I suppose there is now virtue for some that they can be assured of
obtaining the lowest price while sitting on their rump at home nude.
kelly
from the Wall Street Journal
Attack of the Robots
Comparison-Shopping Technology Is Here
-- Whether Retailers Like It or Not
By REBECCA QUICK
Cyberspace is posing a new threat to retailers: consumer-shopping Web
sites that deploy automatic computer programs to hunt down the best
price for everything from books to cars to flowers.
It sounds like a
consumer's dream -- and a merchant's nightmare. Comparison shopping
was once the pastime of only the most dedicated shoppers. Making sure
you were getting the best price meant spending hours, or days, driving
around to different stores and checking price tags. But the new
shopping robots, or "bots," as they are known, are capable of
searching for goods on hundreds of Web sites in seconds, putting
unprecedented pressure on Web retailers to beat their competitors'
prices.
Many retailers worry that the robots will set off a vicious pricing
war in cyberspace and force them to slice profit margins to razor-thin
levels. If one Web site is offering to sell you, say, a cashmere
sweater for $20 less than a competing Web site, chances are you'll buy
the cheaper sweater. That's why merchants are going to extreme lengths
to foil the comparison-shopping sites -- some have even busted the
bots by preventing the programs from entering their cyberstores and
keeping them from cataloging their wares.
Though the Web has brought retailers this new challenge, it also
offers them a chance to respond instantaneously to competitors' moves,
such as changing prices and products. Can Web retailers resist this
new world of dynamic price competition? A surprising number of
industry executives and analysts think retailers will eventually stop
trying to shut out the bots and are likely to even embrace the new
technology.
Fundamental Shift
Comparison-shopping technology is here to stay whether retailers like
it or not, they say, because the Internet has empowered consumers with
more information than they could possibly get by cruising the shopping
malls. Even the least savvy Web surfer can go to a search engine, type
in the name of the product he or she is looking for and find hundreds
of Web sites offering information about that product. And that, in
turn, has begun to change the way people shop.
"There is a fundamental shift in power, and it's shifting to the
consumer," says Glover Ferguson, director of the electronic-commerce
program at Andersen Consulting in Chicago. "The Internet has set up a
flow of information that didn't exist before."
Here's how the technology works: A shopper goes to one of the bot
sites and types in exactly what he or she is looking for (the more
specific the better) -- like the book "Einstein's Dreams" by Alan
Lightman. The robot program then trawls through numerous Web
merchants' sites -- from Amazon.com Inc. to Barnes & Noble Inc. to
smaller, specialty Web stores -- looking for any site offering that
particular book.
The bot returns with a list of offerings -- as well as all the key
information, such as price, description and e-retailer. For this
example, a search on the mySimon shopping agent (www.mysimon.com)
showed the paperback edition of the book for $7.99 at Amazon.com
(www.amazon.com), $7.94 at Books.com
(www.books.com/scripts/default.exe), and $7.75 at A1Books
(www.a1books.com/). The consumer then reads through the list of
offerings and picks the online merchant with the best price, or using
some other criterion such as availability.
Big-Ticket Research
Analysts say consumers use the Internet to research potential
purchases even when they have no intention of buying the items online.
That's especially true for big-ticket items, like cars or computers.
Comparison-shopping bots can be particularly useful in these purchases
because the difference in price can be much more substantial. And as
more consumers move to cyberspace, the bots will gain more influence.
Bots are already hot. The major portal sites are scrambling to acquire
comparison-shopping technology, which is seen as a sure way of luring
consumers to a Web site.
Just last month, America Online Inc. snapped up PersonaLogic Inc., a
San Francisco developer of software that guides online shoppers, for
an undisclosed amount. Earlier this year, Amazon.com dished out $180
million for Junglee Corp., the most prominent developer of shopping
bots. And portal sites Excite Inc. and Infoseek Corp. also offer
comparison-shopping technology.
But the bots are only as good as the information they collect, and
several Web merchants have been loath to cooperate with a technology
that puts so much pressure on their margins. Some have gone so far as
to thwart the bots by feeding them inaccurate or misleading
information, or preventing them from entering their sites to gather
data.
And even without retailers resorting to such tricks, comparison
shopping can be more complicated than it seems. On the search for
"Einstein's Dreams," the comparison is made solely on the price of the
individual book, and doesn't take shipping costs into account. And
even if shipping charges were added to the equation, how would a robot
value the convenience of one site getting you a book a day earlier at
the same cost?
But many analysts say that retailers will come to realize they should
do everything possible to assist the bots. These systems are, after
all, driving traffic to Web merchants, something the retailers can
hardly afford to ignore, given the competitive landscape. That's why
many experts say the bots will change how retailers present their
wares to consumers, and how consumers will shop.
One likely change: Retailers will be forced to start offering more
value to customers so that price isn't the only comparison. This is
particularly true for some of the less-expensive items, such as
compact disks or books. Already, sophisticated e-retailers are adding
special services to their sites so that consumers won't mind paying
slightly more for a product.
At the online music store CDNow (www.cdnow.com), for example, repeat
buyers are treated to a variety of perks, including a Fast Forward
Rewards program that lets them earn points for every purchase, much
like a frequent-flier program.
Other ways to keep customers loyal: personalized shopping systems that
remember your preferences and suggest other music you're likely to
enjoy; and gift registries that let you electronically tag items you'd
like to receive.
Still, some are skeptical -- mainly because it's so much easier to
confuse a robot than a human consumer. Some analysts say the bots will
only add confusion as Web retailers move to make their products sound
different from similar products elsewhere by altering available
options slightly, much like the situation today in the market for
cellular-phone packages.
"They'll play around with the specifics on things -- they'll make it
so you can't do an exact comparison," says Cynthia Cohen, president of
Strategic Mindshare, a retail consulting company in New York.
Drawing in Shoppers
Ultimately, whether the bots work or not will depend on whether
consumers gravitate to them. If merchants see that a retailer
cooperating with the bots is getting more business, they'll want in.
And as the shopping bots become more popular with consumers, the trend
may favor smaller, lesser-known merchants that can use slightly lower
prices to combat the huge marketing campaigns of giants such as
Amazon.com.
That's what mySimon, a new bot that launched last month, is banking
on. MySimon claims to search over 800 merchants on the Internet --
well above the roughly 200 merchants that Junglee inspects. But
mySimon seems confident that merchants will actually pay to be part of
the bot technology. Under its business model, mySimon plans to charge
merchants that want to be distinguished on its site with links, logos
or promotional advertising.
Merchants that don't pay will still be included in a consumer search
for a product, though, the company says. "You'll still show up, but we
won't let you look like you're something special," says Brian Rolfe,
marketing director for the Santa Clara, Calif., company.
--Ms. Quick is a staff reporter in The Wall Street Journal's New York
bureau.
Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.
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