Price comparison sites have had a remarkable impact on unleashing the power of market forces in favor of consumers.
The free markets have long been believed to drive exceptional value for consumers, but in reality, they often fall short, owing to certain inherent opaqueness and the lack of free flowing information in the markets, especially in relation to brands, pricing, and features.
The rise of online marketplaces and price comparison sites, however, have since helped bring about much needed transparency when it comes to prices and other relevant information, creating a new breed of well informed consumers.
Beyond empowering consumers, this phenomenon has essentially driven a wedge into the broader dynamics of online commerce and marketplaces. In this article, we thoroughly examine the outcomes of the same, along with the trends that are set to emerge in the years ahead.
Price comparison sites such as Bizrate, PriceGrabber, and Trivago essentially force merchants to compete against each other, and offer the best deal possible in order to attract visitors. This erodes the super-normal profits in many sectors and niches, while cutting margins down to size.
Merchants will further be forced to reorganize their sourcing and supply chains to deliver goods and services at the best possible price to consumers. All of this results in a substantial deflationary force, helping the consumer’s dollar go the extra mile.
Established brands with large impenetrable moats no longer have an edge against newcomers, with price and offerings ruling the roost. With price comparison sites, eCommerce upstarts can easily take on the bigwigs by simply going the extra mile for their consumers.
Consumers no longer have to stick with merchants or platforms they know, and can explore the same product, with similar configurations across 100s of sites, before arriving at the price and terms that best suit their requirements.
Some believe that traditional price comparison sites do a disservice to consumers by only highlighting the price, which is partly true. However, in recent years, the same sites and platforms have started accommodating a wide range of factors, including customer reviews, delivery times, and more.
According to recent studies, 58% of shoppers in the US claimed they would rather have more quality produce than cheaper prices. A further 56% say that would choose convenience over prices for most goods, and fortunately, most comparison sites have since developed ways to accommodate just that.
While comparing prices, many platforms even allow for seamless comparisons between features, services, and addons offered. Products are then ranked based on these, along with customer reviews and testimonials, all aimed at encouraging an obsession with customers among merchants.
As price comparison services get more popular, merchants will start to witness a steady erosion of margins across most homogenous products. This forces them to adopt ways to deliver more value to consumers, such as free, or expedited shipping, complementary servicing, and more.
For many popular consumer electronics goods, the retailer margins are already close to ‘Zero’, with some even selling at a loss.
Acting as a loss leader, the retailers hope to monetize this traffic through other means, such as add-on accessories, extended warranties, and more, ultimately creating more value for consumers in the long-run.
When it comes to infusing dynamism to the global ecommerce landscape, and unlocking value for consumers, price comparison sites are an undeniably positive force.
They are now coming for all major products and services, including energy plans and pricing. People can now use services such as iSelect to compare electricity plans and pricing, resulting in large scale disruption of the status quo.
We are likely to see a lot more disruptions in this space in the years to come, with the potential to completely redefine the role of retail in the economy. All of this makes it an exciting time for consumers, and industry analysts alike.
