As the adage goes, “knowledge is power.” In the internet age, nothing could be closer to the truth, but in modern times, data is knowledge when it comes to understanding consumer preferences and trends. For retail, the voluminous amounts of data generated both in-store and online is a treasure trove of information, often contributing to the growing imbalance of power between merchants and consumers.
Modern retail dynamics disproportionately favor industry gatekeepers maintaining the leverage thanks to the vast amounts of monetizability from data they can use to derive insights or sell to advertisers and other intermediaries.
However, the consumer side of the stakeholder equation is absent in these notable benefits obtained by retailers and gatekeepers higher up on the value-chain. Centralization of activities most often comes at the expense of the least empowered group of participants in the equation. In the case of retail, this means that consumers are left most exposed, whether via informational asymmetries or biases.
Until very recently, bridging this gap was a pipe dream at best. However, cryptocurrency is showing that better stakeholder relationships can be forged thanks to the introduction of more transparent, closed-value ecosystems that abolish the role of unnecessary intermediaries.
The Impracticalities of Necessity
The birth of the internet led to a gradual but very real centralization of data in the hands of a few corporations. Despite its unique ability to make the world a smaller place, the internet reinforced the time-honored tradition of intermediation. Whether ISPs, search engines, marketers, or merchants, the amounts of data generated by global internet users is immense. That numbering is estimated at 2.5 million terabytes daily according to figures compiled by IBM. For retailers, the data they collect on user habits and behaviors is extremely valuable, harboring insightful and actionable information used to better monetize consumers, and even predict future buying patterns.
Despite this massive daily output, the actual data remains in the hands of a few parties that decide how to manage and capitalize on the information. Amazon perfectly exemplifies this problem by acting as an intermediary between merchants and consumers, taking fees for their services alongside all data pertaining to transactions. This data is then mined for marketing re-targeting purposes and other push advertising activities. Even though merchants do receive some information about their consumers, they remain largely at the mercy of Amazon, and rarely see the full picture.
Instead, Amazon can drip-feed them nuggets of information while keeping the valuable aspects of data for themselves. Furthermore, merchants listing on Amazon are required to pay monthly subscription fees and a fee per sale.
Nevertheless, these drawbacks have not prevented Amazon from capitalizing on its central role in e-commerce. It is evidenced by the rapid surge in its market capitalization and growing list of services. Even so, new market participants are quickly disproving the myth that online retailers need intermediaries or facilitators.
Shopee, a Philippines-based mobile commerce application has boldly gone where Amazon has not, offering a platform free of fees and commissions as it attempts to grow its market presence.
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