Business Week e.biz -- Cutting Edge
Shoppers: Take Charge!
New buyer-driven sites require a real change in the consumer's mindset
Just a couple of years ago, everyone thought the Internet would give buyers unsurpassed power over sellers. Consumers would have the ability to compare prices with a few mouse clicks. Armed with this information, they could play merchants off each other for the best deals. New middlemen, even automated shopping programs, would spring up to act as advocates for buyers.
So far, the whole idea is pretty much a bust. Think about it: People believe they get deals on auctions like eBay Inc.'s, but that's an illusion. If enough buyers pile in, the price of a Beanie Baby or leather jacket often gets pushed beyond even the retail price. Maybe it's fun, but it's hardly a deal.
Priceline.com Inc., the name-your-own-price site, isn't much better. Essentially, it's a way for airlines, hoteliers, and other companies to sell excess tickets or rooms below their usual prices. But the buyer has little control over precise times or locations--certainly far less than with traditional consolidators, who offer similar deals. The same goes for new group-buying services such as Mercata Inc. and MobShop Inc. They imply that prices drop every time someone new makes a bid, but in reality, discounts are negotiated with suppliers far in advance.
Finally, a new class of Web services might deliver on the Net's promise to empower buyers. Startups such as Respond.com, eWanted.com, iWant.com, and myGeek.com all let buyers anonymously describe precisely what they're looking for, then sellers post or e-mail offers. Buyers can choose which to accept and, unlike with Priceline, reject them all if they don't pass muster.
On one of these buyer-driven e-marketplaces, Respond.com, I submitted a request for a particular coffee grinder that's tough to find in stores. Within 12 hours, I had two offers. One fit the bill, and while it cost a little more than I said I wanted to pay, I knew my offer was lowball. People who have bought more typical items, like digital cameras or stereos, say a dozen or more offers are common, even at this early stage. Notes Craig L. Palmer, chief executive of eWanted.com Corp.: "If eight or nine people make you an offer, you have a pretty good idea you're getting a good deal."
Surprisingly, merchants don't mind. Neerav Berry, vice-president of marketing at the wireless phone site Cellmania.com Inc., says people who request a cell phone plan on Respond.com end up buying up to 10% of the time--triple the rate of Web site visitors. The only disadvantage, he says: "You're competing with other merchants, so you have to put your best foot forward." Well...yeah! That's the idea.
Online consumers are starting to adapt to this new empowerment: Market watcher Jupiter Communications Inc. estimates 89% of online purchases are products people specifically sought out. Even so, these buyer-driven sites haven't really caught fire yet. Why? I don't think it's just because they're so new. This style of shopping requires a real change in the consumer's mindset.
Malls and department stores have gotten us used to passively browsing racks, and Web sites retain the same assumption that we just want stuff thrown at us. (It's no accident we peruse sites using something called a "browser.") Taking even more charge of buying power than clicking a buy button will be a difficult leap for most consumers. But if we want to gain the real benefits of the Web, we have to become much more activist than ever before, and make merchants do the work for us. Hey, it's our money. Seize the power.By Robert D. Hof, Rob_hof@ebiz.Businessweek.com