Free-riding is fun. Well, at least it can be fun for consumers.
Here's how it works. Say you go to the Good Guys (GGUY) to buy some video equipment. Not knowing precisely what you want, you ask the assistance of their knowledgeable sales people. They help you by offering solid advice. Since the Good Guys must pay for these salespeople, this will obviously be reflected in the price for the video equipment they helped you decide on. Knowing this, you go home and order it from Amazon.com (AMZN).
What you've done, of course, is to free-ride off the Good Guys' service. You got their service and maybe they gave you the opportunity to try out some equipment - something you can't do with an online retailer - and Amazon's lower price. What a deal!
Consumers can do this with lots of products, especially those that require a high amount of pre-sales service or the ability to touch or try out the product, like furniture or clothes.
FREE-RIDING HURTS SERVICE
Manufacturers and retailers have traditionally hated free-riding, for obvious reasons. Academic research indicates that over time free-riding will lower the incentives for sellers to maintain their service levels. It also attracts only the most price sensitive consumers.
Brick and mortar companies have traditionally tried to keep consumers from free-riding by using various devices, like territorial restrictions. The idea was to make it hard for customers to compare products and prices from different retail outlets. Of course, the proliferation of catalogs put pressure on this idea and the Internet has almost obliterated it completely.
Even with the Internet, consumers at brick and mortar stores, like the Good Guys, haven't really had the opportunity to free-ride as much as possible. The reason, I think, deals with convenience. If you're in the mood to buy something and you found it at a brick and mortar store, it's just not convenient to get back in your car and go home to buy it online.
Take the first step (it's free).
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