opinion If there is one thing which maverick Australian entrepreneur Dick Smith is good at, it is causing controversy.
From Australian manufacturing to population control, from environmentalism to freedom of speech, from terrorism to civil aviation, if Australia is debating an issue, then Dick Smith is likely to have an opinion on it, and all it will take for that opinion to spill forth is a quick call from a journalist. Ten minutes later, Bob — or maybe Dick — is your uncle and the media has a new, sensationalist and usually apocalyptic quote from an Aussie icon to slather all over itself, in big gooey, slightly radioactive globs.
Last night proved no exception.
For reasons which I have been unable to ascertain, given that he sold his flagship electronics chain to Woolworths 30 years ago (almost before the Internet was even invented, and at a time when it predominantly sold black and white TVs and bits of wire), the ABC’s normally excellent discussion show The Drum called on Smith to proffer his expertise on the issue of online retailing. How might Australia’s supposedly ailing retail industry take itself forward with vim and vigour, The Drum’s host Tim Palmer wondered out loud, with the ominous threat of the Internet hanging over every cash register, siphoning transactions daily from the great wheel of commerce?
And of course Dick had the answer.
As I — and no doubt, countless others — watched, aghast, the 67-year-old Smith sequentially shut down every other member of the panel discussion of which he was just one part, and proceeded into an epic nationally broadcasted rant about economic protectionism, Gough Whitlam, the cost of Australian wages, the ongoing complaints by retailers like Gerry Harvey about online GST collection and why politicians should “tell the truth” about jobs going offshore.
In one memorable moment, Smith claimed that if international online retailers weren’t charged the “$600 million” worth of GST he claimed they should be paying, Australia wouldn’t be able to pay decent wages for our police forces or even fund the ABC, and that the retail industry for items with a value less than $1,000 would eventually cease to exist as Australians bought everything online.
As rants go, it was fantastic. My blood pressure rose several points as I fought an overwhelming urge to throw my dinner at the television screen, and Dick was successful in drawing the entire focus of The Drum’s panel discussion into a shouting match between him and normally impeccably behaved commentators like the ABC’s Annabelle Crabb and the Institute of Public Affairs’ Tim Wilson. To put it nicely: Our Dick was on fire.
I recommend you watch the entire segment to catch the Aussie icon at his finest; the debate starts here at the 29 minute mark.
Now, I wouldn’t describe Smith’s rant as entirely coherent; it was less in the line of reasoned argument and more in the line of an angsty rambling monologue which sought to sledgehammer the Government on a whole range of issues while avoiding any modicum of responsibility on the part of bricks and mortar retailers for the less than perfect “trading conditions” which they currently find themselves in. But that didn’t matter really. It wasn’t as if anybody else on the panel was qualified to speak on the issue anyway … Dick’s only real control factor was the host, Palmer, whose feeble protests about the strengths of Apple’s retail stores was brushed off by the entrepreneur within the space of about three seconds.
However, after I calmed down, finished my dinner and started thinking about Dick Smith’s history and the issue of retailing in the electronics industry in general, a wider point begun to surface in my mind. For that, Dick, and for almost making me choke on my brussel sprouts, I thank you.
As Australia’s technology sector has begun its annual two-week saturation experience with news emanating from the Consumer Electronics Show in Las Vegas, it is increasingly clear that globally, many technology manufacturers and retailers still largely see themselves as being caught in what I would describe as the paradigm of ‘marketplaces’ for their goods and services being sold.
Companies like Sony, LG, Samsung, Canon, Microsoft, Nokia, HTC and others are currently launching thousands of products at CES, and will launch hundreds more at the upcoming Mobile World Congress confab in Barcelona, with the view of attracting broad interest. The idea is that they will then work with retailers like Harvey Norman and distributors like Telstra, Optus and Vodafone to offer these products to customers.
The concept — call it historical — is that customers wanting a new gadget will walk into stores or browse their options online and make a choice between the various products. They will then buy the one which they want. It’s this sort of buying pattern which retailers like Dick Smith and Gerry Harvey have grown up with. It’s all they know. And it dates back millennia, to the days when community markets were the only place where regional goods were sold. From Rome, to Egypt, to China, every city, every civilisation has had its markets, and Dick Smith and Gerry Harvey are but the latest scions which this epic economic cycle has created.
The only problem is, in many cases, consumers are no longer making the traditional types of choices about what products they buy, because something like 95 percent of new products don’t matter.
Take the mobile phone market. Right now, if you talk to industry insiders, it is becoming appallingly clear that despite the fact that new phones are being launched all the time, in reality consumers are predominantly buying just a handful of devices. The huge number of Australians who bought a new smartphone in 2011 were far more likely to have bought an iPhone, a HTC Desire or Sensation, or a Samsung Galaxy S II, than any other handset.
They didn’t go to a “marketplace” and make a choice. They bought one of the top three or four options directly from a telco and ignored the bottom 50. And when the Samsung Galaxy S II, likely 2011’s best smartphone is available for peanuts — $39 per month (including plan) over two years on Vodafone — can you blame them?
It’s a similar situation in tablets, where something like 90 percent of Australians are buying iPads, which is virtually the only tablet brand with any market penetration right now. The only other tablet device Australians are really interested in is the Amazon Kindle. And often people will own both, because the Kindle is the best eReader. In laptops it’s a little more diverse, but again there are only a handful of models, led by Apple’s MacBooks and with the most popular models from HP, Dell and Acer hovering around as well. Lenovo in the business world. In television sets right now, according to my peer group, it’s Samsung. In furniture, Ikea.
The rapid integration of technology platforms with each other is only increasing this trend. Many people no longer use separate MP3 players, GPS navigation units, fixed or video cameras, audio recording devices, portable gaming consoles and so on. They just use their smartphone for all of these purposes. And I’m sure in a year or two laptops will start dying as keyboards are better integrated into tablets. TV brands will start dying when Apple eventually launches the iTV or whatever. We all know it’s coming.
Other areas are being touched by this trend as well. ISPs like iiNet do not want consumers to make choices about their ADSL routers. They want them to buy their standardised BoB device. Telstra does not want consumers to use their own digital video recorder. Telstra wants customers to use its T-Box. Video gaming options have increasingly become condensed to Microsoft’s Xbox and Sony’s PlayStation 3 consoles, and we’re not too far away from a future where all content to those platforms will be delivered digitally, doing away with yet another “marketplace” — the physical video game retailer.
Even within these digital marketplaces, choices are becoming less important. If you’re into role playing games, in late 2011 you were probably playing just the best one — the Elder Scrolls V: Skyrim. If you were into action adventures, there is no doubt you would have been playing Batman: Arkham City. For many people, there has been no need to make choices about which game to play, when it has become incredibly obvious which one is the best one to suit your needs. When you can get the best experience in a convenient format at a decent price, there is no need to settle for second-best.
The reason why this is occurring should be obvious by now: Globalisation.
When most of the top products are available globally (at least in first-world countries), there is no need any more for consumers to make choices — and hence, compromises — about the products they buy. They can simply read an authoritative review on the whole category of products on a global site like Engadget, and then follow that site’s recommendation for the best global product at any time. Then, you can often buy that product directly from the manufacturer — for example, Apple or Amazon — rather than dealing with a local distributor.
This process is inherently better than dealing with third-party distributors. You get the best stuff from the people with the best expertise about that stuff. You might pay more for it than those living in the manufacturer’s home country, but then you’d pay more at retail anyway, and this way you avoid the uncomfortable experience of dealing with retail staff who usually know less about the products you sell than you — or your cluster of Internet review sites — do. It’s this concept which is behind the success of Apple’s retail stores. If you buy stuff from Apple directly, you know they have the model in stock, you know precisely what the price is going to be, you get great service (albeit with a free dose of reality adjustment thrown in) and you’re getting one of the top products in whatever category you’re shopping in.
This concept — of the demolition of the idea of ‘choice’ and ‘marketplaces’ — is also evident in other areas of consumer electronics.
One of the central issues with Google’s Android platform is the difficulty consumers have with upgrading their handsets to the latest version. Honeycomb? Ice Cream Sandwich? Gingerbread? Froyo? We don’t care. We just want the latest version, whatever it is, and we don’t want that download to be controlled by our carriers, because they’re not the people who make our smartphones. Just get out of the way, the mantra goes, and provide one central, standard way through which Android can be updated, directly from the source to you.
A lot of what Dick Smith talked about last night, and what manufacturers will be talking about post-CES, is distribution. Jobs for people in stores. Deals being signed with carriers. Country-specific marketing campaigns. Economic protectionism for local manufacturing. But the reality is that increasingly, consumers don’t care about any of that. Many people would prefer the third-party retail ‘marketplaces’ which have existed for millennia to simply disappear as the ability to build relationships directly with the people who actually make the stuff we buy becomes possible, and in fact, completely normal. That middle men have a vastly reduced future in the global economy should, by now, be obvious to everyone. And this capitalist class — which has long made its margins on the top of the real innovators — deserves to die an ignominious death.
Dick Smith and Harvey Norman are fabulous examples of retail marketplaces where you can buy anything. But increasingly, people don’t want to buy anything. More often than not, they only want to buy the best thing. And that’s the one thing which mass market retailers never quite seem to want to sell you.
Image credit: Dick Smith on The Drum last night, believed to be covered under fair use