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Why e-tailers in Scandanavia don’t sell in Schenectady

August 21, 2014, 12:18 AM UTC

In the physical world, our purchasing is limited by our geographic circumstances. In the digital world, we are unbound from the shackles of geography. The world is flat, we’ve been told: anyone with an Internet connection and a credit card can get anything at (almost) any time. Ordering online is the great equalizer—if you want artisanal coffee or extra-narrow shoes or a fisherman’s sweater hand-knit by a Danish craftsperson, you can get it with the click of a button. The Internet turns the world into a global all-access shopping mall: whether you’re ordering from Iowa City or New York City, the options are the same.

But even though we can get anything from anywhere, we don’t. Consider something as seemingly personal as brand preference. In study after study, blind taste test after blind taste test, most consumer food brands are shown to be virtually indistinguishable in terms of flavor. Research shows that even rabid fans, people who feel very, very strongly that Pepsi is too sweet and Coke is the drink of champions don’t have a preference when their are eyes closed. So where does the loyalty come from?

Your preferences, it turns out, are written in your zip code. In his latest book, Location Is (Still) Everything: The Surprising Influence of the Real World on How We Search, Shop, and Sell in the Virtual One, Wharton marketing professor David Bell trots out a laundry list of convincing evidence that today, despite all the world-is-flat hype, where we live still dictates our buying patterns. It’s a welcome addition to a conversation that seems to ignore the fact that even in today’s hyper-connected age, only a projected 9% of retail transactions will happen online by the end of 2014, according to Forrester Research—and even those purchases are shaped by the physical world around them.

Witness the location-dependent first-mover affect at work: leading brands have the largest market share in the region where they were first introduced. That means San Franciscans go for Folgers (established in San Francisco, 1872) but further east, people tend to sip Maxwell House (founded in Nashville, 1892). And there’s more: if you move from Folgers-dominant San Francisco to, say, Boston—decidedly Maxwell House turf—your brand preference, too, is likely to change. Sixty percent of that shift happens almost immediately. But the rest takes decades. The ghost of Folgers lingers on.

Even Amazon, legendary pioneer of the new and supposedly democratic American shopping experience sees variation based on physical location. When a new Barnes and Noble opens, Bell’s data shows that starts to lose sales in that zip code. Predictable—but here’s the wrinkle: Amazon sales decline only on the most popular items. For niche items, online retailers win every time. Unlimited by the confines of physical space, Amazon can cater to highly specialized markets. (It is worth noting that Amazon owns the imprint that published this book, too.) What you can access in the real word dictates what you will access in the digital world.

Fans of niche items don’t exist in a vacuum, though. Who your neighbors are—and what your neighbors do, think, and buy—influences your own behavior. Ideas spread through neighborhoods. If a guy down the street raves about a restaurant, that information is useful to you: he lives where you do. His circumstances are likely similar; you’re likely to share taste preferences, Bell points out. His recommendation affects you. Likely, you’ll try the restaurant.

The same phenomenon works online. If your co-worker orders a package from to the office, is now on your radar. It’s no accident packages their orders in distinctive, brightly colored boxes printed with the brand name in prominent white letters. (It’s also no accident that they encourage customers to get their deliveries at the office.) “Proximity,” Bell writes, “powers demand.” You’re more likely to buy what the people near you are buying.

And the imprint of the physical world on the digital one doesn’t stop with Amazon and—looking at the world through Bell’s lens, one begins to wonder if there’s any possible way to interact with the web that is not location-sensitive. Many of the most successful startups, for example—Facebook, Yelp, Foursquare, Whisper, AirBNB, the list goes on—have a huge local component; for the moment, at least, we’re still products of space and time. E-tailers would be wise to keep this in mind. It’s a global world, but just because we can our buy coffee from across the country, doesn’t mean we will.