Will Reducing Transaction Costs Be the End of Retail? - Michael Munger writes for AIER
Those empty Sears, Penny’s, and other large retailer stores at your local mall may soon be repurposed as flexible retail platforms where online sellers can let people interact with their products at very low cost. Firms may become dramatically smaller, as other systems for controlling transaction costs replace them. Stores will act like miniature malls, renting space, not selling products.
Richard Sears was originally a railroad man; he vertically integrated into retail through his famous Sears Catalogue as a way to ensure business for his railroad. Later, the company paid a fortune for retail space, which it owned and operated at a high volume.
We are moving back toward a 'catalogue' setting, where people can find things online. But folks still want to touch, to feel, and to try on. Renting space and sharing it with other retailers in a 'curated' setting is not really new. It’s just a different way of reducing transaction costs.