It is well known that the cost of products decreases over time. In most cases, the products are quickly replaced by new products. The new products are better and bump up the price long enough for the next product to come along. There are some things that are not replaced. Postal service as a service hasn’t changed for thousands of years. People need to get their items from one location to another. Today this can be done faster and for less money than it could have been done one hundred years ago. In another hundred years it will undoubtedly cost less for even faster delivery. Products and services such as transportation and communication don’t have replacement products to maintain their cost over time.

As a result, traders find themselves with more competition and smaller profit margins. Traders a century ago faced only regional competition for most products and could justify large turnover costs due to the price of transportation and other costs. While the decreased costs could have meant larger profits for th traders, increased communication and transportation technologies forced traders from across the country into direct competition. So how do this affect the market networks discussed in class?

It forces both traders and sellers into direct competition that results in zero profits. In a recent Time magazine article*, the author suggests that the only way to be successful selling a product is to convince consumers to purchase your product even when it costs more. The success of Starbucks and the Geek Squad were cited as examples of how companies have been successful by convincing consumers to pay more for a “better” product. Starbucks sells food and drinks for more than competitors and manages to keep it’s stores busy. The Geek Squad manages to capture the tech repair market by promising customers authentic “geeks,” which are surely the best tech repairmen. In today’s global economy, it seems that authenticity will be the only way to escape the profit drain of competition.

And what about Walmart and McDonald’s? Well they are just damn good cutting costs.

* http://www.time.com/time/specials/2007/article/0,28804,1720049_1720050_1722070,00.html