C&B Notes

Tesco Innovates in Korea: Is Pricing Transparency an Unintended Consequence?

A couple of notes from this video about Tesco in South Korea:

• It will be interesting over time to watch how online shopping impacts everyday grocery shopping and how that changes the economic model (for example, capital expenditure levels and mix, labor costs, and advertising budgets) of the relevant retailers.  This evolution will be an interesting long-term trend to follow.  As a note, the retailing leaders that have huge competitive advantages in brand, supply chain networks, purchasing power, and capital to invest make it generally less likely that an up-and-comer will be able to disrupt the competitive balance (we have talked about this previously and call the increasing domination of retail by a few large, sophisticated operators the “Wal-Mart effect.”).  However, we would imagine that some market share will accrue to the companies among this leading group that innovate more creatively and effectively.

• While pricing transparency afforded by the Internet has already had a big impact across retailing, it has more than proportionally impacted certain areas like bigger-ticket consumer durables, electronic accessories, travel, and the like.  It is clear, however, that in the future it will have a large impact even in groceries, basic staples, and other consumables.  The ability to easily shop and price compare online among multiple trusted retailers/vendors should continue to influence pricing across the retailing industry.  The lowest price competitive advantage is likely to assume greater and greater importance.