Mass Substitution in action – How Google and Apple have decimated the British High Street

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Mass Substitution is where by a product or service acts as a complete replacement for an existing economic ecosystem. This is what the mobile revolution started by Apple and championed by Google had done to totally devastate the British High Street.

At first glance it is easy to blame tough economic times, the repeated dips into recession and so on however this masks the real trend that is taking place.  This trend is the increasing pace at which the mobile revolution is replacing traditional forms of commerce. The mobile revolution has offered us unparalleled access to information regardless where we are and nearly what we’re doing. However it is not just access to information but also the ability to “do/action/execute” (D/A/E). What I mean by D/A/E is with your smartphone you can, order a pizza, buy a plane ticket, arrange a date with a total stranger,  or simply watch a video, to name a few, not to mention you can also make a phone call!

The power of Information combined with D/A/E has lead to the rise of “everything on the go”, where ever and whenever you are. This has massively reduced our reliance on one of the core building blocks of developed market economies “the store”.  For developed markets “the store” has been the longtime replacement of the market and at one point a massive social hub where neighbors could bump into each other, and singletons could initiate encounters, all while spending or looking to spend.

This strength of this “everything on the go” trend became most apparent to me during my tour of the Consumer Electronics Show 2013. The number of stands filled with I-Phone or smart phone accessories was immense. Innovative new consumer electronics products that did not rely on you having a smart phone where few and far between. Even with high profile stands from the likes of Intel, it was clear that mobile convergence had taken a severe toll on consumer electronics. Innovation appears to have been reduced to “what’s the best I-phone case or accessory you can design.”

Returning to the UK and strolling down Tottenham Court road it was even more disturbing to see firms like Micro Anvika long time bastions of consumer computing, fold under the pressure of the mobile incursion into daily computing. The way to look at this being, if I have an app in my pocket that can help me map my route to work real-time or find that hidden restaurant my friend invited me to, I no longer need to replace my laptop, printer nor networking accessories that frequently anymore because I don’t need to print anything and I don’t have massive computing requirements. Add casual gaming into the mix unless I’m a massive hardcore gamer I’m not going to need that £5000 Mac-book pro, to play the latest Call of Duty.

Even closer to home walking in Wood Green, Blockbuster, HMV and GAME are further casualties, with consumers shifting to cheaper and more readily available forms of entertainment on mobile.  Basically why buy or rent the latest game or movie when I can download and consume at a lower cost and enjoy in the park instead of sitting in my lounge.

Putting the money involved into perspective the UK now has a mobile penetration rate of 58%, that’s a minimum of 35 million smartphones in circulation of which 23% have used been used for online shopping. This translates into a whopping 8 million customers with the average annual basket size of between £500 to £1000[1], that translates to somewhere in the region of £4 billion to £8 billion of annual spend and rising. To put this into perspective, before going bankrupt HMV had annual sales of just under £1billion and suffered a loss of £38million[2]. This shows is that the purchase power of the mobile user matters and matters greatly. Thus the mobile onslaught unleashed by Google in the form or Android and Apple in the form of iOS is not as benign as the pundits would have you believe.

A further more direct example of this Mass Substitution trend is the collapse of Jessops. This was put down to the rise in Smartphone camera quality reducing the need for consumers to buy dedicated camera devices[3].  Add to this the rise of the  smartphone lens attachment[4], better easier to use software for image modification[5].  The demise of Jessops was obscured but predictable.

So where does this leave us? Well the business lesson here is that it is no longer enough for your organization to focus only on immediate product substitution, or even your immediate competition. Your business now has to look at the wider ecosystem and keep an eye out for Mass Substitution markers and trends, because while your immediate substitutes and competitors may gouge your market share, the Mass Substitutes can literally end your business High Street or no High Street. To illustrate on a micro scale, just because you run a corner store selling drinks it is no longer enough to worry about the bank of vending machines up the road. You actually need to pay attention to the innovations that Cupertino, Mountain View and others are making because they could just lead to innovations in drinks delivery that reduce your customers from the pool of  your neighborhood to the trickle of those simply passing by.