E-commerce = in-E-fficiency

In buying tickets for movies, plays, and concerts lately I’ve noticed that it is always more expensive to buy tickets over the Internet than in-person and usually more expensive on the Web than on the phone.  If we assume that the prices reflect costs it turns out that it is cheaper to pay a human to sit in a booth all day and/or to pay a human to sit next to a phone all day than it is to write some Web scripts and keep a server running.


Given that the hardware folks have done their share and that bandwidth is cheaper than ever, this is a truly sad commentary on the continued stagnation in the world of software.  The great Internet pundits of the 1970s (and the folks who copied those predictions and spit them out as their own in the 1990s) predicted a world of seamless commerce and lower prices.  How wrong they were.


[Tickets for what you might ask?  Tonight is McCoy Tyner at the Charles Hotel ($3.50/ticket extra); Friday night is the Boston Symphony Orchestra ($10/order extra).  Last night was the Harold Pinter play The Birthday Party at Harvard's American Repertory Theater ($3.50/ticket + $1.50/order extra).  I'd give you my review of the play but this email review from a friend is much more to-the-point:



"I saw the Pinter on Sunday night, and all I can say is that it made the invasive gynecological procedure I had to have the next day seem pleasant in comparison."


I guess they won't be quoting her review in the advertisements...]

152 Comments »

  1. Neil

    March 18, 2004 @ 1:20 am

    1

    They will quote her review, but with the standard style of eliding parts of sentences: “I saw the Pinter on Sunday night, and all I can say is that it made … day seem pleasant …”

  2. Jérôme Radix

    March 18, 2004 @ 4:39 am

    2

    E-commerce does not bring lower prices but it may helps to make more profits because you sell the same product with the same price with lower costs. But we have to prove it costs less to sell on internet than on traditional sales channels.

  3. Phil Calvin

    March 18, 2004 @ 4:42 am

    3

    You’re confusing cost of doing business with profit.

    It costs more online because apparently people like you are willing to pay more for the privilege of not having to speak with someone to order tickets. Just because it costs more to you the consumer doesn’t mean that it costs more to produce the good. Demand plays a role.

    For example, I for one, find it a lot more pleasant to shop for books online than in most local stores. Price doesn’t enter the equation.

    Phil

  4. Peter Hobday

    March 18, 2004 @ 5:21 am

    4

    And of course it’s often physically much slower, due to a combination of poorly thought out page designs and inefficient servers. Just this week I tried to book a ticket for Eurotunnel on-line, after about 20 minutes I gave up due to server time-out errors. I phoned them up instead and the transcation took under 2 minutes.

  5. Bas Scheffers

    March 18, 2004 @ 5:38 am

    5

    Peter, sometimes the benefits outweigh the costs. (in your case, time, not a monatary one) When I book flights online, I pay the same price as at a travel agent. But, I do get a whole screen full of flight choices and I can choose to pay, say, 20% more for a flight that leaves at a more convenient time or choose to fly at a different time than I originaly wanted because it is much cheaper. The travel agent probably wouldn’t be as thoughtful, they never have been with me anyway.

    But, as you mention, that does rely on the servers working properly. Thankfully, I have never had such problems with ba.com, expedia.co.uk or opodo.co.uk.

    But getting back to the topic of tickets, I wanted to get some Sarah McLachlan tickets, she’s playing at the Hammersmith Apolo here in London. That is not too far out of my way going home from work, so I thought I just pop by and pick ‘em up to avoid the

  6. Stella Aquilina

    March 18, 2004 @ 8:04 am

    6

    Sometimes the price is the same even at the box office. At the MCI Center in DC, when you buy a ticket you get to pay the ticketmaster fee even though you are at the box office.

    But there is something to be said for online convenience. The last two concerts I attended at Wolf Trap, Sheryl Crow and the Indigo Girls, I was able to obtain front row seats by astutely monitoring the best open seats a few days before the show.

    Now tell me why Ticketmaster wants extra money if you print your own tickets instead of using Will Call ?

  7. Pedro Vera

    March 18, 2004 @ 9:06 am

    7

    The $1 charge for movie tickets here in North Virginia is a bit high unless you are trying to avoid the mess in front of the multiplex, especially if the movie is going to be popular. If it is for a matinee it is easier to me to just walk to the ticket dispensing ATMs in the lobby (which I have to use anyway if I buy online!).

  8. David Eddy

    March 18, 2004 @ 10:52 am

    8

    It takes a looooooong time for new (technology) things to be accepted.

    Since I’ve largely been involved in trailing edge technology (punch cards & back office paper pushing), it is my experience that it takes a minimum of 20+ years for working things to trickle down to mass adoption… & therefore subjected to serious price competition.

    Two points… at a Boston firm I left in 1978, they had two systems…

    (1) Massachusetts Title IV-D Child Welfare payments… It took a Harvard MBA to come up with the bright idea that having an accounts receivable system might have some impact on whether or not parents would pay their child support obligations. As in any social system there was a population of recalcitrants. The cash flow impact of sending out dunning letters was quite astonishing.

    I assume aspects of that mainframe-punch card, flat -file system are crunching away to this day.

    One facet is publically visible… it seems to be a spring ritual in Boston to publicize the “Most Wanted” list of Deadbeat Dads. It was on TV just this week.

    (2) This same company also tried to sell a touch-tone phone bill paying service. Never took off. [Time check... Rolm was a HOT, HOT, HOT company with touch-tone phones... IBM bought it & Rolm disappeared.] Remember this was 1978.

    Today, I’m slooooooowly & painfully trying to shift my personal bill paying from paper checks to electronic… it’s a rocky road. At least with checks, the interface is highly stable. On the web, every company has a different way of navigating their process… tabs over the top PLUS menus down the side.

    While I may be saving the 55 cents (34 cents for the stamp & 18 cents for the &^*% check from Fleece), the time spent navigating the merchant interfaces is painful.

    Another time-check observation… not to forget that just 10 years ago, we were still dancing around the issue of “commercial” use of the Internet. Outside of military & academic circles, access to a network meant (a) a company’s private facilities, or (b) something like CompuServe or Prodigy.

    Implying that one was using the Internet (ARPANet?) for personal or commercial purposes was something just not spoken.

    Finally… please to remember that despite all its wonders, we still have no means of actually measuring information. There are no meters, calipers or scales. Said another way… were still not to the Model T stage of the information age.

    JSi

  9. theCoach

    March 18, 2004 @ 10:58 am

    9

    “The great Internet pundits of the 1970s (and the folks who copied those predictions and spit them out as their own in the 1990s) predicted a world of seamless commerce and lower prices. How wrong they were.”
    Really? We are not experiencing lower prices and a more interaction? It seems that way to me. Software has helped all aspects of commerce (including the efficiency of people/people transactions), and the next ten years should be more interesting than the previous.

  10. Matthew T

    March 18, 2004 @ 11:44 am

    10

    Prices don’t reflect costs. Prices reflect demand and supply.

  11. Woody

    March 18, 2004 @ 12:06 pm

    11

    It is naive to think that if the retail price goes up, the production cost must have gone up. The perfect example was given above, Ticketmaster charging you to PRINT YOUR OWN TICKETS! It is simply not possible for this to cost them more, except for the initial cost to modify their system.

    Do you think it’s because they have a monopoly? Think again. In Canada our banks are supposed to be competitive. However, internet transactions and ATM transactions and phone-based transactions are all subject to the same fees. Is it possible they all cost the same to the bank? No way. It has been proven to me because ING has severely undercut all of them. They don’t need to charge you for any of this.

    Don’t even get me started on the phone company and fees for call display, etc. These features require a one-time system upgrade and prices should gradually approach zero with competition. Hasn’t happened, at least up here.

  12. Tayssir John Gabbour

    March 18, 2004 @ 12:14 pm

    12

    Well, you are talking about only certain kinds of merchandise, inexpensive stuff which is only useful during a set time interval at a specific place. All right then, you’ve found a category which the hype doesn’t apply. ;) At least not immediately.

    Prices do not always follow the cost of manufacture/distribution. For many consumer goods, apparently people demand it does and get angry when someone “price gouges,” but assent when a slight convenience is involved. Maybe you can hit the nearest b-school and ask around.

    … However there is one thing which often strikes me. Computers are not nearly invisible enough. At the very least there is some psychological effect of that.

  13. Cameron Watters

    March 18, 2004 @ 12:18 pm

    13

    This issue may simply be a necessary part of the transition from fully human to fully non-human purchasing. Currently, when using purchasing solutions such as Fandango ($1 surcharge per ticket), one is still required to “bother” the ticket seller at the box office, thus incurring costs for both methods.

    Additionally, the value of the online solution is ofset by the number of people that actually use it. Until we see a majority of tickets purchased online, we can probably expect to see these surcharges.

    Additionally, for every online transaction, there is a credit-card processing fee, which can be substantial. While these fees may exist for many transactions at the box office, the box office is also likely to receive a significant amount of cash, which carries no fee. It would also be unpopuplar/impractical to charge credit-card users more than cash users, although accepting credit cards always eats into a seller’s profits on that particular transaction.

    Finally, I believe that online purchasing of tickets, at least for me, DOES represent a substantial cost savings. My time is worth far more than the few extra dollars I may have spent. The time I saved by purchasing online _at my convenience_ is worth far more to me than the measly $1-5 dollars that might have been saved by waiting in line during the day.

  14. Naum

    March 18, 2004 @ 12:34 pm

    14

    My big gripe is the response time and laborious transaction route (having to fill in a half dozen panels to complete a business transaction).

    For a long time I created and supported these types of transaction systems on IBM DB/DC or CICS DB2 type platforms and anything greater than *sub-second* response time for transactions was considered to be a total failure. Of course, the screens were 24×80 or 43×80 fixed width text (color and bold were prevalent even in the 80’s, contrary to the green on black that ruled for such a long period). I used to win great favor with the CSR when I eliminated 3-4 panels with one they could fill in (or change the default template values provided) and hit ENTER. Nowdays, on this great WWW, entering an online transaction is a big frustration – many times a page never returns or it takes minutes to return. And the tendency for these e-commerce applications to break the browser navigational tools (disabling the back button or causing startover if you do click BACK button) even makes it more criminal.

    Next, I’d launch into a rant on how big a piece of shit Oracle is but I’d probably enflame some here who consider it the premier DB platform. The old IMS and DB2 implementations on mainframe hardware still were much more resilient, reliable, efficient, though too much “magic SQL” could put a damper on them too.

  15. Dominik Rabiej

    March 18, 2004 @ 12:52 pm

    15

    I remember back in the early days of the ‘net, Amazon was more expensive than buying books at the local B&N. Amazon has been diligently expanding its services and now is actually cheaper than my local B&N, plus they offer free shipping for orders over $25 (two years ago it was ~$100, if I remember correctly, and three years ago there was no free shipping). So there’s a case of the Internet becoming more efficient/inexpensive over time, primarily because of Amazon learning what works/what doesn’t and also because of economies of scale.

    Hopefully we’ll see a similar trend online ticket purchasing, since it is still rather “new” compared to buying books online. Also, regarding the economic side of the equation, it might be prices are higher because there are hidden costs to using the online system: e.g. paying the web design firm that built the system in the first place is more expensive than the already well-oiled business mechanics they have in place for plain old f2f ticket buying. <shrug>

  16. Ryan

    March 18, 2004 @ 12:54 pm

    16

    This is probably about the nature of event tickets rather than the cost of the software. The event promoter has a monopoly — you’re much less likely to switch from Madonna to Janet Jackson based on price than from United to JetBlue. Thus, we see companies like Southwest Airlines offering double frequent flyer credit for booking online while theater or concert organizers charge extra. Both probably save money booking online, but for the airline the cost savings is a much bigger competitive advantage. The concert guy could maybe fill an extra seat or two by shaving a buck or more off the price of a ticket, but for the most part he knows his customers will pay pay pay because how else are they going to see the show.

  17. Tony Scalia

    March 18, 2004 @ 1:44 pm

    17

    Philip: I’ve not personally noticed this (JetBlue charges less for flights booked over the Internet, otherwise most things in my experence are the same price online as on the phone). But one more reason why companies should charge less: There are all sorts of disclaimers of warranties, agreeements to submit to arbitration, etc. etc. that they can’t easily do over the phone or easily in person, but which can be packed into a lengthy text-box that you agree to by “checking here.” One more incentive to do things online, for the company.

  18. Judy

    March 18, 2004 @ 6:48 pm

    18

    Price is dictated by the market (supply and demand), not by cost.

  19. rps

    March 18, 2004 @ 10:01 pm

    19

    In a perfectly competitive market, prices tend towards the lowest point at which a seller can stay in business. In a monopoly, a seller will charge as much the market will bear before people just decide to do without. Their own costs of production have nothing to do with it.

    A concert promoter/theater is closer to which hypothetical seller?

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  23. Nancy

    April 3, 2004 @ 3:23 pm

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    Blaming the cost of software or promotion is not the reason for the higher ticket costs. It is basically a funtion of the airlines trying to make more money and setting the prices to those e-commerce merchants and online retailers. An example are cigars. In this case you can always buy them with more discounts than at the stores. Not only that but the easy access to information on cigars and their prices forces all the online cigar stores to compete. Take a site that sells cigars online and also retails cigar humidors. Compared to cigar stores their prices are heavily discounted. Now the cigar smokers are able to buy their products for less. That is because the maker of these cigars and humidors does not control the pricing, and sells to the stores and the online sites at the same prices. They compete based on their overhead, not preset limited pricing established by the producer of the product or service. Just my two cents.

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