The emergence of price comparison sites and its impact on retail pricing

In the age of price comparison websites and large online marketplaces, online retailers can no longer rely on the value they provide through their service. The exclusive factor that seems to matter in the consumer’s eye is price.

Just a decade ago, this wasn’t as much the case.

Suppose John wanted to buy a new guitar. He’d visit his favourite shop–one selected based on reputation and expertise–to try out the guitar and discuss with the sales assistant. If he liked the item, John would buy it on the spot or go home and order it on the shop’s website, expecting great customer support and aftersales.

Back to our more contemporary times. John now knows about PriceSpy, Idealo, eBay, Amazon and the like. To buy a new guitar, while he may try it in the same physical store, he must now overcome the large temptation of going back home and ordering online from a cheaper site. While he is not familiar with all the possible vendors, comparison websites make it painless for him to navigate the full list of market offerings; they reduce customer loyalty and can often boost rivalry between shops.

In other countries, things sometimes get messy. In Greece for example, due to lack of regulations and their enforcement, some electronics shops are able to achieve rock-bottom prices through various Balkan importing and taxation schemes. Their eye-catching prices get high visibility on comparison sites and the whole consumer market satisfies its craving for a good deal amidst the economic crisis.

So when price alternatives are presented to the consumer at a glance, significantly more importance is attributed to pricing compared to the other aspects of a store’s offering. Because of this, new shops are able to rise quickly in some cases–neglecting every facet but price. Indeed, as comparison sites promote “blindly” based on price, newcomers who manage to achieve strikingly low prices can potentially appear first in search results and get an immediate inflow of sales.

This is not the case with all retail sectors and brands, however: many markets are well regulated and follow strict pricing guidelines (manufacturers, for instance, can set minimum advertised price (MAP) policies to protect their brand value where legal).

Competition is nevertheless a healthy part of any industry and research shows that comparison sites enjoy a high level of consumer trust and satisfaction.

73 per cent of those using PCWs describe them as ‘fairly’ reliable, while 52 per cent rate them as ‘useful’ in helping to find a good deal

When competition is rooted in pricing, retail companies have to alter their operating model to track competitor prices, utilize price intelligence tools on their assortment of products, and take advantage of all available automation systems, in order to get ahead of their competition.

Despite their pros and cons, big marketplaces and comparison sites have become engrained in consumer culture and are here to stay. Accordingly, a business looking to grow or stay big must try to take advantage of those sites and develop its pricing strategy and systems around them, yet making sure to compromise as little as possible on core business values which will benefit the company in the long run.

Aimilios Hatzistamou, founder of WisePricing®

At WisePricing®, we have developed solutions that eliminate time-consuming work, and provide customers with actionable data. Whether you need to monitor prices, use AI to beat your competitors, or simply understand your market, we can help you increase your margins and profit.

To learn more, visit wisepricing.com, or Request a Demo.