The Jevons Paradox

This 19th century lesson predicts the future of online sales and marketplace dynamics

Back in the 19th century, the British Navy ruled the seas, but had a significant weakness. Their ships cruised the oceans with ease, yet they consumed a strategic resource: coal. The mines of Britain seemed infinite at the time, but as consumption skyrocketed, the fear of depletion prompted concern.

Engineers reassured politicians and military leaders by saying that steam engines were becoming more efficient, which implied less coal consumption.

However, economist William Jevons countered this idea. He argued that as steam engines became more efficient and cheaper to operate, they would be used more, leading to higher overall coal consumption. This economic principle, known as "Jevons Paradox", has withstood the test of time since then.

Example:

Consider how manual tasks in the 1830s, like hand-copying books, evolved into using typewriters that doubled production speed and allowed for multiple copies with minimal effort. Similarly, the introduction of early adding machines meant that accountants could work faster and with greater accuracy.

These innovations didn't reduce the workforce but instead increased demand for more workers. And multiplied production.

More in these ideas here, in an excellent article by Benedict Evans

Enter Artificial Intelligence

Now, let's discuss the current game-changer: Artificial Intelligence. It promises to skyrocket efficiency without reducing workload.

Jevons would be thrilled to see how AI is about to transform marketplace selling by leveling the playing field between new and experienced sellers, as well as domestic and international players.

Decades ago, starting a brand was a privilege exclusive to big consumer brands. Amazon blew that wide open, inviting everyone into the game. The barriers have fallen so much that today, you can start a retail brand from your living room using dropshipping, often with minimal initial investment.

However, the ease of entry doesn't guarantee success. The landscape is more competitive than ever. Traditionally, in physical retail, the main skill was selecting brands that consumers would buy. Today, thanks to data and tools like Helium 10 or Jungle Scout, guessing is out of the equation. Sellers can accurately meet market demand, and the competition is fierce.

AI is the next evolution in online sales.

AI will choose which products to create or source, manage inventory levels, create appealing product content, optimize ads and pricing, and resolve channel-related issues. Sellers will operate with tenfold efficiency, and while some of these tools are already out there, more are coming, promising seamless integration.

Imagine the competitive market where AI obliterates informational gaps. Both new and experienced sellers could operate with equal proficiency, making geographical boundaries irrelevant.

Artificial Intelligence will handle most tasks, from creating listings to managing inventory, both a seller in China and one in the U.S. could create flawless English listings through AI assistance.

The world of retail has shifted from a handful of brands dominating the supermarket aisles to millions of sellers operating on marketplaces today.

AI will accelerate this process, turning every seller into a marketplace expert, fueling the growth of even more sellers.

Today, whether sellers use Seller Central, Excel spreadsheets, third-party software, or specialized agencies, AI might not radically change this overnight.

Yet, in the future, sellers may only need to inform the AI of their available capital and a few other details, and AI will handle the rest on the online selling process. The result? Consistent weekly payouts from product sales managed entirely by AI.

Sellers relying solely on Excel spreadsheets may find themselves outmatched by those leveraging AI.

How do you feel about this vision of online sales?

For me, it inspires both concern and excitement.

One thing is clear: it calls for preparation, adaptation, and boldness.

— Pablo Renaud

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My other contents (in Spanish)

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• Explore the original EcommLetter
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