Power Leaves the Consumer

August 7, 2020

Over time there has been an erosion of the power consumers have in their purchase decisions.  That power has shifted to the seller.

Many services have been outplaced from the retailer to the consumer, self serve gasoline, self checkouts at retailers, ATM machines at banks.  Sellers saw it as a way to reduce costs.

There was a second benefit which was to provide them more leveraged control over the transactions.

So too online services.  The consumer provided information about themselves as part of the transactions, allowing the sellers to market specifically to them with products known to be of interest.  One could argue that also added efficiency but it also shifted more decision making power to the seller.

As enterprises get larger, they go through stages of efficiency.  When they get really large and have few competitors, they gain additional clout with suppliers, with customers, with regulators.

We often joke about who has read the user agreements for software, credit cards, all kinds of them. The answer is always, “No one.”  We already know that the user agreements are a form to transfer away any recourse we might have.  The power has gone.

If you fit into the flow, that is if your use is within the normal range of uses, you probably have nothing to worry about.  If something unusual happens, you might find yourself helplessly trying to swim upstream.

I just returned from an Apple store where I went to get a replacement for a broken iPod.  This was my second trip.  The first trip, I was told I had to make an appointment as there were long lines due to the COVID19 virus.

I arrived and checked in.  After waiting to get in, I was told that my appointment was only for purchase, which is what I wanted to do – to purchase a replacement iPod.  “No,” I was told “ we classify that as repair.  You need a new appointment.”  So now I have a third appointment – maybe three times is lucky.

What was clear was that with the long line ups and requirement to make an appointment, the Apple Store had considerably more leverage with its customers that a small local retailer or restaurant does.  I can go anywhere to eat, but only to the Apple Store with problems with my Apple product.

A transfer of buying power has occurred.  The selling power easily outweighs it.  There will be no negotiation on price – take it or leave it.  No request for a refill on your drink.  The idea of capitalism usually leaves room for negotiation as part of the economic transaction.  That only happens when you deal with smaller enterprises.

My advice, particularly after the pandemic, patronize smaller companies.  They need you to survive so you have more leverage with them.  And for large companies, start looking at ways you can transfer more power to your customers or you may be like Hertz, and many other large enterprises, and lose your future.

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