* Comparison shopping engines in commodity marketplaces can be valuable
Now that there are so many merchants online, the consumer has a problem even when they know what they want to buy: Too much choice.
It is one thing to be a “browser oriented” shopper (one that is cruising the virtual aisles or doing research before purchasing) and be presented with many sources for a product – at that point you don’t care because you are in the process of making a decision – but if you are a “task oriented” shopper (one that knows what they want and is trying to decide where to buy not what to buy) then determining which vendor to order from can be very difficult where commodity products are concerned.
For commodity products the decision is usually based on two factors: Product price and confidence in the retailers. The former can be very difficult to establish on-line. For example, if you do a price search on Google for an everyday item you’ll get scores if not hundreds of hits. As for confidence, that’s a difficult quality for a retailer to establish and for a consumer to evaluate.
Thus has the scene been set over the last few years for the comparison shopping engine (CSE) market. CSEs became very popular early on in the online travel business, but consumers are now finding CSEs in other commodity marketplaces to be equally valuable.
I just had an interesting discussion with Mike Brown, CEO/President, of HealthPricer Interactive Limited. Their service, HealthPricer.com is one of the leading CSEs in the health products market.
The health products market is also a good example of where a CSE makes a huge difference. Mike pointed out that are so many products in the health market and they go under so many different names for the same thing that consumers can find it very difficult to find a good deal.
On top of that, many commodity product retailers play games to ensure that such searches place them as high up in the results list as possible. They’ll do things like leave out shipping costs and handling fees figuring that if they annoy a few customers who find out that their prices aren’t the best and decide not to buy from them, the increased traffic and consequent sales will more than make it up.
The issue of honesty in pricing is interesting. Big retailers such as Wal-Mart have to be honest simply because of their size and visibility as do small retailers who are smart about online business because they can’t afford to loose potential and existing customers. It is the large number of retailers in the middle who seem to be more willing to play fast and loose with how they explain their pricing.
But when a retailer is included in a sophisticated CSE it ensures that the vendor is being honest about which products cost how much. This is a key issue that makes CSEs really valuable to consumers.
HealthPricer tracks some 300,000 products (this obviously requires domain expertise) from more than 80 retailers, and to do so they have had to regularize product names and pricing and build a searchable database. The results are interesting: According to HealthPricer the retailers have seen conversion rates increase by a factor of three to four times and a significant reduction in conversion time — the actual stats for conversion time improvement are being analyzed at present.
So far, the most developed CSEs are focused on well-defined product markets such as HealthPricer with health products, but the benefits to both retailers and consumers are so profound that you can expect to see the same strategy being applied to products with much more complex attribute data such as cars or flat screen TVs.
