Friday, June 21, 2013

Will the internet kill all large traditional businesses ?

The other day, I dropped by Coffee Day(indian coffee chain - startbucks equivalent). Adjacent to it was the well loved Crossword store and I clearly remember that there was a connecting glass door somewhere which let people who had come for coffee to stroll by and look up books and dvds and vice versa. I could see some books lying about but the place looked empty and the glass door seem to have vanished. So, I casually asked the Coffee day guy and he told me something to the effect that the place was shutting down. It was kind of a gentle shock for me and though I could hardly remember buying a book from Crossword, hanging about in bookshops has been one of the idle pleasures of urban life.Then it struck me, that though I dont read a lot these days, there was a time I spent a couple of thousand rupees on books every month and most of it was at Crosswords. In the last six months, that spend had got diverted to online stores like flipkart and in many cases I could just read for free - flipboard etc. I have no idea whether the store actually closed down due to business reasons or whether it was just a phase of temporary shutdown due to renovation etc but like in the US, book businesses everywhere seem to be facing major challenges and most if not all is due to the internet.

The internet is quite puzzling. Consider this :

1) Email is free - only a decade or so ago, people used to send telegrams and pay per word. Its weird that a service that is many many times faster and reliable is actually cheaper - well not just cheaper, free.

2) There was a time only 15 years ago, when we used to attend book festivals to buy editions of Enclyclopedia for thousands of rupees. Now you just get a million times of that content for free. Also, searching this mammoth knowledge base again is free.

3) Music is basically free. If you are a music lover with generic tastes like most of us, gives you almost everything you need - For free.

In short, the internet has turned most industries on its head :

1) Book industry - Why would you buy a book if you can download it ? Traditional booksellers are just looking one way and that is down.

2) Music industry - It was only ten years ago that you could just walk along Planet M at Brigade Road, Bangalore and sample out music before buying. Now, its difficult to imagine people buying CDs

3) Post Office - The Indian Post office just stopped the telegraph service.

Which ones will be next ? The movie industry, the retail industry , enterprise software products.

All this obviously means that if someone is losing out, someone must be winning. So who should be the winners, obviously the internet companies - but if you look a bit closer at the internet companies, if you leave out the leaders, most are struggling to make money...Giving things free actually costs money, giving discounts actually cost money. The internet can be a democratic force giving the small guy a chance to compete but it has probably made the race so competitive that its a race towards the bottom and may kill a lot of industries in its run and maybe hurt itself on its way. The good part is you dont need a license to join the race.

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