In the mad dash for Sony PlayStation 2, Internet shoppers discover a web-based tool that could transform e-commerce.
During Christmas 2000, everybody and his brother lusted after the hard-to-get Sony PlayStation 2. According to NBC News, the throngs even included Iraqi groups linked to President Saddam Hussein. These determined shoppers apparently bought 1,400 PlayStation 2 units around Detroit and shipped them to the Iraqi military, which covets the machine's extremely powerful microprocessor.
By getting their hands on PS2, the Iraqi loyalists succeeded where thousands of American shoppers failed. Demand was so strong that most retailers offered only empty shelves and the promise that more units might be available in March.
In cyberspace, however, the story was different. While anxious parents paid up to $1,000 for the game systems on auction sites, savvier consumers used special shopping programs to snap them up from Internet retailers seconds after they became available. The New York Times reported that one college student used these programs - "bots" in tech parlance - to buy and resell 14 PlayStations at an average profit of $250 each.
Bots scoured e-tail sites throughout the holidays, simultaneously checking web addresses every 30 seconds or so for available PlayStations. After finding one, the bots sent users e-mails, paged their cell phones, or sounded buzzers on their PCs. Some web retailers, such as Kmart's BlueLight.com, struggled to deal with bot-driven traffic. "We saw on the order of 80,000 hits in a few minutes," says Dave Karraker, spokesman for San Francisco-based BlueLight. "We knew those were bots looking for PlayStation 2."
Bigger than PS2?
The intense demand for PlayStation 2 dominated holiday headlines. But part of that story largely went unnoticed: Although shopping programs appeared years ago, holiday demand for PS2 prompted many consumers to learn about and use shopping bots for the first time. "People who never heard of bots all of a sudden became interested in them," notes Karraker.
Could shopping bots become the dominant online consumer tool? And if so, how might this affect retail? Some analysts say widespread use of such programs could lead to more competitive pricing and heavier overall e-tail traffic. Others say bots could boost business for specialized niche players and hurt the e-commerce ventures of major brick-and-mortar retailers.
"PlayStation 2 might have gotten people to try bots, but I think the bots themselves are a much bigger story," says Barry Parr, a director of e-commerce research with Framingham, Mass.-based IDC, a technology market research firm. "It's going to take time for bot shopping to take off. But like anything else on the Net, once it takes off it's going to be an overnight phenomenon."
Steven Koenig, senior analyst with Reston, Va.-based PC Data Inc., notes that shopping programs offer greater value and convenience than conventional search engines. "The search engines right now are helpful, but they are labor-intensive," Koenig says. "It can take forever to get online and hunt around and do all of these searches. Shopping bots will do it all for you."
The future of e-tail?
Amid holiday reports of people vainly surfing the web for up to 30 hours in a row, programmers developed and actively promoted a variety of bots designed specifically to hunt down PlayStation 2. But millions of consumers have begun using more general shopping bots such as PriceSCAN, Roboshopper and Nextag to find all kinds of products.
Some sites, such as Shopping. Yahoo or Shop@AOL, conduct limited searches among paying retail partners. Others scour the entire web, sorting search results according to criteria set by users. One of the most popular bots, mySimon.com, searches among more than 2,600 e-tail sites. (MySimon is not affiliated with Indianapolis-based Simon Property Group, which recently filed suit in an attempt to force mySimon to change its name. MySimon officials declined comment on the matter, citing the pending litigation.)
MySimon spokesman Brian Rolfe argues that Net shoppers will drop conventional searches in favor of shopping bots. "The Internet is an inherently linear place. You have to go from one site to another to another," Rolfe says. "If you have the option of searching all sites at once, why not take advantage of that?"
Nielsen/NetRatings recently reported that about 1 million people visit mySimon.com each month. "In the first quarter, our traffic went through the roof," Rolfe notes. Likewise, adds Parr of IDC, Microsoft Network's shopping site doubled its holiday sales in 2000.
But Karraker of BlueLight.com remains skeptical, pointing out that most bots let consumers conduct specific searches only. "People still want to browse," he says. "Searching for something on the Internet yourself is like walking down the aisles of your local Kmart."
But Rolfe says bots are adding all kinds of general content. MySimon now lets consumers who have only a vague idea of what they want browse up to 15 general shopping categories. Once they've decided on a product, they can search for it among the 2,600 retailers.
Should retailers prepare?
Whether bots will transform e-commerce is an open question, but experts say retailers should pay attention to the trend. Parr recommends developing deeper relationships with shopping sites and bots. At mySimon, retailers can pay a fee to have their brand and logo presented more prominently. The analyst says fears that shopping bots will radically drive down prices are exaggerated. "Consumers aren't necessarily going to buy from the lowest-price site," Parr explains. "They'll pay a small premium to shop the lowest-price site that seems to be trustworthy."
But don't assume click-and-mortar players will have the upper hand, Parr says. "In a world where you can go to Yahoo Shopping and find anything you want from a specialist, does it make sense to go to Wal-Mart.com, where the selection for each category is more limited?"
Koenig of PC Data says the growth of bots will challenge online retailers. "They'll have to be smarter in pricing, look for ways to add value, and turn up their marketing a notch." He urges e-tailers to make sure their sites can handle technical challenges posed by bots. Some merchants have blocked bots from their sites. "But combating these things is like putting up barricades outside your retail store," Koenig explains. "These are basically agents for people who are looking to make purchases."