There has always been a certain tension between businesses and consumers. What has been good for one has not always been particularly good for the other.
For example, if a business can preserve and expand its profit margin on the things it sells it is usually more profitable, a good thing for the company and its stockholders. But high margins mean fewer sales and discounts – bad for consumers.
For a long time it seems businesses have maintained the upper hand in this relationship but the tables appear to be turning in favor of the consumer, and the Internet – which has emerged as a powerful tool for communication and commerce – may be the reason. The latest evidence may be found in the most recent holiday sales.
More online shopping
A report by the Wall Street Journal found in-store traffic during November and December was down sharply from the 2010 holiday shopping season – about 50% lower. Since the economy was much stronger in 2013 than 2010, a year after the end of the Great Recession, that shouldn't be.
Consumers were still spending money, however. They just weren't spending it in retail stores.
Economists saw the same thing happen in 2012. On Black Friday in-store sales dipped slightly. However Black Friday online sales jumped 26%. In 2013 that trend continued.
CardinalCommerce, a payment system for retailers, says there was a record number of online transactions during the 2013 holiday shopping season, an increase of 46% over 2012. On Cyber Monday, consumers spent $2.29 billion, making it the biggest sales day in e-commerce history, according to the Custora Pulse, an annual holiday benchmark report.
Cyber Monday's overall online shopping numbers marked a 16% increase from 2012. Online sales broke all-time records each of the five days from Thanksgiving Day through Cyber Monday in 2013.
With so many transactions occurring online, fewer were taking place in stores. Retailers like Target and Walmart, with a strong online presence, were able to make up for their lost in-store revenue. Stores without a strong web presence were the big holiday losers.
The real winners, one can argue, are consumers who can quickly shop for the best price on a particular item and then buy it, without ever leaving the house. In the past shoppers had to go from store to store to find what they wanted, and didn't always get the best price.
Lest anyone doubt the shift from in-store sales to e-commerce, just look at what happened to United Parcel Service (UPS) in the last week before Christmas. UPS acknowledged that it was overwhelmed by unexpected volume but that explanation didn't sit well with consumers, who said the company should have stopped guaranteeing next-day delivery if it couldn't deliver. One driver quoted by USA Today said it had been the "worst Christmas ever."
Worst Christmas for UPS, perhaps, but the best Christmas yet for online retailers. And undelivered presents aside, a win for consumers who were able to get more bang for their Christmas buck, thanks to the Internet.
The Internet has given consumers an advantage in other ways as well. In the last few years – especially since the explosion in mobile devices – deal and coupon sites have grown in popularity. These sites direct consumers to stores in their areas that have discounts on all kinds of products and services.
The trade publication eMarketer estimates more than 92.5 million people in the U.S. redeemed a digital coupon in 2012. This year, the company predicts U.S. adult digital coupon users will surpass 100 million.
Finally, the Internet gives consumers a way to communicate, sharing information about experiences, good and bad. ConsumerAffairs has given consumers a place to communicate with each other since 1998. There have been many other sites since then.
Businesses taking advantage of consumers, or providing poor service, have been called to account. The smart operators have adapted, using the Internet to respond to consumer complaints and make things right.
Now, when you make a significant purchase, such as a car or major appliance, you are likely to get an email from the company you did business with, wanting to know about your experience. It's a proactive way to identify product and service problems before they get posted online.
The bottom line is that all of this is returning power to consumers, who now have more leverage in the marketplace than they once did. In many cases, it's resulting in better deals and better service.
There has always been a certain tension between businesses and consumers. What has been good for one has not always been particularly good for the other....