Barcodes, Perfect Competition, and the future of shopping
Barcodes? The future of shopping? Is this some weird sort of retro post? Like when the newspaper does ‘today in 1972…’?
Because, of course, there’s nothing new about the barcode… it was first tested in US supermarkets in the sixties. As technology goes, it’s as old as the hills.
Because what matters nowadays is not the barcode itself, but the reader…
Supermarkets (and now other high street chains) have been putting the control of scanning in the hands of customers for a few years now… not as an advantage to the customer, necessarily, but as an automation of a job that used to be done by checkout assistants.
(…the economic labour market implications of this helps explain why the five members of Girls Allowed had to find alternative employment…)
With developments such as this, and through years of watching shop assistants at work, we’ve all been taught by the shops how to scan barcodes…
However… imagine you could take that barcode, and scan it with something else… something that lets you compare prices across every outlet, order it online… and essentially through market forces means that the price you pay becomes as low as possible…
Well, that scanner is here. And it costs £1.19. And it’s an app for the iPhone 3GS called Redlaser…
It works like this; you fire up the app, and it uses the camera on the phone to take a picture of any UPC barcode you hold in front of it, as the video explains…
When I first heard about it, I expected it to work on things like books, CDs and the like… but then I tried it on baby milk…
…which quickly told me that our local pharmacy were charging £1.19 for something that costs £0.58 in Boots.
I still can’t quite get my head around just how big a step this represents in the way our economy works… but it’s taken me back to my Economics degree and a thing called Perfect Competition.
Like many things in Economics, Perfect Competition was just a theory based on unattainable assumptions… infinite buyers & sellers, costless transactions, zero entry/exit barriers and so on
…read the wikipedia entry here for a full explanation)…
…but the one assumption that is close to becoming fulfilled by Redlaser is Perfect Information; prices and quality of all goods in the market are known to every seller AND every buyer.
Perfect Competition as a theory has many ramifications… but perhaps the most important is this; it becomes impossible in the long run for any company in the market to do any more than cover their costs.
So for instance, if I have perfect information about everyone who sells Aptamil baby milk, and there is no ‘transaction costs’ which set any seller apart (e.g. I can order from all store in bulk via the internet), then I’ll always just order the cheapest one.
If everyone did that, for every product, that manufacturers and retailers would only ever break even, as market forces will continually drive down prices…
(Now, that’s not of course how everyone behaves now… but it’s got me thinking of something that’s worth a separate post. And I think there’s more implications for the Perfect Competition hypothesis from the internet too, but I’ll go in to them on another separate post too…)
So we’ll all have perfect price information, but what about the other half of Perfect Information; the quality of products?
How can we possibly begin to share the information about a vast array of products across society in a way that bypasses manufacturers and retailers…
…oh, hang on, right you are…
Whatever it is you’re buying nowadays, there’s a discussion/forum/review on the internet from other people which will guide you as to the quality of the product you’re looking at.
What does it all mean?
Well, in a world where people have access to Perfect Information about just about every market, what implications does this have for branding?
Is traditional branding a mechanism that only works to protect price premiums in a world of imperfect competition? Will I find out about the quality of products from other people, then the cheapest place to buy it via mechanisms like Redlaser?
I’m certainly going to be thinking about this a lot more in the weeks to come… probably at 4:00am when I’m feeding James with all this bargain baby milk we’ve been buying…
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