Sunday, October 19, 2008

Haggling Over Price Not Everyone's Favorite Way to Shop

We have a friend – I’ll call him Richard - who negotiates with everyone on everything. He even once got a car dealer to throw the tie he was wearing into the deal. No joke. For him, it was sport, and he did it in a way that was natural…for him.

No doubt, there are lots of people like Richard who enjoy auctions and haggling over price. Ebay got its start as an auction site, and the idea of the garage sale has fueled the company’s identity from the outset. I have bought and sold a lot of stuff on Ebay – I bought a brand new MacBook on Ebay while standing in the Apple store waiting my turn for service. I bought a Bestey Johnson dress there, and I’ve sold lots of tickets to Giants baseball games there, too.

But I don’t enjoy haggling over price – I find it somewhat degrading, particularly for the seller. And I don’t like online auctions, either. They take too long to play out, and odds are that someone will bid more at the last second, meaning I’ll have to go find and buy the item somewhere else, anyway.

I prefer Ebay’s fixed price feature for both sides of a sale. And apparently I’m not alone. Brad Stone reported in a recent article in the NY Times, on the brewing e-commerce war between Ebay and Amazon. In the article, Ebay’s leadership admits that its unwillingness to embrace the fixed price side of e-commerce is a strategic miss that has contributed to the company’s current difficulties.

That got me thinking about ways retailers can sell more by letting the rest of us in on the price savings that some die-hard negotiators, like Richard, manage to finagle. is an interesting new site that does this by appealing to both people who enjoy haggling, and those who want to buy at a fixed price what has already been negotiated by a fellow shopper. CEO Steve Bell estimates that less than 10% of shoppers will bargain with a supplier, and Shangby provides tools that support the negotiation process including a live video conversation with the manufacturer or merchant facilitated by a Shangby concierge. For the other 90+% of shoppers, the site makes the merchandise available to all comers at the negotiated price and highlights the savings that the price represents.

So, the best-priced merchandise on the site is all stuff that a shopper actually bought, not just stuff that a merchant thought s/he could sell. And all shoppers benefit from the haggling one shopper took the time to do.

When I met with Steve, I asked about scalability. Turns out Brad Stone asked him the same thing as he reported a year ago in the NY Times . The folks at Draper Richards and G-51 saw enough potential to get past that issue, and funded the business.

Shangby’s value proposition seems to me mostly about undercutting Wal-Mart on price. Perhaps because of its focus on price, the site and format shortchange the cultural experience that I believe is possible here. In fact, I first told Steve Bell what I later told – that there was a great opportunity to bring the romance of different cultures to life through the site and to feature more evocatively and less commercially the stories behind the merchants and the merchandise

That said, there is a kernel of an idea here that any e-commerce site, including Ebay, should appreciate.

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