Wild Power Swings From Buyer to Seller—And Back
Historically, trade began with small-scale, relatively inefficient markets (think of your local market, but thousands of years ago), where buyers and sellers engaged in personal one-on-one negotiations with limited selection, limited trading partners and often limited trading times.
As seller scale and supply access grew, control shifted to sellers. Trade became more efficient but less personal. Selection and prices—while often better from scale—were set by sellers, and consumers were made to take what was offered (think Walmart).
E-Commerce: So Efficient It’s Scary
Then the internet came along, and arguably, at least initially, control shifted power back to consumers. Selection became unlimited. Shopping was 24 hours a day. And importantly for both buyer and seller, comparison shopping could now happen in a matter of seconds. A whopping 92% of people now shop online, but a seller can pay for an ad to lure you to their site, pay for content and an experience to delight you, and then lose you in the click of a button to a site selling for $1 less.
Jeff Bezos’ Amazon has dealt with this by outscaling everyone else, and now 66% to 82% (depending on who you talk to) of consumers searching for a new product start there. In some ways, that’s remarkably efficient.
But what if a smaller (SMB) seller has a better deal (price, service, etc.) to offer you? Amazon can suffocate them with ads and drive them out of business. Further, you may not want Amazon as your only choice. To make a long story short, ultimately the most efficient market in history could become dangerously inefficient again.
Others companies have tried to help consumers find the lowest available prices through the use of browser extensions like Honey. The company’s free browser plug-in and mobile app automatically looks at the items in a consumer’s cart and then combs the web for coupons. When it finds the code that will save the most, it uploads it to the website the consumer is shopping on to ensure the best deal possible at checkout.
“Our company mission has always been relatively clear-cut,” Honey COO Glen Allison explained in a released statement last year, “to level the economic playing field by empowering customers and retailers alike with the ability to make financial decisions more efficiently.”
Negotiation Restores Balance to the Force (of the Free Market)
While power and control have been swinging wildly, two things have remained constant: buyers have a primal desire to save money (and increasingly, time), and sellers have to grapple with competition (and the respective risk of losing customers and margin).
Negotiation addresses both needs. Since 69% of online shoppers who request a discount get one (versus 59% offline), negotiation grants both sides a valuable means to establish the perfect discount—a win-win for all. Buyers win what they want at the price they want, and sellers win the sale, and better yet, a potential customer relationship.
Negotiation Is the Oldest Idea in Trade—For a Reason
Negotiation works. Not only does it provide both sides of a transaction with some control, but it initiates a valuable dialogue between buyer and seller. In addition to efficiently finding an agreeable price that benefits both sides, through this dialogue, a buyer can establish a level of trust about the product and the seller. And a seller can engage with a customer they might have ultimately lost in an instant to comparison shopping. That is huge.
Negotiation brings the kind of benefits that can only occur when two parties actually engage, creating a win-win dynamic that has largely been lost in the early phases of e-commerce.
But E-Commerce Negotiation Needs an Upgrade
Some people love to negotiate, while some have PTSD from their experience on a used car lot. So, it has to be simple, fast, and in some cases, private.
Why private, you ask?
There are some instances in which sellers are constrained by product manufacturers with rules like Minimum Advertised Pricing (MAP). “Minimum advertised pricing is what manufacturers put in place to preserve their brand, and it basically sets a minimum price for which all retailers can advertise as their sale price” PriceWaiter co-founder and COO Andrew Scarbrough explained to PYMNTS, a B2B payments industry platform.
A private negotiation makes MAP moot by allowing the buyer to save more—while both the seller and manufacturer can sell more—without eroding price or brand equity.
As for “simple and fast,” this is where modern technology comes back in to save the day. We’ve seen technology-assisted negotiation boost seller conversion rates by 25% and save consumers on average 14% more than posted prices, resulting in millions of dollars saved and hundreds of thousands of transactions which, in the opinion of sellers, would not have happened without the ability to engage the shopper in a negotiation.
All Roads Lead to…
Negotiation. If its resurgence doesn’t yet feel like a trend yet, it will. Many other trends, some reaching their endpoints, point to it.
Sears, J.C. Penney, Macy’s and countless offline and online retailers have suffered from the shifting and seemingly impossible-to-navigate dynamics of discount pricing. What dictates the right discount for a retailer? How do they know if a “clearance” price is leaving money on the table, or is right outside a buyer’s budget?
What can help buyers and sellers re-engage in a simple, quick, trust-building dialogue that efficiently leads to a win-win transaction? What can lead buyers and sellers to the perfect price?
Negotiation—that’s what. And it’s coming back.