The heyday of low prices is over. dot-coms are jacking up shipping charges, cutting back discount offers, and flat-out raising prices. We're not talking about diamonds and Audis. E-tailers across the board are dismissing the low-price strategy as a failure.
Surprisingly, shoppers haven't been scared off by the increases, nor have they taken their business elsewhere on the Web. "We did a study on customer loyalty and found that highly price-sensitive customers tend not to be loyal," says Sean O'Neill, an analyst with e-commerce consultants Mainspring. "Although a number of customers are shopping for lower prices, the most loyal are the ones that are looking for convenience and depth and breadth of product offering."
A great example is Books.com, a discount bookseller that underpriced Amazon.com in more than 99 percent of its product offerings before being acquired by Barnes & Noble. Regardless, Amazon.com commanded 80 percent of the market. "E-tailers like Amazon.com have established such a brand name for themselves by providing great fulfillment, ease of ordering, and general customer service that customers do remain loyal. Thus it's enabled e-tailers to charge higher prices based on that confidence level," says O'Neill.
Says Amazon.com spokesperson Patty Smith, "A lot of companies are discovering that they can't sustain the lowest-price business model because they're just getting customers interested in the lowest possible price. Those customers are going to be very fickle."
A Drugstore.com spokesman says his company had the same experience. Since raising shipping prices in the spring of 2000, the company hasn't seen any fallout. "We basically had no reaction from consumers, and believe me, they watch those kinds of things very closely," says Mike Concannon, vice president of merchandising.
