Friday, May 16, 2003

Oligopolies and variety The traditional image of a monopoly is one-size-fits-all, take-it-or-leave-it. And that's pretty much the way it is with current monopolies like electricity companies, water utilities, and (in part) Microsoft. But monopolies have to cover an increasingly divergent set of tastes and desires. That's why retail oligopolies, in particular, are so good at adapting to every need. Online and offline, in every medium, consumers now expect a lot more variety on a lot more shelves. The first place to see that in action is your neighborhood grocery store. Fifty years ago, the corner store (along with its country cousin) was still powerful. It had only a few shelves to stock, so it could only offer a limited range of products and choices. But few customers were frustrated. After all, no one knew any better. No one expected the local store to have Basmati rice and Arborio rice and Jasmine rice, along with Uncle Ben's --  not to mention, offer them seven days a week, until late at night. By the time Amazon.com launched its first ad campaign, North American consumers had developed gargantuan expectations for product availability, even in brick-and-mortar outlets limited by physical space. Whether they shop online or not, in the age of Wal-Mart and Home Depot most people are no longer awed by vast arrays of countless categories and products. From toilet paper to shotgun ammo, from ten types of lawn chairs to two dozen kinds of headache remedies, we expect it all under one roof, at almost every waking hour. (The country store often had a similar range of products, but the premises were so crowded there was only enough room for one or two brands in each category.) These days, specialized online and brick-and-mortar stores can serve up thousands of jazz CD titles, a hundred varieties and brands of Belgian beer, a panoply of electric lamps of every size and shape. Want a digital camera or a cell phone? Consumers have scores of choices in specialty stores, a range that's often both enticing and intimidating. But these stores don't want to deal with thousands of small independent suppliers. The logistical and accounting nightmares would be impossible. They gravitate to the suppliers and manufacturers that can provide them with the variety of goods they want, while being able to deal directly with a tolerable number of salesmen, delivery drivers, and invoices. That's why stores make it easy for oligopolies, difficult for single-item suppliers. For the oligopolies, the directive is to serve as many tastes as possible or, rather, profitable. This sometimes involves "pseudo-variety," where a number of products that are essentially identical are offered (why, for example, there are dozens of varieties of Colgate toothpaste). But it also can be in terms of real variety, as with a company like Kraft offers both the most calorie laden junk foods and diet and even organic/"natural" food; record companies offering everything from hip-hop to Beethoven; movie studios producing standard Hollywood movies, independents, and even foreign films. They do these under different brand names, but all the major bases are covered. 3:51:17 PM

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