P rice comparison websites have become increasingly popular around the world over the last ten years. In the United Kingdom and the United States market research groups have estimated that annually $1.5 billion transactions pass through this well-established industry, according to Wize Commerce.
Because of the ease of use and straight forward manner of these numerous websites, western consumers use the price comparison websites for a whole manner of different price checking exercises including shopping, vacations and home utilities among some of services available in different markets.
The first official price comparison websites were Bargainfinder.com and Jango.com, which gradually made way to competitors offering better prices or using different funding structures.
Price comparison websites use a method called “scraping,” which basically scours vendor websites and pits each website against each other to list the best site.
Often these basic price comparisons earn their revenue by a service called “clickthrough” or “referral fee,” which means each time a consumer clicks on specific vendors, the price comparison site makes a small commission, in a way like a traditional phone book used to.
In the past few years this service has been supplemented by other services and more advanced crawl services which automatically checks companies’ websites for prices rather than relying on the site for artificially fixed prices.
How the Local Industry Fairs
The price comparison website industry in Iran is a relatively new phenomenon with local web entrepreneurs only starting out in this industry in the past three years.
Currently sites such as Emalls.ir, Gheymatyab.com, kalalook.com, sarfejoo.com and sefr.ir are the most sites for checking electronics and home appliances prices around the country. However they are not yet a widely used phenomenon in their target demographic. When asking around the Financial Tribune office, many in the office were not aware of the sites to begin with. This poses many questions about their overall viability if after this long Iranian consumers are still unaware.
Prior to this the online shopping industry didn’t really get going until high profile sites like Digikala and Chare.ir began to compete with traditionally independent retailers throughout the country around 2011. However, unlike the West, online shopping is restricted by a number of different factors slowing the industry down.
Firstly, unlike the West, online shopping in Iran is still a local affair, even large companies like Digikala are geographically restricted and their prices will ultimately differ when people from different cities purchase, say a phone or a camera.
Another factor skewing the industry is the lack of online payments. One online entrepreneur told the Tribune, “We have a serious problem with taking payments. Unfortunately, the banking system still isn’t set up to deal with online transactions, and some consumers are hesitant to deal with such methods.”
These issues also have a knock on effect to the price comparison sites within Iran. For example when a person searches for a Dell laptop and they live in Shiraz, the cheapest laptop for sale happens to be listed on a website based in Yazd.
The customer calls the company to order a laptop and is told it will cost X amount extra due to shipping costs; thus, negating the saving made. When the customer continues to search, he would find that the cheapest website in Shiraz is 20 percent more expensive than Yazd.
In this situation the customer uses the price comparison websites as a general price guide before shopping for discounts in many bazaars and stores around the country; thus making the price comparison site less viable as a business in the long term.
A research project conducted at Warwick University suggests price comparison websites impose two opposing forces on the markets in which they operate. On the one hand, they increase competition between firms, which pushes prices down; but on the other, comparison websites make substantial profit, which they glean in a large part from fees charged to firms for referring customers to them.
There is another issue when it comes to the price comparison industry, one which has only just become apparent to researchers in the West currently. In some well developed market, because of the power of some price comparison markets in the United Kingdom, for instance, have pushed retailers to lower their prices and conversely helped the price comparison website increase their profit which would ultimately have a knock effect where the consumer loses out.
Would this happen in the Iranian online comparison market? Right now the consumer still has the upper hand when it comes to the power of price comparison websites. The overall benefit to the Iranian consumer still outweighs the downsides of using these sites. Also they are still likely to get a better deal than shopping at traditional shopping centers where prices are at least 10 percent higher.
