters report, Best Buy CEO Brian Dunn
noted that high priced TVs with fancy features such as 3D and Internet connectivity were doing
poorly.
What I think is reflected in these results, which are likely to carry on through the season, is a shift
in consumer behavior that is finally affecting the mainstream. Essentially, consumers, especially
younger ones, have gotten used to time-slicing and multitasking and tend to enjoy shorter
snippets of content (read: YouTube displaces broadcast television). Also, the rise of NetFlix
underscores the trend toward Internet distribution of content and away from physical inventory in
stores. Thus, Best Buy is likely losing share in soft goods, not to Wal-Mart or Target, but to NetFlix
and BitTorrent.
The argument in favor of Internet distribution is unassailable, save for the familiar suite of
communications issues (i.e., reliability, ubiquity, and speed). As these issues are mitigated by
carrier investments over time, the argument for Internet distribution (and all cloud services) will
only strengthen.
The decline in TV sales points to the same phenomenon. Many people are just watching less TV
and getting more of their information and entertainment from the Internet. The new behavior is
active — darting around, looking at this and that, checking Facebook and Twitter, reading a short
article, hitting a link in that article to follow a train of thought — in contrast to the older form:
passively sitting on the couch for hours watching show after show.
All of our lives are more closely time sliced. We have to execute more tasks, and these task are
shorter. Part of reason for the increase in the number of tasks is that we’re more connected. Our
world is larger because we’re in touch with many things that were formerly out of reach. Very few
people are lying on their backs for four years to paint the Sistine Chapel’s ceiling these days.
At this point, it looks like we’ve turned a corner and won’t be going back. Connectivity will continue
to improve, and more things will come from the cloud rather than stores. Computers of all sorts
will continue to displace TVs with traditional television content eventually becoming a subset of
video consumption that occurs on computers. Computer monitors and TVs will converge into a
single category.
The cloud offers some advantages that are difficult to argue with:
Retailers will suffer under this new regime, although shifting their mix of products can mitigate the
pain to some extent. Cloud providers, of course, will benefit. This group includes the usual
suspects (e.g., NetFlix, Amazon, Apple’s iTunes). Panel makers need to deal with a morphing of
TVs into monitors. Computer makers can take some comfort in these trends, as they are the
main endpoint beneficiaries. However, they need to continue to make their offerings more
consumer friendly (i.e., smaller, prettier, quieter, and easier to use) to take full advantage of the
trend.
© 2010 Endpoint Technologies Associates, Inc. All rights reserved.
underway for some years now has finally gained sufficient momentum to be visible to pretty much
anyone.
Both are evident in the drop-off in sales at Best Buy. What’s interesting about this decline is not
the overall figure, but the detail by category. The weakest area was not computers (up 4.8% y/y for
3Q10), but “soft” goods like DVDs and videogames (down 13.9%). Another category under stress
is consumer electronics, led by TVs (down 10.6%). In a Reuters report, Best Buy CEO Brian Dunn
noted that high priced TVs with fancy features such as 3D and Internet connectivity were doing
poorly.
What I think is reflected in these results, which are likely to carry on through the season, is a shift
in consumer behavior that is finally affecting the mainstream. Essentially, consumers, especially
younger ones, have gotten used to time-slicing and multitasking and tend to enjoy shorter
snippets of content (read: YouTube displaces broadcast television). Also, the rise of NetFlix
underscores the trend toward Internet distribution of content and away from physical inventory in
stores. Thus, Best Buy is likely losing share in soft goods, not to Wal-Mart or Target, but to NetFlix
and BitTorrent.
The argument in favor of Internet distribution is unassailable, save for the familiar suite of
communications issues (i.e., reliability, ubiquity, and speed). As these issues are mitigated by
carrier investments over time, the argument for Internet distribution (and all cloud services) will
only strengthen.
The decline in TV sales points to the same phenomenon. Many people are just watching less TV
and getting more of their information and entertainment from the Internet. The new behavior is
active — darting around, looking at this and that, checking Facebook and Twitter, reading a short
article, hitting a link in that article to follow a train of thought — in contrast to the older form:
passively sitting on the couch for hours watching show after show.
All of our lives are more closely time sliced. We have to execute more tasks, and these task are
shorter. Part of reason for the increase in the number of tasks is that we’re more connected. Our
world is larger because we’re in touch with many things that were formerly out of reach. Very few
people are lying on their backs for four years to paint the Sistine Chapel’s ceiling these days.
At this point, it looks like we’ve turned a corner and won’t be going back. Connectivity will continue
to improve, and more things will come from the cloud rather than stores. Computers of all sorts
will continue to displace TVs with traditional television content eventually becoming a subset of
video consumption that occurs on computers. Computer monitors and TVs will converge into a
single category.
The cloud offers some advantages that are difficult to argue with:
- Long-tail content can be kept available indefinitely, satisfying a broader range of
customers
- A lack of requirement for inventory allows a catalog far larger than any physical store can
hold
- Serendipitous browsing, focused search, peer recommendation all allow easy extraction
of desirable content from a large pool
- Instant gratification means no waiting to enjoy chosen content
Retailers will suffer under this new regime, although shifting their mix of products can mitigate the
pain to some extent. Cloud providers, of course, will benefit. This group includes the usual
suspects (e.g., NetFlix, Amazon, Apple’s iTunes). Panel makers need to deal with a morphing of
TVs into monitors. Computer makers can take some comfort in these trends, as they are the
main endpoint beneficiaries. However, they need to continue to make their offerings more
consumer friendly (i.e., smaller, prettier, quieter, and easier to use) to take full advantage of the
trend.
© 2010 Endpoint Technologies Associates, Inc. All rights reserved.
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