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You get (most of) what you pay for

“You get what you pay for” is a common saying which holds a lot of truth.  However it is about to become a whole lot truer.  Traditional retail has had us believe that the more expensive items are better than the comparable cheaper items - and this is generally true.

Yes. You get what you pay for. But what exactly does that include?  Obviously you're paying for the product including its components and materials, manufacturing, quality assurance, testing, packaging, storage, and freight.  The better the materials, or the more quality assurance and testing, or the more careful the freight process, the higher the price.  Arguably all these items add to the value of the product so a higher price is justifiable.

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You paid for more than just the product.  But what else have we been paying for?  In the traditional retail model you also pay for its marketing, its shelf time, the importers’ margin, the wholesalers’ margin, the rent and outgoings for the shop, the shop fitout, the convenience of parking, the salesperson's salary and commission, and so on and so on.  In fact, on average you paid about 60% for the "product" and about 40% for all the other "stuff" that supported its sale.

But there's more.   You didn't just pay to support your shopping experience - you probably paid for many others' shopping experience too.  Let's say for every 10 shoppers that visit a fashion store, only one buys.  That purchaser basically pays for the experience of the other nine browsers - essentially paid for their parking convenience, their time with the shop assistant, and their experience in the store.  The shopper subsidised the browsers.  Browsers in traditional stores cost money to serve, and whilst the browsers didn't get the product, they did get the other "stuff" you paid for.

Online retail model - you DO get what you pay for.  Now let's consider the online retail model.  There is no rent, no shop assistant, and no parking.  Whilst there are other "stuff" such as warehousing, the website and shipping, they are typically add up to far less than the 40% that is observed in the traditional model.  Also, as the cost of a 'browsing customer' visiting the online store is effectively zero, the 'browsing customers' are not leaching value off the 'purchasing customers'.

It appears that online shopping is growing for more reasons than convenience and price - it is getting us much closer to what we have always related to: "you get what you pay for".

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