There have been many cultural changes so far in 2008. Some of these changes are in response to the rapid increase in the price of oil and other commodities. Some of these changes have been due to technological innovations. In both cases new behavior patterns are being established that will, to some degree become permanent and will create new dynamics in certain industries. Today we take a look at some of the predictions made here last January.
The predicted shopping trends were written with a long term view. What is interesting is that the high price of gasoline has accelerated the speed of implementation of some of the forecasts. On shopping, this column forecast:
“Shopping behavior will noticeably change……purchases will go down per capita. This will due to belt tightening but also due to the effect of the explosive growth that on-line sales will now have on off-line sales.”
This forecast was based both upon the long term up trend of on-line shopping but also upon the short term pessimism felt about the economy. When people feel uncertain about their economic future they cut back on major expenses. This explains the significant decline in auto sales this year and the bankruptcies of several retail chains. What has been interesting is the reality that much of the growth in on-line sales at the expense of off-line sales is due to $4. a gallon gasoline. When one can order on-line and have the merchandise delivered with low cost or free shipping, it is cheaper than driving to the mall. There have been numerous stories in the media about consumers shopping on-line to save on gas. Many chains report that their on-line sales are experiencing double digit growth year to year while their physical stores are showing little or no growth. Some chains report single digit decline in off line sales while experiencing double digit increases on-line.
I have often spoken and written about how the growth of broadband will help humanity deal with the energy crisis. Working and shopping from home via a high speed connection eliminates the friction costs of commuting or driving to the mall. The accelerator in this behavior in 2008 has been $4 gas.
The forecast in January:
“A month ago Google accounted for 65.1% of all searches in the U.S. That compares to 58.3% 18 months ago. This means that the company has three times the market share of its’ nearest competitor Yahoo, and nine times the share of the distant third place finisher, Microsoft. Will Google continue to be a/the central player in the current zeitgeist? At least for the next year it will be as it is making all the right moves facing the future.”
Well, this has proven to be true. What was unexpected was the continued stumbling by Yahoo and the subsequent self-absorbed behavior by its board relative to the premium priced offer from Microsoft. To run from Microsoft into the arms of arch rival Google only accentuates this prediction on search
It was forecast here in January that:
“The transformational changes that digitization and the Internet have brought to music, video and news reporting will now begin to affect the book publishing industry in a noticeable way. The unstoppable process of disintermediation I have often presented in this space will now move to book publishing. The two most noticeable areas will be in ebooks and in print on demand. Amazon’s launch of the Kindle will be the beginning of a rapid upswing in the sale of ebooks, albeit from a very small base.”
It is too soon to document the transformational changes of digitization and disintermediation to the book publishing industry. There is little doubt here that when year end sales are tallied, 2008 will be a year of no real growth in off line sale of books. At the same time there will be an explosive growth in both on-line sale of physical books – for reasons stated above – and in e-books. The Kindle from Amazon is the game changer for e-books. I now see the Kindle pool side and or airplanes. Several early adopters have told me that if a book isn’t available for the Kindle they won’t read it. 2008 will be looked back upon as the year the e-book took off, on-line sales continued growth, the number of print on demand book titles increased dramatically and off-line, or physical retail sales declined. In 5 years, 2008 may be viewed as a threshold year in the book publishing industry’ a threshold between the way it always used to be and the way it will be in the future.