Amazon and ShitBegone
Virginia Postrel had a piece in the NYT today about a recent study on consumer surplus from online commerce. The study focused on Amazon book sales of items below the 100,000 sales rank, i.e., the books that probably would not have been found in your run of the mill Barnes and Noble superstore or independent bookseller, and asked how much more people would have been willing to pay to obtain these books above what Amazon sold them at.
On average, consumers were willing to pay about 70% more on the purchase price for the ability to buy obscure titles. For example, a $20 book could have sold for $34 if the buyer couldn’t find it at the local bookseller. The main benefit of online retails like Amazon was initially believed to be price competition — online prices were 10-15% lower than offline prices on average — but the study found that the consumer surplus associated with greater variety and choice is perhaps ten times as great as the pricing benefit. “People were really happy to find obscure books, and would be willing to pay far more for them.”
This sort of consumer surplus isn’t well captured by the usual economic statistics, because there’s no direct measure of it. An economy with more choice is naturally a more vibrant economy, and Internet commerce is a component of this vibrancy. Similar things can be said for trade, as the variety of television models at Circuit City and the presence of Beard Papa down the street from me demonstrate.
Postrel also notes that the Internet’s variety of choice is also beneficial to small, obscure retailers, selling niche products. Such niche products would have difficulty finding their target arkets if they were confined to physical locations. BoingBoing.net’s recent coverage of ShitBegone notes that it’s an art project that somehow morphed into a commercial venture. This would be one of those niche markets Postrel talks about; postmodern toilet paper can only be commercially successful because of the Internet’s power to bring obscure products to consumers who would actually care enough to fork over hard cash. Similar products may be the iDuck, the miscellany over at ThinkGeek.com and the custom T-shirt printers CafePress. Before the Internet, you might be able to find these things in quirky stores in the corners of malls, East Village boutiques or tiny ads at the back of magazines. Now, anyone with a computer, a credit card and a sense of irony can pick up pomo TP. And the world is better for it.