Internet Application Strikes Fear among Retailers

Now, here are two situations that occur more and more frequently in Argentina and on a worldwide scale:

First scenario: A client walks into a shop and asks the shop assistant about a particular product. The salesman, very kindly, shows the product, allows the customer to try it, and explains in detail its functionality and benefits. The client asks about the product’s price and leaves the shop.

Second scenario: The client gets to his house, checks about the said products on the internet, and finds lower prices than in the shop, so he selects a site that he trusts and makes the purchase through the internet.

Price Check, an Amazon app that compares prices, has unleashed the rage of traditional shops that accuse it of paying its customers to spy for the company.

The proliferation of sales websites, especially online, generates a price distribution that more experienced shoppers can profit from. This situation occurs in a wide variety of categories of products such as electronics, household appliances, clothing, car parts, toys and books, among others.

Retailers usually denounce this distortion of prices to manufacturers and importers, who find it extremely hard to resolve these situations, which they shouldn’t ignore.

The traditional sales business claims that the imbalance of prices happens because, while they need to make big investments in shops, stock and staff, electronic channels can function on a fraction of those costs. The traditional businesses’ greatest fear is to become the showroom for products sold over the internet.

This fear seems unjustified because in recent years, traditional commerce has grown as much as e-commerce. One of the factors that limits the potential growth of online trade (actually the only one) is how time consuming comparing prices is. Up to now, this effort is only justified in the most expensive products.

However, this is changing. Comparing prices is becoming increasingly easy and fast. In some countries, simply by downloading a special application onto your mobile phone with a camera and internet access, you can scan the bar codes of articles and get to know the prices in other shops instantly, especially online shops. Furthermore, this comparison can be done taking a picture with a cell phone or via voice recognition technology, which requires saying the product’s name.

Is this a distant future? No way. In a polemic move, Amazon offered a five dollar discount in the States for clients who, using Amazon’s Price Check, scanned the price tag of a product in an actual shop and then compared it with their site. This promotion aimed at stimulating the usage of Amazon Price Check. Also, this made it possible to gather data about their competitors’ prices, which were identified using the phone’s GPS. This promotion caused the rage of many conventional shops that accused Amazon of paying its clients to be its price “spies”.

The answers from shop owners did not take long. Many chambers repudiated Amazon’s actions and even created Facebook groups of indignant people, like “Occupy Amazon”. The dispute has just begun.

Clearly these kinds of applications will revolutionize trade worldwide. The number of stowaway consumers, or “free riders,” who get advice about a product in a conventional store only to later purchase it online, will rise if prices continue to decrease, and so will intervention by products’ owners. That is to say it will be crucial that manufacturers and importers see if the point of the traditional sales industry’s destiny is to become more than a mere showroom.