By Eelco van de Wiel
Two mayor players in online retail have initiated a mobile application for price comparison. In November 2010 Amazon launched a new price comparison app for mobile phones (Business week, 2010). Before also Ebay noted the importance of mobile price comparison as a future growth strategy and bought the price comparison app RedLaser (ZDnet, 2010).
Business week wrote: “The idea is to boost sales by making it easier for consumers to compare prices, read product reviews and make impulse purchases wherever they are - even in a rival’s store” (Business Week, 2010b).
“Mobile represents an enormous opportunity for retailers (…..) If you’re a pure-play e-commerce company, you want people to go to these stores and pull out their app and get a better price,” said Dave Sikora, chief executive officer at Digby.
The first results from a research of Eelco van de Wiel (Bizzsms) of Tilburg University about the effects of mobile price comparison apps on offline retailers shine a differentlight on this case. The research was conducted among over 125 people from the Netherlands using an experimental research design. The participants were asked to buy a TV and were currently visiting a store where the TV was available. The research had three steps in which the participants were presented: 1) Just the price, 2) A mobile app (simulation) with only price comparisons, 3) A mobile app (simulation) with mobile price comparison and retailer service quality indicators based on reviews. Five Local retailers were listed in the mobile app in four conditions, 1) Low price, Low quality 2) High price, low quality, 3) Low price high quality and 4) High price, low quality. Low quality or low price had rank 2/5 and high quality or high price had rank 4/5.
The main findings of the research:
- People with the mobile app available search more for prices and are therefore more price sensitive
- When the price is high the purchase intention is lower (also with high service quality) than without the application
- When people use the mobile app with only the price comparison there is less purchase intention in the specific store for both the low and the high price condition
- There is a significant difference between the purchase intention with service quality indication in comparison to the condition without service quality indication.
- The purchase intention is significantly lower when the service quality is low in comparison to a high service quality.
- Service quality of the retailer has a bigger influence on purchase intention than price has in this hypothetical situation
- Al conditions except for the high quality, low price condition give a lower purchase intention. The high quality, low price condition gives no significant result. Possibly with more data the purchase intention will appear higher than with no service quality indication.
Based on this research the implications of mobile price comparison applications on offline retailers might be huge. As the results indicate only the purchase intention of the very best option will not decrease. The price sensitivity of offline shoppers will increase tremendously bottom line resulting in only a few winners: the ones that deliver the highest quality for the lowest price . More price and quality transparency may therefore result in even more upscaling of both offline and online retailers.
Retailers should focus on delivering service quality and making that service quality publicly available using social media. Also retailers should make agreements with producers to get differentiated products for their company so people are not able to compare prices anymore. Another strategy can be to focus on less products for creating higher per product volume and deliver them at the lowest price.
It appears that now the web is evolving more and more the Long Tail paradigm, which once was a leading view that also small retailers could create an online business, is replaced by the emergence of online superpowers like Facebook, Amazon, Google and Ebay which become larger and larger and take over or defeat their smaller competitors as a result of scale economies.
Business Week (2010) Amazon.com Targets In-Store Buyers With Price-Comparison Tools. Retrieved from http://www.businessweek.com/news/2010-11-22/amazon-com-targets-in-store-buyers-with-price-comparison-tools.html Business Week (2010b)
Best Buy, Amazon.com Try to Reach Shoppers Through Their Phones. Business week news. 2 December 2010 Bloomberg. Retrieved from http://www.businessweek.com/news/2010-12-02/best-buy-amazon-com-try-to-reach-shoppers-through-their-phones.html
ZDNet (2010) eBay acquires barcode scanning app for iPhone. 23 Juni 2010. Retrieved from http://www.zdnet.com/blog/btl/ebay-acquires-barcode-scanning-app-for-iphone/36235
