The Internet is steadily reshaping every industry that gets in its way and remolding it in its own image. You can imagine it as a black hole, once an industry goes in there is no going back and the industry cost base is smaller forever.
More and more industries are coming into the sights of the Internet, even those that were previously immune as they sold products that had to be physically touched for customers to appreciate their tactile nature, just look into thefurnituremarket.co.uk.
Other industries have already been radically transformed by the Internet, for example, the travel industry, retailers, and insurance. I would argue that any industry that hasn’t yet been touched by the Internet is simply that, and industry which hasn’t yet been touched by the Internet. Its time will come.
So, what is it that makes the Internet completely transform each industry it takes on? It’s a combination of two things: cost and reach.
The operational expenditure (OPEX) needed to run an Internet business is very different from that of a traditional business. Just look at the travel industry.
A traditional travel agency business would have the overhead of running a set of physical stores, with all the costs this entails such as rent, rates, water, electricity, fitting out etc. It would also have to staff the office, incurring salary costs, training costs, HR costs, management costs etc.
With an Internet travel agent these costs are completely removed. Instead the Internet retailer simply needs to provide a call center to field customer queries. Because of this lower operating cost base the Internet retailer can offer its products at a much lower price to consumers. This makes it very tough for traditional travel businesses to compete.
If we take again the travel agency example, the reach of a traditional bricks and mortar travel business is probably restricted to the surrounding area of each travel store. With the Internet, the reach can be far wider, with people from all over the country having visibility to the products the Internet holiday retailer sells.
One thing to note about costs: although the cost base is significantly reduced for the Internet retailer, they will have to spend a significant amount of money on advertising to attract eyeballs to their site.
It is probably just a matter of time before every Industry is remolded in some way by the Internet. They two key attributes driving this change in Internet businesses are a lower cost base and an increased reach.
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