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The Internet was never friends with local and small businesses. One of the most prominent ideas spawned on the Internet in the last decade is that of “disintermediation”, a term technology entrepreneurs use to describe “getting rid of the middlemen” and to “eradicate inefficiencies”. The Internet allows businesses to directly connect with customers anywhere in the world. Eventually a possibility of infinite demand is created, economies of scale bring in supply chain efficiencies, and prices fall for consumers. Amazon sells books directly, disintermediating distributors and small bookshop owners. Expedia sells flight tickets and hotel reservations directly, removing the need for the local travel agents. Monster finds us jobs, disintermediating recruitment agencies. All online businesses provide services no different from local businesses they disintermediated. However, because of

scale and deep pockets they could out-price and out-market their smaller local competitors. I call it the ‘Walmartization’ of the Internet. For most of the previous decade, local businesses and the Internet remained at odds with each other. Local businesses did not quite know how to use this ‘thing’. Also, the Internet did not quite know how to make it work for local businesses. For example, Google allowed me to buy the most authentic Japanese macha tea from a quaint and online store in Tokyo, but has no clue when it comes to my relationship with the local businesses around me. However, several new developments over the last many years have begun to change this.

Cheaper Computing PlatformsThe widespread adoption of smartphones and tablets by small businesses and their

As the Internet transforms the way people consume,

disintermediation has offered consumers direct access to

products and information that otherwise would require a

mediator. Although this is an advantageous aspect, this can

affect and impair the way local businesses run.

by Rahul Gupta

Internet and the Local Business

Communities

Kuliza Social Technology Quarterly Issue 07

Photo Credits

Top: DawnMiddle: Johan LarssonBottom: Johan Larsson

the node, search was the key driver and keywords became the connection between a business and a prospective customer. In the beginning, many small businesses benefitted, but slowly large businesses with large marketing muscle drove prices of common keywords high, which pushed smaller merchants out. Keywords became expensive and to optimize on SEM (search engine marketing) became time consuming.Of significance is that not every business relationship begins with a search. I may get to know of a pastry shop while walking around in my locality or through a friend, without exhibiting any intent of looking for and hence purchasing a pastry. Facebook and Twitter provide a more personalized way for local businesses to connect with their customers. If people like a local business they can connect with the store owner (“Like” or “Follow”), your friend may get to know about it, and visit the store if interested. This is the digital version of “word of mouth,” which businesses today seek.Local deals companies such as Groupon allow local businesses to reach out to new customers who pay online for an offline experience, such as eating at a restaurant. It works similar to pay-for-performance marketing for local businesses.A small business in one part of a city does not really have to reach out to people in another part of the same city. Also, a small business would not be able to afford the time and money to acquire skills or resources for search engine marketing. Social media and group deals offer easy-to-understand and cost-effective means for small local businesses to market their offerings to their local market. The era of internet-enabled devices, along with the social web, presents a number of opportunities for small local businesses. From being the largest online sellers of apparels to even paper plates, there are hundreds of ideas that entrepreneurs can work on to empower millions of small local businesses to compete with the larger

online players. It is time to disintermediate the disintermediator.

ReferencesWhittaker, Zack. “IDC: iPad retains tablet share

crown, Android rapidly catching up.” ZD Net, 05

Nov 2012.

Five Star Equities, “Number of Smartphones

Around the World Top 1 Billion - Projected to

Double by 2015.” Yahoo! Finance, 19 Oct 2012.

customers is creating opportunities for developers to build tools and applications that can access larger markets than ever before. There are more than one billion smartphones used in the world today. About 28 million tablets were shipped in Q3 of 2012 and the overall tablet market is growing at a rate of 50 percent. These powerful and easy to use computing platforms will have apps for small businesses to manage their inventories, create a better sale experience, devise loyalty programs for regular customers, conceptualize marketing campaigns (Facebook, Twitter, Glyder), collect payments (Square), pay taxes, and so on. This was impossible to accomplish in the era of the personal computer.

People as the Node of the WebBefore social networks, websites were the node of the web. There were hundreds of tools that allowed us to make websites. Small businesses used these tools to create their online identity. Search engines scanned them and ranked them. People ‘googled’ and discovered these small businesses.Social networks, on the other hand, allow individuals to create their identity. People who thought this is useful created a Facebook account because that is how offline world works - people connect with people. This is especially true for a small and individual business. The identity of a mom and pop store is the mom (or pop) running it. The identity of a small photography studio is the photographer running it. The identity of a travel agency is the travel agent running it. Social networks thus illustrate what identities small businesses can create for themselves. The Evolving Landscape of Social Media MarketingThe second important shift is the changing dynamics of digital marketing. One of the offshoots of the website and search engine world was unaffordable and unmanageable marketing costs. Since websites were