SEVENTEEN

Euro-Bots

BY DAVID PRINGLE

July 17, 2000

Simon Renny types the words “Catcher in the Rye” into a search engine on the Web site ShopSmart.com. One click and 15 seconds later, the London-based accountant has a list of five U.K. stores with the book in stock, the total price they charge and how long they take to deliver. He selects a retailer called Gillihams, which lists the second-cheapest price and second-fastest delivery time. (The cheapest was one of the slowest.)

Mr. Renny has never heard of Gillihams Ltd., an online retailer based in London, while he recognizes one of the other retailers listed, well-known retail chain Waterstones Booksellers Ltd. But he says he “would always go for price and delivery time rather than name.” By buying at Gillihams, instead of Waterstones, Mr. Renny is able to get J. D. Salinger’s classic novel delivered for a total cost of GBP 7.54 (about $11) rather than GBP 9.44 (about $13).

As they become savvier about buying online, large numbers of Europeans like Mr. Renny are visiting comparison-shopping services known as bots—also called shopbots throughout Europe—to help them locate the biggest bargains on the Web. Though bots don’t yet cover every retail sector, it’s relatively easy to find European comparison services for such online shopping staples as books, videos, CDs and software.

With the help of a television advertising campaign, ShopSmart.com, run by London-based ShopSmart Ltd., was the eighth most popular retail site in the U.K. in April, attracting 399,000 visitors, according to London-based research firm MMXI Europe. CNET.com, a technology comparison-shopping service run by San Francisco–based media company CNET Networks Inc., attracted 407,000 Europeans in the same month.

If other consumers follow Mr. Renny’s example and plumb for the best deal regardless of brand, bots are set to put unknown online retailers on a more equal footing with their widely recognized brick-and-mortar counterparts. Indeed, the companies that run these services believe that they are altering the balance of power between big and small retailers.

Nicholas Lovell, chief financial officer of ShopSmart, says comparison-shopping engines make it easier for an online retailer without a large marketing budget to get noticed. “We do provide a level playing field for lots of people,” he says.

Moreover, the millions of dollars that some retailers plow into marketing may be better directed into cutting prices and speeding delivery. That said, even in a world where a retail offering is distilled down to its bare essentials, a well-known brand could provide an important edge. Analysts reckon that many bot users will be prepared to pay a small premium to buy from a retail brand they know and trust.

Some brick-and-mortar retailers are uncomfortable with bots’ narrow focus on price and delivery. Sue Jenvey, Internet marketing manager at Waterstones, says the problem with bots is that they don’t give the consumer all the relevant information. For example, she says, Mr. Renny could have purchased Catcher in the Rye for GBP 6.99 from Waterstones if he was prepared to pick the book up from a store, rather than have it delivered. Ms. Jenvey adds that if Mr. Renny changed his mind, he could have returned the book to a Waterstones store for a full refund. But none of that information was available on ShopSmart’s listing.

Mr. Lovell says ShopSmart allows the consumer to bypass most of the material on a retailer’s site, homing in on the salient information.“There is no point in clogging up the consumers’ bandwidth with all the additional eye candy,”he says, estimating that ShopSmart’s computers view only 1/20th of the data that would be accessed by a human shopper to retrieve the same information.

Of course, many online retailers like Waterstones regard this so-called eye candy as important marketing and promotional information that helps the consumer choose where to shop. Still, analysts say that some discount online retailers could dispense with conventional marketing, on the assumption that if they cut their prices sufficiently, the bots will deliver a steady stream of prospective buyers.

“Retailers can go after very specific consumers without going for banner advertising or a marketing campaign,” says Carrie Johnson, associate analyst with Forrester Research Inc., a market-research firm in Cambridge, Mass. “Instead of running a banner ad saying 15% off VCRs, you go straight to the shopping engine where you know the customers are.”

Online discount retailer Buy.com Inc., Aliso Viejo, Calif., receives a large volume of traffic from bots, says Ms. Johnson.

Gordon Henderson vice president of Buy.com’s U.K. unit, says, “They are the most efficient customer-acquisition engine I have. . . . I just wish there was more of them.” But he won’t disclose what proportion of Buy.com’s sales originate from bots.

Mr. Henderson says Buy.com’s U.K. unit doesn’t spend money advertising on Web sites. Instead, it focuses on ensuring that it has the cheapest prices on the Internet. Buy.com’s staff uses bots to gauge how it compares with the competition, and the company will change its prices on an hourly basis if necessary.

There’s anecdotal evidence to suggest that bots already are contributing to a shakeout among online retailers. Elisabeth Schick, chief executive officer at bot DealTime Europe AG—a Heidelberg-based joint venture owned by New York–based DealTime Ltd. and Germany’s Bertelsmann AG that offers comparison-shopping services in Germany, the U.K. and Italy—says one U.S.-based technology retailer asked if it could be removed from the evenbetter.com comparison-shopping service, now owned by DealTime, because it was always shown to be more expensive than its five main rivals. The retailer was removed from the service. But in any case, Ms. Schick says, this company has now switched its focus to the business market.

But even in the apparently egalitarian world of bots, well-known companies have an edge. “If Amazon is only a little bit more expensive, it can still get the sale,” says Ms. Schick, referring to Seattle-based Amazon.com Inc., the leading online book retailer. He believes a well-known brand could attract a premium of as much as 15%.

“If you have a good brand,” adds Lars Waagstein, an analyst in Stockholm for New York–based Jupiter Communications Inc., “maybe you can go over the lowest price by 10%, but not 50%,”he adds. Retailers who believe their brand is an asset can pay to have their logos displayed on DealTime Europe’s service.

Ms. Jenvey at Waterstones says that although she’s wary of the bots’ narrow focus, her site does receive a “fair amount” of traffic from shopping engines. And she has no qualms about cooperating with bots. “It’s good for us, in that it helps us get our name out there,” she says.

Other retailers also have mixed feelings about bots. “They make life easier in some ways . . . [but] what happens to brand value?” asks Steven Blackburn, online marketing director at U.K. video-games retailer Gameplay.com.

Mr. Blackburn says that although bots do attract customers to his store, he would be loath to abandon advertising. “You still have to maintain that brand presence to retain control of your own destiny,” he says. “Slowing down what you spend on marketing because other people are doing it [for you] is not a wise move—they might drop you from their service.”

Indeed, not all retailers are welcome to join some bot services. For example, ShopSmart, which has sites in the U.K., Germany and Sweden, will compare prices only from Web sites that can respond quickly to its own computers’ queries.

“You can’t be a mom-and-pop shop,” says Mr. Lovell of ShopSmart. “You need to provide a fast response.”

In practice, that means that in each of the four categories it covers—books, music, video and games—ShopSmart compares prices at fewer than 10 online shops. The service lists retailers according to how quickly they respond, which, ironically, could penalize popular Web sites that are busy dealing with other customers.

And ShopSmart will include only retailers that agree to pay a flat fee of 50 pence to #1 for each referral, in addition to a commission on any sales. The commission varies according to the kind of products involved, but is usually on the order of 5%. DealTime Europe also asks for referral fees and commissions.

Although both ShopSmart and DealTime Europe accept advertising, they maintain that their comparison services are objective and neutral. DealTime Europe doesn’t take advertising from companies that sell products included in the price-comparison service. In any case, Jupiter’s Mr. Waagstein says: “If you can’t compete on price, then you shouldn’t try to advertise on these sites.”

Mr. Pringle is a staff reporter for WSJ.com in London.