Overnight a couple of big web deals highlighted again how the retail model is in the process of being completely transformed by technology and the GFC.
Over in the US, auction giant eBay bought a local shopping site called Milo.com. The site basically plugs into a retailers inventory system, allowing users to see what products are on the shelves and when. The idea is that buyers search for a product, check it’s price, check if it is in-store, and then are hopefully converted from online browser to in-store shopper.
The second deal involved Australian-born site RetailMeNot, which is the biggest online coupon site in the world, and has a huge American user base. It was bought by a US company called WhaleShark Media, which is in the middle of a roll-up of deal and coupon sites.
When we place these deals alongside Google’s plan to takeover group buying site Goupon, we see a clear trend – the world’s big web players have realised there is money to be made in servicing the legion of bargain hunting shoppers around the world.
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Sites such as Groupon, RetailMeNot and Milo have trained customers never to pay full retail price.
When you want to buy something, first you do a bit of online comparison shopping, then you look for a coupon, and if all else fails, then you wait for a group buying deal to come along. If you’ve got the right iPhone app, you can even do comparison shopping while you’re in the store. And if you find a better price, just wave your phone in front of the manager’s face and demand they match it.
But whatever you do, you never need to pay full price again. Ever.
The rise of these sites and tools has been fuelled by economic conditions, particularly in the US and also in Australia. Low consumer sentiment means shoppers are naturally on the lookout for bargains, and these sites have just made it so easy.
Of course, this is bad news for entrepreneurs (except those who can sell their businesses for big prices, of course).
The bargain hunting mentality might start in retail (where margins may never really recover to pre-GFC levels) but it will spread to B2B transactions.
Defending profit margins is about to become even harder.