Shopbots

RANDY WATTS LIKES to design webpages, but he doesn't like to pay unnecessarily high prices for new development tools. Like a growing number of small businesses and consumers, Watts has started relying on shopbot technology to help him find killer deals on a wide array of products. But while current 'bots can offer a great service to small-volume buyers and individuals, similar tools for larger companies are just starting to appear. And if you're an online merchant, the very thought of such margin-slimming shopping assistants may cause you to groan.

Shopbots are intelligent software agents that scour the Web to find the lowest price on a particular product. They can also help shoppers avoid drowning in choices. "I don't have a lot of time to spare, so I really don't want to run from merchant to merchant in order to find the best deal," says Watts, owner of G&R Designs in Redondo Beach, Calif. "Shopbot technology helps me acquire the newest and most powerful software quickly and cheaply."

Shopbots have come a long way in a remarkably short period of time, says Edmund Ha, an e-commerce analyst at Giga Information Group, a technology research company in Cambridge, Mass. "They place shoppers in the driver's seat by allowing them to easily decide which merchant offers the best deal," says Ha.

Yet, despite their immense potential, shopbots remain far from being a problem-free technology. Critics complain that because of various technical and business-imposed limitations, shopbots can mislead consumers into thinking they've uncovered a rock-bottom price when, in fact, much better deals exist. For merchants, shopbots mean added expenses as well as a heightened level of price competition that can lead to razor-thin margins. "The technology can make it especially difficult for smaller merchants to survive," says Malcolm Maclachlan, an e-commerce analyst with market researcher IDC (sister company of CIO's publisher, CXO Media).

Shopbots Grow Up

During the past couple of years, the shopbot market has evolved to the point where three specific types of intelligent agents -- price-, feature- and merchant-comparison engines -- have become available to consumers. "Shopbots have come a long way from the days when they could only rank products by prices," says Ha.

Price-comparison shopbots -- the oldest shopbot technology -- continue to be popular. MySimon.com, DealTime and BottomDollar are among the many shopping services that provide users with suggestions about where to find the best price on a particular product. Product-comparison shopbots, such as the type developed by eWonders.com, aim to help shoppers who are concerned with product features as well as pricing. Merchant-comparison shopbots, offered by BizRate, Dash and Frictionless Commerce, are designed to showcase retailers that are best able to meet a shopper's specific needs in terms of products, prices, support and related areas.

Current shopbot services are consumer and small-business oriented -- a situation that isn't likely to change any time soon. Big corporations usually don't buy products at retail, which is the environment where today's shopbots tend to work. "You're not going to use this technology to find the best price on large quantities of ordinary products or unique, high-ticket items or raw materials," says IDC's Maclachlan.

Nevertheless, a hybrid search agent, using a commbination of shopbot and Web auction technologies, could prove attractive to businesses of any size, as well as consumers. NexTag, for example, allows users to haggle directly with merchants over product prices, configurations and options. "It's almost a Wall Street type of bidding environment," says Rafael Ortiz, vice president of business development for the San Mateo, Calif.-based company. NexTag's Business eXchange enables companies to negotiate deals on products ranging from marketing services to lumber.

In the meantime, some issues with existing shopbots need to be addressed, says Steve Siu, owner of Mobius Systems, a computer consultancy in Osage Beach, Mo. Siu uses shopbot technology to uncover bargain prices on add-in boards, monitors, hard drives and other types of computer components. Yet he feels that shopping service providers let users down in several ways. Merchant anonymity is one concern. "Some 'bots don't let you see the vendor, so you have no way of knowing who you're buying from," he says.

Siu has also run into conflicts between shopbot-suggested prices and what he finds during his own searches. "Often, if you look directly at the retailer's site, you'll find that the price is somewhat lower," he says. That's because the merchant is able to eliminate the shopping service middleman and pass some or all of the savings along to the buyer. The tendency of many merchants to omit shipping and handling charges and local sales taxes from their listed prices further muddles accurate shopbot comparisons. "The deals aren't always what they seem to be," says Siu.

In fact, shopbots often disappoint users by failing to find the best price on a product. Sometimes, the problem is simply a shortcoming on the shopbot's part -- typically a failure to scan enough retail sites or not visiting sites often enough. More often, however, the omission is the result of a calculated business decision. Shopping services generate revenue directly from the merchants, says Giga's Ha. "If a merchant doesn't cooperate with the shopbot operator, chances are that organization's products or services won't be included in the shopbot search or placed at the end of the results."

Product quality, or lack thereof, is another important issue, says Siu. He finds that shopbots sometimes retrieve products -- particularly software items -- that are outdated, beta versions or out-and-out bootlegs. To fight the scammers, most major shopbot operators carefully screen the merchants they deal with. "We pay close attention to the merchants we work with," says Josh Goldman, president and CEO of MySimon, in Santa Clara, Calif. But a growing number of smaller shopbot- based shopping services aren't as careful, and dubious merchants can often slip beneath the radar of even the most watchful shopping service provider. In any event, Siu says shopbot users need to be alert and must draw on their common sense: "If something is too cheap, it might be bootleg or stolen."

Minor Margins

For sellers, shopbots can be a double-edged sword. On one side, the services help merchants expand their products' visibility. Unfortunately, they also put items right next to identical or similar products from the competition. Whoever offers the best price will probably get the sale, which means that margins can be sliced to -- or even below -- the point of profitability.

The shopping service middlemen trim margins even further. According to Ha, merchants can find themselves paying shopping services in three different ways: for each hit made to their site as the result of a shopbot recommendation, for a sale made as the result of a shopbot recommendation or for a favoorable placement on shopbot-generated lists. Additionally, many merchants end up paying two or more services in order to obtain maximum exposure for their products.

And as the wireless Web emerges, shopbot operators are beginning to view the mobile market as their next price-lowering frontier. Shopping services that are compatible with Web phones and wireless-equipped personal digital assistants (PDAs) allow users to make purchasing decisions from almost anywhere. InfoSpace, for example, is bet-ting that shoppers will want to bring their Internet-enabled devices -- and shop- bot technology -- into brick-and-mortar stores for on-the-spot comparison shopping (a frightening thought for any shopkeeper). The company offers shopbot services to AT&T and other wireless carriers, allowing Web phone and PDA users to compare products and prices in a variety of categories. The technology turns a mobile device into a personal shopping adviser.

Most analysts say armies of shopbot-equipped customers will eventually have a major impact on both brick-and-mortar and cyberspace merchants, leading retailers to adopt more aggressive marketing and pricing approaches. "Retailing is undergoing a revolution, and shopbots are on the front line," says IDC's Maclachlan. "The shopbots' influence is only beginning to be felt."

This story, "Shopbots" was originally published by CIO.

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