Changing the Basics of Our Economic Behavior
“People tend to be clueless about prices. Contrary to economic theory, we don’t really decide between A and B by consulting our invisible price tags and purchasing the one that yields the higher utility. We make do with guesstimates and a vague recollection of what things are “supposed to cost.””
William Poundstone, the author of Priceless: The Myth of Fair Value
We do live in a world where e-commerce is actively thriving and affecting the roots of our economic behavior. Thus, the issue of price sensitivity must be examined with the current tools we possess.
There are three important points you should pay attention to:
- Uniqueness of the Product: In e-commerce almost no product is unique to one seller. Someone in somewhere very close has just sold the exact same product.
- Availability issue: Customers are becoming more and more aware of the substitute sites.
- Comparison difficulty: Contrarily to what Mr. Poundstone said, buyers can now make healthy price comparisons among competitors very easily; therefore, shaping the business interaction as we know it.
The case is directly linked to price sensitivity. Buyers tend to be more sensitive if the product exists in multiple platforms. In an average situation we have at least 5 competitor e-retailers selling the exact same product for different prices. It is in your interest to buy the identical product for the lowest possible price. But how will you make this comparison? With so many e-retailers out there; the deed is a horrendous chaos. This chaos was the opportunity for the price comparison sites to arise. They became the tools that provide the customers with an appropriate channel. By their strategy, the shoppers wouldn’t be missing on great products and deals while e-retailers would not be missing out on the customers.
Comparison companies continuously seek for ways to glare among all the similar services. Nowadays, they even have mobile applications that users can reach at the push of a button. These apps have similar keystones. They struggle to create the most user-friendly, accurate and fastest comparison search engines. Some of them experiment with interactive features as well.
Let’s suppose you were walking down the street, then you saw the TV that is just perfect for your living room. But the price-tag left you with some questions. If you have one of these apps in your pocket, the world becomes easier. Scan the barcode of the product you want to buy or just make a quick search. If you are a user of Red Laser you can get information from retail and online stores. If you are more of a Smoopa person you can check if it is the lowest possible price or you can use Shop Savvy to keep an eye out for when you can get it at a discount. The Find limits results to what’s useful and locates only nearby deals. If you live in America and want to reach the massive database of an international comparison site you can use the app of Price Grabber. If you are not sure of your decision you can consult with the other shoppers worldwide by using either Consumr or Scan Life.
Shop Advisor watches the changes in prices, when they go under what you had in mind, the app will alert you. Even Walmart has an application in which you can check the price against the competitors to see if you could have bought it for less, if so Walmart just pays you back.
The need for the comparison sites proved to be so large that these firms just exploded. For example Kelkoo, a European service, is now operating in 14 countries. It features online shopping guides and user reviews to help finding the latest products at the best price available. Comparison sites could become handy for other purposes as well. Eventually, in 2004, Kelkoo was bought by Yahoo! Inc with the aim of providing advertisers with the ability to target individual products. Kuanto Kusta is another market focused service. It targets the Spanish & Portuguese speaking countries.Buscapé (bought by Naspers in 2009) and Zoom are also working in the Latin America market. On the other hand, Twenga and Shopmania are more globalized than their competitors. Today, Shopmania operates with an astonishing reach of 5 continents and 28 countries.
By using comparison sites and apps customers are keeping the money in their wallets. Thus causing the shopper satisfaction to increase which can be observed directly. 8 of 10 Latin American consumers search for products online before buying. In Brazil, price comparison websites are even more popular than retail websites. This affinity will surely spark a fierce competition among both B2C and B2B price comparison firms. On the other hand will effortless access to these comparison engines converge to the e-retailers to perfect competition? What do you think? Is it already happening?