Why Comparison sites fail? A quick look into online eCommerce

Why Comparison sites fail?

Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts.

 

In simple words affiliate marketing is just the online version of getting a commission for referring a store to someone in traditional stores. In traditional stores when you lead a potential customer to a store and then he makes a purchase from the store the referrer can bargain a good commission from the store owner. In online stores when an affiliate marketer makes a potential customer make purchase from an online store the affiliate is entitled to a fixed percentage of the sale as commission from the online trader.

The commissioner is fixed and ranges from 4%-14% in the top end stores. It can go as high as 75% in a few stores, but that are extreme cases. We will take a quick sneak peak on the evolution of affiliate marketing from its kick start in early 1990s to the present.

1989

The first affiliate program is started by PC Flowers and Gifts. William J. Tobin, founder of PC Flowers and Gifts becomes the founder of affiliate marketing. He takes the help of Prodigy Interactive Ltd. to take his business to a new level by digital marketing. A company called CDNow launched their affiliate program. CDNow was a company that sold music CDs in the 90s. They took orders online as well as from retail stores and delivered the product to the doorstep. The launch of CDNow affiliate program is noted in the history of affiliate marketing as this is considered the turning point in affiliate marketing. Critics and experts also say that CDNow.com was the worlds very first real affiliate program. The affiliate program was called BuyWeb.com. The site provided a link to CDNow products to their users. When someone clicks this link and made a purchase a good amount was credited to the user’s account. 

1996

The amazon affiliate program is launched, something that changed everything. Amazon’s affiliate program also known as the Amazon Associates is credited for making the affiliate marketing industry a multi million dollar turnover business as it is today. Amazon associates was considered the best and easiest way to make money online at that time, at this time also there is no much change in the subject. Amazon associate, back then was only for books, movies and music. Amazon paid 5%-15% of sale amount to the referrer.

1998

Commission junction launched. Commission junction (now known as CJ affiliate by Conversant) becomes one of the biggest digital marketing and affiliate marketing company till date. Commission Junction becomes the biggest competitor of Amazon Associate and fortifies the market to a great extend.

2000

FTC comes up with their own regulations over the internet. Till the year 2000 the Federal Trade Commission had no rules regarding anything over the internet. By 2000 they realized that a lot of money can be made online. At the first stage they came up with a few regulations. But later it proved to be a tip of an iceberg. Till the year when internet was a regulation free zone to make money there was a huge number of affiliate marketers and they made a bigger profit. With the FTC putting down regulations many small and amateur affiliate marketers were drives out of the industry. Now tax had to be paid on the affiliate commission.

2005

The biggest acquisition in the history of affiliate marketing. LinkShare.com is acquired by Rakuten for $425 Million. This event is of great importance in the book of affiliate marketing as the acquisition showed to the world the mass amount of funds getting pumped into the affiliate marketing industry from around the world. With this the idea of compensation based marketing was more legitimate than ever before.

2007

Facebook and Myspace becomes popular.

The arrival of social media was a big click in affiliate marketing. Now affiliate marketers could reach out to more people with much ease. Social accounts by affiliate marketers started making them sums  of money that cannot be imagined with just owning blogs and websites. In the following years the FTC Regulations on affiliate marketing kept on increases. Major changes were made in the regulations in the years 2008, 2010 and 2014.

PRICE COMPARISON SITES

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Love these comparison sites, ultimate price-checking tool! #saving #smart

Price comparison sites is another industry that came up and gained power with the affiliate marketing. To pool traffic to affiliate marketers they used the medium of price comparison sites. It all started with the simple idea that whenever a person want to buy something online he tends to see the price of the same product in different online stores. Instead of this if there is a site where the customer can see the price for a product across different online stores why will he visit different sites and check price at the first place.

Price comparison sites are very high in number now. But most of the time new price comparison sites drowns in the vast ocean of comparison sites or manage to survive making huge losses. We will be seeing into the reasons why most price comparison sites fail.

Not Providing Clear Information

The reason for the failure of most comparison sites are their inability to provide clear information to customers. Most of the time price comparison sites tend to give customers few complex information whereas what the customer wants is detailed information about the basic of the product. Recent studies show this as the reason for failure of 60% of price comparison sites around the world.

Not Always The Right Price

Price comparison sites are suspected to show wrong prices when comparing products. There are many reported cases in which price comparison sites show a very low price for a product and when the customer actually clicks the link and goes to make the payment it is seen that the price shown by comparison site and the retailer is different.

As the revenue of price comparison sites are from affiliate marketing they somehow want to lead you to buy the product. To do this price comparison sites show a higher price to products in traditional stores and lower price in online stores. This makes the customer believe that online shopping can save them money and shops online earning the price comparison site their revenue.

Single Source of Revenue

Almost 70% of price comparison sites make their revenue only by affiliate marketing. When the source of revenue is only one the business is too risky. If the traffic of a price comparison site goes down their revenue from affiliate marketing also goes down. And when affiliate marketing is the only source of revenue reduction in the revenue puts them into loss.

To avoid this risk price comparison sites should go for different revenue sources. Other revenue sources can be advertisements, other forms of digital marketing etc from the same site. Diversifying revenue sources can reduce the risk of price comparison sites failing.

Misconceptions by Customers

Misconceptions by customers is another reason why price comparison sites cannot make it. When you compare something on a price comparison site you are show a list of items similar to what you have searched. Most of these may not be of the same use as the intended product. Many a times the customer may end up buying the wrong product.

Once a customer have a bad experience buying the wrong product from a price comparison site he will never go to the same site to comparing prices again. This is the major reason why price comparison sites lose their audience. Losing visitors means losing sale which leads to reduced revenue and brings wreck to the site.

Less Market Coverage

Price comparison sites tells you that there is nowhere else you have to go for online shopping. But the truth is as studies prove, none of the world’s leading price comparison sites have more than one third of the products available in stores. This lets the customer compare and buy only one third of the product in store. When a customer notices that the product he wants to compare is not available in the price comparison site it creates a bad impression about the site.

Peas In A Pod

Almost all price comparison sites are the same, most of the time what separates them from their competitors are the name and logo. The services, facilities and products provided by almost all price comparison sites to their customers are the same. The lack of a new idea or trend is what keeps price comparison sites from being a big success. Even when the sites makes it to to top notch it doesn’t move a bit from their as there is nothing that separates them from their competitors.

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