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We buy but can we sell online?

BUYING and selling are usually seen as two different angles on the same transaction. But as more and more business moves into the electronic world – telemarketing, web-based sales, etc. – the distinction is becoming much more than a word game.

The difference between the two varies greatly from one product or service to another, and between the attitudes of customers.

Very few of us, for instance, buy household insurance for our own needs – it is sold to us. But it is very common for businesses to buy insurance to cover their operations.

The difference is in who bears the brunt of the transaction costs. That’s the economists’ term for the costs in searching and then negotiating the price for any good or service.

To go back to the insurance example – the vast majority of householders know they probably should have some insurance (over and above what their mortgage provider requires) but life is really too short to spend a scintillating Saturday afternoon going through companies’ brochures.

So the insurance companies response is to support a vast network of agents sprinkled across the countryside who spend a good deal of their time involving themselves in junior sporting organisations, and other activities, where they have the best chance of rubbing up against good prospects.

Strike a relationship in a non-threatening environment and then be ready for the invitation to deal with that nagging problem – “I’ve been meaning to do something about insurance, what do you reckon?”

It is a model which has worked extremely successfully for many years, but we pay a high premium for all that smooching time.

Selling insurance to business, on the other hand, is quite a different matter. The buyer will tend to be far more motivated. They may give the salesperson a different kind of headache in closing the deal, but the costs of searching out buyers are likely to be less.

How can you schmooze in the electronic world? Some market segments can be courted and cajoled online, but you’d have to say that so far the evidence is that selling online is a dud.

But if you have something people want to buy then maybe you are in with a show. Take pornography, or drugs.

The book market is an interesting case. While Amazon.com must be listed in the Guinness Book of Records for the most frequently used example of anything, and while it may still be swimming about in red ink, it does offer up some useful examples.

Putting the lack of a good old fashioned profit to one side, the company has generated a spectacular turnover in a few short years. But my guess would be that the vast bulk of its customers would be card carrying book junkies.

The occasional book buyer is unlikely to bear the grief and heartache of finding their way to the Amazon site and doing their business there.

They are open to persuasion to pick up a title when it is sold to them in the bookstore but not when they have to contribute so much to the cost to buy.

The kicker in all of this is just where the balance falls in what is the greater cost – going online or going to town. And that will move quickly over the next few years for different goods and services and for different consumers. Stay tuned.

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