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A Dartmouth graduate is using an idea from his senior economics paper to help retailers win the online price wars.
Zach Blatt told us that he was a student at Dartmouth when he was struck by the inefficiency of retail pricing.
“I realised that price is hugely important in purchasing decisions, yet there was no service that told retailers how much the competition sold products for online,” Blatt told us.
He graduated college in 2011 and started Right Bid Retail last year. The service shows retail companies how much competitors are selling products for online.
We chatted with Blatt about his idea and the future of Internet price wars.
Business Insider: What made you decide to start Right Bid Retail?
Zach Blatt: I was familiar with online comparison shopping for consumers like PriceGrabber. Those sites let shoppers find the lowest prices online. If one merchant is selling a television for $299.99 and the other is selling it for $298.00, most customers would choose the cheaper option. It occurred to me that retailers could use a service that gave them access to what competitors are charging.
BI: What consumer trends set the landscape for you starting a business?
ZB: The competitive landscape has changed and retailers have to look at setting smarter prices. Consumers are increasingly savvy and have access to apps and websites that alert them to the lowest prices. Sometimes, retailers don’t realise that a competitor offering a slightly lower price can win the sale. Retailers need to be more proactive about pricing than ever.
BI: But aren’t retailers worried about the possibility of constantly lowering prices to match competitors?
ZB: A lot of my potential customers are paranoid about pricing wars. They’re bummed because the Internet has turned into this rat race for competitive pricing. But we’ve added precautions to our software that makes prospective pricing increases up to the retailer. They can build their own pricing rules. Instead of constantly losing pricing wars, my software puts control back in their hands. In a lot of cases, the lowest-price competitor is only prices 0.5% lower than the next merchant.
BI: Can you point to any data that shows the importance of offering the best price?
ZB: Customers referred from customer shopping engines act differently than customers who go directly to your website. Economics have found that these shoppers pick the lowest-priced merchant 50% of the time, the lowest two merchants 70%, the lowest three merchants 80%, and the remaining seven merchants just 20% of the time. As consumers use these services more and more, it’s essential that retailers get on board.
BI: How do you plan to expand your business?
ZB: I’m going to focus on building out my client base and am looking to get some bigger companies on my roster. I’m also a one-man operation, so I’m looking to hire another employee soon.
Here’s a chart Blatt shared showing the number of clicks online retailers get per price rank:
To find out more about the company, visit Right Bid Retail’s website.
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