The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased ...
Danger Will Robinson! Whether pure electronic agents that prowl the Web for the lowest price or more complex ones that compare product features, shopping robots undeniably draw traffic. MySimon.com, for instance, reported nearly 2 million visitors in December, with about 70% clicking through to merchant sites. Throw in the fact that some bots report conversion rates three times the industry average, and you have appealing tools for acquiring customers.
But a closer look shows the extra traffic often comes at a steep price. Many comparison shopping bots charge merchants per lead or per transaction for the shoppers they send their way, while others charge retailers for preferred placement in product comparisons. Plus, retailers run the risk that satisfied customers could begin to reward the shopping services, rather than merchants, with their loyalty.
“Increasingly, we’re seeing competition for storefront status between merchants and bots,” says Ken Cassar, an analyst with Jupiter Communications, New York. “As the bots offer more services, like product reviews, and they start to adopt some of the functionality that’s historically belonged to the retailer, it’s inevitable there will be competition for ownership of the customer. In the long run, some of the bots aspire to relegate the merchant to being little more than plumbing.”
In fact, observers say a shopping bot’s ability to depress prices-especially for commodities like books, where competition is fierce-will push consumers to the cheapest source. To drive sales in a click-and-compare environment, some merchants are discounting books and CDs 35% and more. But as more consumers use comparison shopping services, is there a limit on how deeply merchants will be forced to discount?
“Nope,” says Malcom Maclachlan, e-commerce analyst with International Data Corp. “Not as long as they’re willing to keep losing money to gain market share or mind share. The idea is that they’ll blow money, but eventually, their competitors will drop out.”
Risks aside, shopping agents are rolling onto the Web faster than you can say, “Find me the best deal.” Two years since they emerged, the buzz over bots is already less about whether to partner with the services than about how-and with whom. “Not many of our members are asking whether they should participate,” says Elaine Rubin, an e-commerce consultant who chairs Shop.org. “They’re sharing information on which are the best ones. After all, shopping bots are another place to be seen.”
E-retailers have come a long way-initially, some tried to block bots from their sites. But the potential for traffic and the march of technology have changed that. Comparison shopping services have spent millions on technology that allows them to gather price data from Web merchants. Merchants can still write code aimed at stopping them, but it’s difficult to gauge how often that occurs today. “Merchants will tell you that they can block any bot they want,” says one observer, “and bots will tell you that they can get into any merchant they want.” Given the speed of technology development in e-commerce, the truth is a moving target. Of 2,000 Web merchants searched by MySimon, only one has asked the company to remove it from its listings. And later, says mySimon CEOs Brian Wolfe, the same merchant asked to be relisted.
Price doesn’t always matter
What’s changed since the first price bots warmed retailers up to comparison shopping services? For one thing, merchants have learned there are plenty of shoppers who don’t buy on price alone. In fact, among users of DealPilot.com, a bot specializing in books, CDs and DVDs, the purely price-driven represent less than half the service’s users, says Matthias Epp, vice president of marketing. “There are people who always go with what’s cheapest, just like in the brick and mortar world,” he adds. “But there are companies that don’t want to compete on price exclusively-they want to compete on service, quick turnaround or superior order processing.”
Bots also can mean heavy traffic. Some comparison shopping services have partnered with major portals, potentially putting retailers in front of audience numbers hard to ignore. Amazon.com, for example, acquired shopping bot developer Junglee. Online financial services site Quicken.com offers Clickthebutton.com’s downloadable shopping bot free to its nearly 7 million users. And in January, MySimon was acquired by CDNET, a major content provider that logs an average 9.6 million visitors a month.
Shopping services also have come up with business models that make them both consumer-focused and merchant-friendly. Dash.com’s “shopping companion” is available as free software consumers can download to surf shopping sites anywhere on the Web. The user interface is a toolbar that stays on the computer’s desktop after installation. Dash negotiates discounts with 120 merchant partners, including heavy-hitters Barnes & Noble, Dell and J. Crew. When a user pauses over an item at a non-partner merchant, the toolbar lists partner sites that offer the item at discounts ranging from
5 to 25%. Dash returns the savings to shoppers and keeps a transaction fee. CEO Dan Kaufman says his service isn’t aimed at coupon clippers: “We’re built for consumers who want to go to trusted brands and get rewarded for it, without having to do a lot of work.”
Clickthebutton.com offers a downloadable shopping bot with a twist: It pops up lower prices, including tax and delivery fees, plus merchant links wherever it finds a better deal-but only when the shopper asks to see comparisons by clicking a desktop icon.
Clickthebutton isn’t partnering with merchants as much it’s pursuing alliances with wallet vendors like Quicken. “We help people on a merchant’s site be comfortable buying, by giving them an idea of what’s a good deal,” says Cheyenne Erlich, the company’s founder and CEO. Most shoppers, he contends, have no idea whether the goods they’re browsing are offered at a good deal. “As long as companies are fair in their pricing, they don’t have to be the cheapest. We are going to turn more browsers into buyers.”