When Amazon.com executives said earlier this year that they planned to build their business by lowering prices whenever possible, the statement raised more than a few eyebrows.
While the e-tail giant has claimed its efficient operations make it possible for it to be profitable while always selling for less, what surprised observers most was that Amazon had chosen to go against the grain in terms of consumer interest.
“All of our research shows that consumers are most interested in convenience, not price,” GartnerG2 research director David Schehr told the E-Commerce Times.
Shoppers do still expect bargains online, but fast delivery and a wide selection are more important factors, according to Schehr.
“Price comes into the picture along with convenience, but it’s no longer the main reason people shop online,” he said.
Still, some shoppers expect to pay less online. During the 2001 holiday season, only free shipping offers drove more business to e-tail sites than pure percentage or dollar-off discounts, Forrester analyst Christopher Kelley told the E-Commerce Times.
But perception and reality may not mesh. An admittedly unscientific survey of prices on leading e-tail sites and at brick-and-mortar stores found that it is often a toss-up when it comes to where the best prices can be found.
A CD was priced at US$11.99 at a Best Buy brick-and-mortar outlet. A smart shopper would save $2 by avoiding Amazon.com, where it was listed for $13.99. And unless that shopper spent $100 or more at Amazon, she also would pay for shipping.
A DeWalt cordless drill was listed on Amazon.com for $179.99, $20 less than the price listed in a Sears circular. Amazon, however, apparently did not have the item in stock. The product page carried a note saying the e-tailer would e-mail the customer with news of the product’s availability.
If a Samsung DVD/MP3 player was on the shopping list, the choice was a toss-up. Both Amazon.com and an in-store Best Buy circular listed the item for $129.99. A really frugal shopper might opt for Buy.com, where the product was selling for exactly 4 cents less, at $129.95.
The above comparison might have produced quite different results if it had been conducted two years ago. Because the Web enables consumers to make comparisons on their own with relative ease, many e-tailers opted to offer discounts in the early years, banking on the theory that customers who came to the site would stay and buy higher-priced items with fatter margins.
But a recent study by the Massachusetts Institute of Technology found that while sites that offered steep discounts attracted 40 percent more traffic by lowering prices just 1 percent, only 10 percent of shoppers lured by such bargains upgraded to bigger-ticket items. Dozens of failed dot-coms could attest to that trend firsthand, the researchers noted.
Walking the Line
It may be a while before the Internet can successfully shake its image of being a discount paradise for shoppers. Closeout sites like Overstock.com, the success of auction sites like eBay, and Amazon’s low-price promise and success with its used-goods stores all indicate that shoppers can still sniff out bargains online.
“There is a sense that the Web is still where the lower prices are,” CarsDirect.com CEO Bob Brisco told the E-Commerce Times. CarsDirect recently launched a used car offering. “People expect the prices to be favorable, but I don’t think they are expecting amazing bargains anymore.”
Indeed, although early adopters of Web shopping may have become accustomed to low prices, many e-tailers that used steep discounts as part of a customer acquisition strategy are no longer in business. And those that still exist are trying to find the right mix of discounts and profit margins.
“Getting that balance right is the challenge that all retailers are struggling with right now,” Forrester’s Kelley said.