Dubai: Even a one dirham pricing differential matters... especially for shoppers browsing online for the “best deal in town.”
That difference is all that it usually takes to place a particular e-commerce portal at the top of the heap when a potential buyer does an instant comparison. A portal finding itself somewhere in the middle could potentially have lost out on the deal even without the buyer entering the site.
Being at the top of the comparison charts matter... and that could also explain why more pure-play e-tailers are making the switch to being “online marketplaces.” Though at first glance, these may mean one and the same thing, there is so much more leeway that being a marketplace offers.
“The advantage is that you don’t need to worry about competitive pricing, since having thousands of sellers in your marketplace will inherently create a hyper competitive market,” said Nadim Al Ameddine, Co-Founder of Pricena.com, the comparison site. “In a marketplace, you will make a smaller gross margin per unit of sale than in direct retail, since you will be charging a commission on the seller’s profit.
“So, if the average gross margin of a seller on a smartphone is 8 per cent, you will probably charge the seller 2-4 per cent or less of the sale value. But the bet is that a large share of the market will move through your marketplace.”
More online vendors are seeing the virtues of being defined as marketplaces. By “hosting” multiple sellers on their site, these portals are not necessarily bound by having to offer pre-agreed prices on their inventory, done with the brand owner or its local distributor. By trimming their selling prices by a few dirhams, these marketplaces can become a magnet for shoppers looking for the cheapest deals. In the business of selling gadgets those kind of volumes count for a lot.
“Online vendors still offer better prices than offline stores,” said Al Ameddine. “Although we notice the competition is intensifying as offline stores now compete either with their own marketplace or spinning off an online store under a different brand to have more flexibility on pricing vis-a-vis the brands.
“Only a handful of stores are sticking to direct retail as a differentiation strategy, focusing on great customer service and fast delivery.”
In fact, some brick-and-mortar tech retailers have created online versions where they price the inventory lower than at their own stores. In a retail market where shoppers are less prone to splurging out and making do with their current mobile for more than a year or two, vendors are resorting to every tactic they can get think of.
“To give you an idea of how important pricing is to get volume, the top ranked store gets 2-3 times more volume than the second ranked store, even if the price difference is only Dh1,” said Al Ameddine. “The reason is consumers don’t necessarily look at the price difference, they just want the cheapest. In that mindset, they click the top ranked store.
“At Pricena, we not only show the best price but also allow consumers to make an informed decision based on a combination of price, shipping charges, speed of delivery and customer service. Sometimes a store that’s Dh10 more expensive delivers faster... so it might be worth the extra change.”