Where price meets value online, consider it sold!

Oscar Wilde once said that a cynic is someone who knows the price of everything, and the value of nothing. Tell that to the modern-day Indian online shopper, who would dismiss it with contempt, finding, well, no value in it. They will spend their hard-earned money only where price meets value. This festive season, when eCommerce vendors have pulled all stops to woo customers, let’s tag along with a few such shoppers. Even as we observe their behaviour, let’s try to help them with feedback from a few pricing experts.

The first stop is product discovery. Says Sitakanta Ray, Co-founder and COO of MySmartPrice, which runs price comparison and product discovery websites and smartphone apps, “Product discovery refers to the ease of narrowing down to that one product the customer is happy to buy. This is of great value to the customer and is unmatched by mere reduction in prices. It shortens the decision cycle and solves indecision.”

He says the mobile phone category is the only one for which customers come with a specific product in mind. The mantra is to present the customer with equal parts freedom and equal parts guidance. MySmartPrice’s product discovery tool allows customers to shortlist products on the basis of their budget, preferred brand, vendor, services, etc., and makes recommendations accordingly.

Habits so uniquely Indian

Then come a set of behaviours, which are perhaps unique to Indian shoppers online. Ray believes that COD (cash on delivery) is a requirement for most. This belief stems from the surprise finding that almost 70 per cent of the customers on MySmartPrice don’t buy from the ‘lowest price store’. The tool offers price comparison across 10–12 vendors for electronics, and product discovery for about 40 vendors across all other categories. “Only 30 per cent of customers buy from the store that offers the lowest price. This means other factors such as store reliability, post-sale services, payment conditions (COD, EMI), and delivery conditions (period, delivery charges) strongly influence purchase decisions,” he said.

Agrees Saurabh Vashishtha, vice president (business), Paytm, “Although discounts attract customers, there are two challenges to it. One, it does not command any customer loyalty. Two, most large brands discourage this practice as inconsistent pricing erodes their value.” Paytm has hence found a solution in ‘cashback’. “Cashback, as a combination of loyalty points and instant gratification, is equivalent to hard cash,” he says.

K Jaya Kumar, Vice President and Managing Director, @WalmartLabs, says: “Even if a customer uses a particular portal to discover, research, understand, and compare a product, he/she can easily switch windows to buy it from a different website.” According to him, price comparison is extremely subjective. A customer may use various tools for product discovery and price comparison, and then buy from a completely different channel (more often than not an offline one). Chips in Ray, “Only 20 per cent of the people who surf shopping websites are genuinely interested in buying online. An overwhelming 80 per cent are just doing their research to buy offline.” In Delhi, Hyderabad, and Chennai, MySmartPrice is catering to such an audience by comparing store prices on the website.

“For categories like groceries, gifts, and other small items, people will not hold off a purchase or travel far even if there are better deals out there. For the bigger purchases, people are willing to put in an effort to look up websites to compare alternatives,” says Ray.

Time for that sticker shock

Now comes pricing. The online shopper loves price comparison tools. But  how do they get made?  The @WalmartLabs division of the $486-billion retailing giant Walmart, which manages all the major websites, mobile sites, and mobile apps of its parent, is uniquely placed to offer its perspective on this.

“We are committed to low prices,” says Jaya Kumar. Using Savings Catcher, its grocery savings app in the US, Walmart tracks prices of purchased goods typically for three days from the date of purchase, and notifies the customer if a competitor is offering a lower price. The difference is then reimbursed with a Walmart gift card.

“Savings Catcher has been hugely successful in the US,” says Jaya Kumar.
Walmart uses an internal tool which compares vendor prices across 50 platforms, which @WalmartLabs developed over many years, with one full year spent on refining it. Jaya Kumar was kind enough to break down the process of building a price comparison tool for the readers of DH (see infographic, ‘Eight Steps to the Right Price’).

According to him, Step 5, where trends are studied, will take the longest because algos need to be stabilised. “During sales and promotional activities, price movements are more frequent. For a category like electronics, we draw the trend often on an hourly basis. Otherwise it can be even as long as a month for some categories.”

Tips for the power user

All the experts we spoke to had some tips to offer for power users. “When a customer makes a purchase through the Paytm wallet, a certain predetermined portion of the money spent is credited back to his/her wallet, which can then be used for further transactions. Cashback only works when there are enough terminals where the customer can use this money,” says Paytm’s Vashishtha.

Ray of MySmartPrice says that when a signed-in customer decides upon a particular product, the tool offers a special service to monitor its price movements over a week. He broke down the process for us in a few steps:

 Step 1: Every user starts off with some sub-category in mind. Locate the category on the website.

Step 2: The website will present options under two data points of best-selling products and best-deals. The former is based on decisions made by well-informed buyers, hence making it dependable data. The latter is extremely relevant it terms of price (discounts on different platforms).

 Step 3: When a buyer decides on the product he/she wants to buy, the website also allows the buyer to sign up for notifications on future price drops. This will be sent for seven days, and will cover specific stores if required.

“This feature saves the customer the trouble of having to visit the website over and over to check for better deals, thus making it a ‘powerful’ tool to retain customers,” says Ray. “About 15–20 per cent of the sales on the website are generated through this feature.

However, only six per cent of our customers have made use of it,” says Ray. Jaya Kumar has some suggestions to make price comparison more effective, “Current tools do not offer end-to-end prices. They omit delivery and other value-added service charges. The customer would have to reach the end of the purchase cycle to realise discrepancies, thereby making the tool inefficient. This could be fixed.”

He added, “For invested customers like gizmo freaks or fashionistas, who are product-price watchdogs, they are well aware of trends in price movements across the year. They know when to buy, where to buy, and how much to spend. They are also in a position to make better use of price comparison tools. To transfer such a power user’s capabilities to everyone is the ultimate goal. Given this, if tools were to advise customers on when to buy, i.e. ‘buy now’ or ‘hold off a purchase for an expected better deal’ , it would be of great value.”

The seasonal shopper

Finally, the Indian online consumer is also influenced by shopping seasons. Google’s Great Online Shopping Festival, Flipkart’s Big Billion Day, and Snapdeal’s ‘Dil ki Deal’ are among the biggest activity propellers across eCommerce platforms. “On an average day if 100 individuals visit the website and two of them make a purchase, then during such events 200 individuals would visit the website and conversion to sales also go up proportionally,” says Ray.

Paytm claims such events lead to traffic spike and sales conversion numbers for them as well. “Paytm’s traffic increased 3X during the sales. People already have money in their Paytm Wallets. So it would only make sense for them to make use of it by shopping on Paytm,” says Vashishtha.

Over the week that was consumed by Flipkart’s ‘Big Billion Day’ sale and Snapdeal’s ‘Dil ki Deal’ campaign, MySmartPrice’s traffic went up two to 2.5 times with about Rs 5 crore of GMV (gross merchandise value) sales from an otherwise daily average of Rs 2 crore. “Overall, MySmartPrice saw Rs 25 crore GMV sales during these events,” Ray added.

Eight Steps to the Right Price

Web crawling ‘spiders’ or bots are dispatched
They crawl websites and fetch relevant data
This data is assimilated on the database
The data is stabilised to make units of reference uniform
The prices are studied over aperiod for trend discovery
The frequency with which data is drawn for trend discovery is decided separately for categories
The resulting data is compared with other price comparison tools for consistency
The price
discovery tool is now ready for customer benefit