“Give me an idea that’s fundamentally true but no one agrees with you on.” – Peter Thiel
Conventional wisdom suggests that online price comparison services are good for consumers but harmful for retailers. The services allow consumers to easily compare the price of a specific product across multiple retailers, which in turn incentivize retailers to engage in a zero-sum game of price competition. For this reason, it is no surprise that some online retailers consider price comparison services an unwelcome development in the world of online retailing.
WinBuyer, a Tel Aviv-headquartered e-commerce technology solutions provider, is on a mission to change the way online retailers think about price comparisons. The company presents online retailers with an unusual proposition: implement their Onsite Comparative Pricing (OCP) application and visitors to your site will be able to see what other retailers (i.e. your competitors) are charging for identical products.
Basic intuition dictates that it is unwise to show consumers where they can find products elsewhere for different (sometimes lower) prices. But WinBuyer’s customers have discovered that by being transparent and providing consumers with access to comparative pricing information, online retailers can increase sales conversion, average order size and site-stickiness. It is counter-intuitive, but providing consumers with easy access to other retailers offering the same product at a lower price turns out to be good for business.
A recent study undertaken by WinBuyer in conjunction with the e-tailing group, a Chicago-based consultancy, provides in-depth research into the buying behavior of consumers with a particular focus on price comparison. The study finds that the majority of consumers invest a significant amount of time searching for the lowest price when purchasing a commodity product: 94% engage in some form of comparison shopping for the best price, 36% spend more than 0.5 hours doing so, and 51% visit more than 4 shopping sites before making a purchase.
WinBuyer encourages online retailers to accept that price comparison shopping tools are fundamental to the online shopping experience, and that the best strategy for dealing with this phenomenon is to embrace it. Presenting consumers with comparative pricing saves them time and effort; consumers acknowledge this favor and consequently develop increased confidence when dealing with a particular retailer. Even if consumers leave a retailer’s site in pursuit of a more attractive deal, 78% would return to the retailer when shopping for items in future.
The OCP application, which launched in the United States in September 2008, has already been adopted by Overstock.com and more than 200 other merchants. The company sources its product listings through partnership agreements with Shopping.com and Shopzilla, and just last month secured a partnership with PriceGrabber.com – as a result, the company now has partnerships with all of the leading direct-to-consumer comparison shopping engines. The application is made available for free to retailers but adopts a revenue share business model where affiliate referral fees are distributed between WinBuyer and the retailer.
WinBuyer helps online retailers face-up to the challenge of diminished pricing power by addressing comparative pricing as an opportunity rather than a threat. The OCP application is a welcome development for the online retailing market, and one that will encourage retailers to focus on distinguishing themselves through competitive differentiators other than price. For consumers, online retailers and WinBuyer itself, it is difficult not to see this as an all-win situation. The company has 34 employees based between Tel Aviv, London and Scottsdale, Arizona, and recently secured a $6.9 million venture investment led by Pitango Venture Capital with participation from Giza Venture Capital and other private investors.