Reverse auction site divides pundits

TOM PULLAR-STRECKER
Last updated 13:39 29/10/2012

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E-commerce experts are divided on whether New Zealand's latest online trading venture - a "reverse bidding" site designed to help people get sharp deals on new goods such as electronics and whiteware - could prove a winner.

Pricemaker.co.nz has been launched by former Westpac foreign exchange trading head Erin Walshe, with two other fulltime staff, and is based at the BizDojo technology incubator in Wellington.

The idea is that consumers can upload details about the type of product they want to buy to the website and participating retailers then compete to supply the product.

Retailers can view each other's offers and undercut them if they want by repeatedly lowering their price or adding "freebies" such as extended warranties or vouchers. Consumers do not need to accept the lowest-priced, or indeed any, bid.

Walshe said the concept was not original but he believed its timing could be right.

Electronics and homeware retailers 100% Appliances and Magness Benrow have agreed to trial the service, which is free to consumers. Pricemaker is understood to have also had discussions with Farmers.

The service would probably remain free to retailers for about six months, he said. After that, they would pay a fee - yet to be decided - for the right to bid in specific product categories, which are currently limited to televisions and kitchen and laundry whiteware.

Walshe said he recognised retailers might be reluctant to support Pricemaker if the bidding process always became "a race to the bottom". But retailers could throw in stock they had been unable to move, offer different, better products than the consumer had originally specified or offer other sweeteners.

"We have tried to encourage price and non-price competition."

Canterbury University marketing lecturer Ekant Veer believed that while it was "early days", the business model could appeal to retailers that did not have effective online sales channels of their own and said it made more sense than tackling TradeMe head on.

"This is offering an e-commerce model to those who don't have the ability or inclination to put their products online."

There was "a real gap" in that area, he said. "You have got the 'daily deals' sites and the peer-to-peer trading people like TradeMe, and 'price comparison' websites but there is no-one who is translating offline sales to online sites that I can think of. I can see how this is an opening into the market that could be valuable to smaller stores."

Veer believed the concept could be a convenience for consumers. "The old Yellow Pages slogan was 'let your fingers do the walking'. This looks like 'let your mouse do the walking'."

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However, e-commerce expert Stefan Korn was deeply sceptical.

"What most people fail to see, I think, is the time that is involved in managing all of these channels. Retailers are busy enough as it is and along comes another channel that someone needs to have a look at and update on a regular basis," he said.

"[Retailers] run promotions all the time which means they have to be careful that they are not compromising some offline promotion with whatever they are doing online. It just comes down to 'how many hours do you have in the day to manage all this stuff?'. Unless you can get to the point where, say, 15 per cent of revenue for a particular retailer comes from that channel, it just doesn't make sense."

The "chicken and egg" problem of attracting buyers and sellers would make that a formidable task, Korn said. "[Telecom's] Ferrit showed $15 million in the bank won't help you either.

"I am surprised people keep launching these things in New Zealand. I don't understand how these guys do their business plans. The cost in most cases of acquiring enough customers would far outstrip whatever they would make from it, which means even if they are well-funded it is a matter time before funding runs out.

"If you are in the United States and you have got good financial backing, a new interesting model and good contacts in the industry so the retailers jump on board, you might make it work. But in New Zealand ... nah."

- © Fairfax NZ News

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