The digital era has been killing off traditional physical products and services but a few are making a come back as premium products with a slight digital twist
The reinvention of old school products should provide inspiration to businesses that are being disrupted by digital.
In the late 1980s the shelf space in music stores quickly shifted from vinyl and cassette to compact disc with only a passing nod to mini-discs.
At the time I remember CDs commanding around a 20% price premium to vinyl and cassette on account of reproduction quality. My local HMV would charge around £10 for an album on CD, with the equivalent vinyl LP record and cassette going for £8. Music was generally (and still is) cheaper in the US, but the differential was also about 20%.
Today CDs are priced about the same in absolute terms. Chart albums go for less, back catalogue for a touch more, but in real terms the price of a CD has halved in the last 25 years.
Vinyl prices by contrast have soared and recently the category has been the one high growth part of the average music store.
JB Hi Fi is Australia’s last standing chain selling music, books and video. It has survived and indeed thrived by embracing a no frills environment and reducing its dependence on music, books, video and computer games to less than a quarter of sales. However while the CD shelves have given way to tablets, phones and gadgets, the vinyl shelves have grown. The main store in Melbourne now has about an 8th of the music selling area focused on vinyl.
The reason for the shift becomes apparent when you look at the price. Vinyl albums are retailing in excess of $40, a premium of 150% or more on the CD equivalents. Arcade Fire’s great 2010 album ‘The Suburbs’ for example is $46 on vinyl and $18 on CD.
With vinyl people are rediscovering the value of album artwork and sleeve notes. MP3 meta data just can’t compete.
And in a twist, some record labels are allowing consumers to have the best of vinyl and digital. The thrill of owning a piece of artwork and being able to watch the record turn with the quality of the digital file.
One of the original products hit by digitisation has been reinvented as a strong niche product with a healthy price premium.
Mail was once a basic but essential utility but email and the web have sent letter volumes into terminal decline. Last year they fell another 5% in the US and Australia, and 9% in the UK. Mail services everywhere are heavily loss making and being propped up by parcel businesses that have thrived on the back of online retail.
I last raised this two years ago and suggested that prices be raised, payments made easier and collection networks shrunk.
Receiving a social letter or card continues to have much more impact than an email, and while business mail may have no long term future, a niche social letter business might.
Several new social mail services have been doing well in the last few years. Like the vinyl record, they are not trying to directly compete with email, but deliver a richer experience.
While mail is increasingly niche though, its price still reflects a commodity product. A domestic letter costs 46c retail in the US, 60c in Australia and 60p in the UK. Its about time social mail was reinvented, resized and repriced.