FREE ESSAY ON THE CONSOUMER REIGNS

THE CONSOUMER REIGNS

The Consumer Reigns
THE ECONOMY IS a buyer's world. The three great
trends of our time -- globalization, deregulation, and
digitization -- have given the consumer more
choices and more information than ever before. And
choices and information mean market power.
Twentieth-century economists have long taught the
notion of consumer sovereignty; but only in recent
years have consumers experienced its full force.
And then there is the Internet, which has expanded
the consumer's horizons from his or her
neighborhood to the world.
Much has been made in recent years of the benefits
of e-commerce. But actual buying over the Internet
is still only a fraction of the nation's $5.8 trillion in
consumer spending.
For now, the real value to the consumer of the
Internet is not e-commerce, but information. By providing consumers with easy access to
information, the
Internet has already dramatically changed the relationship between consumers and
sellers.
Think about buying a car. If you have ever gone to a car dealership without doing
research, you know
what an unpleasant experience that can be. A salesman will fill your ears with talk of
rustproofing,
financing plans, and options. He'll talk about how he is offering you a price so low that
there's barely any
money left in this for the dealer. And you squirm in your chair. Why? Because the
salesman has all the
information, and you know only what he chooses to tell you.
Spend an hour on the Internet first, however, and the experience is
completely different. You know in advance not just the sticker
price, but the dealer's invoice. You know which options are worth
buying and which aren't. You know exactly what car you want and
how it compares with others in reliability and safety. And if you
used an Internet buying service, you may even know the best
price a dealer in the area is willing to give you. 
Surveys suggest that roughly half of all car buyers now consult
the Web before buying. The same is happening in airline travel.
The book-buying business has been transformed as well. And
other businesses are following at a breakneck pace.
The Internet is still in its infancy, and as it develops, the
consumer's power is bound to increase in a variety of ways. In Adam Smith's market,
consumers had only
two choices: to buy or not to buy. But in the high-tech market, the consumer can send far
more
sophisticated messages.
Already, thousands of consumers are participating in auctions on sites like eBay.com
(www.ebay.com) and
its competitors. And Priceline.com (www.priceline.com) has turned the old economic model
completely
upside down, allowing consumers to set the price they are willing to pay while companies
bid to serve
them.
Moreover, the net allows consumers not only to say how much they'll pay for a product,
but to design the
product themselves. Dell Computer has been at the forefront, but others are rapidly
catching up.
All of this means that ever more control over the key decisions in the economy is now in
the hands of
consumers.