Nobody wants a price war of e-shops, writes David Filippov from Skip Pay

Nobody wants a price war of e-shops, writes David Filippov from Skip Pay
Nobody wants a price war of e-shops, writes David Filippov from Skip Pay

Comment from David Filippov: The last few weeks are left before the start of the Christmas season, but the gloves have long been on, they just don’t talk about it openly. And there will be no price to fight for, basically no one wants that. So the battle will be fought on the level of customer service and quality. Moreover, those who have found money for innovation will successfully break away from the peloton.

Fortunately, Czech e-commerce is fair, and from my point of view, its long-term ferocity lies primarily in the ability with which it pursues innovation. “Catting” always took place here either in campaigns – and so fun and creatively that it didn’t offend anyone too much, as a technological overload, or at the level of individual managers, who often said things to each other’s faces as part of an industry debate.

But these times don’t have to last forever – and there are several reasons for that. First of all, the cake, from which everyone had been happily nibbling until now, stopped rising. We could still cope with that. But it is now shrinking, the e-commerce market has been declining for seven quarters in a row. And in addition, other players who have not had to be counted on until now are starting to take a bite out of it in a big way. Players who provoke simply by playing by their own rules, for example by putting price first and customer experience only second.

Secondly – ever since the coronavirus pandemic, the gap between e-shops that “suffer” and those that go with the flow has been widening. During the economic boom, you often don’t know the difference between them. The breaking of bread comes only at the moment when you need to survive on little. And that moment is probably happening right now.

Those who spent like the upper middle class, today behave like the middle class, the middle class like the lower class.

Why is it not possible to rely on the fact that everything will go on as usual? It’s not just a shrinking market. Much more crucial is that the customer has changed and e-shops will not recognize theirs this year. Czechs under economic pressure changed their behavior perhaps the most in the last decade. Almost half of us have “slumped” down a category in our shopping behavior. In other words, those who used to spend like the upper middle class now behave like the middle class, the middle class like the lower middle class, and so on.

From my point of view, the customer shift is basically simple. One group wants a good price and doesn’t care if they jump to an e-shop, marketplace or brick-and-mortar store for it. You can tighten it up for club offers, points, cashback or promos, but don’t expect it to be loyal per se. When we asked e-shop customers at the end of the holiday season, we found that 64 percent of them had stopped shopping at one of the popular e-shops in the last six months.

Photo: Skip Pay

David Filippov, Head of Sales at Skip Pay

“Only” 36 percent of those surveyed remain exclusively loyal, which honestly still seems like a high number to me. Rather, it is a clear proof of how strong and honestly worked credit Czech e-commerce can now draw on. But – and this is worse – it also shows how easily he can “run into” him.

You will not artificially reduce the quality

E-shops have invested so much in the high quality of services that now they cannot afford to “throw back” as part of the savings. You may be able to change express delivery to delivery in three days, but you cannot save money by downgrading processes, i.e. reducing efficiency, precision and quality, increasing reaction time or worsening returns, for logical reasons. At the same time, a high standard has its operating price, and this logically needs to be covered.

There is only one way out of this paradox. Build your marketing this year precisely on these benefits. And look for more space in innovation. And since the majority of Czech customers take them for granted, it probably won’t be possible without defining yourself against the (clever, but still slightly less) competition. And according to what will these benefits be chosen? You just need to know what has to work to make the customer happy. That is, to look at it ideally from the other side – what you can do to dial it in at the moment.

Every year at Skip Pay, we monitor the so-called “reputational risk” – we ask people why they would give an e-shop a low rating if they “get really angry”. The TOP 5 list is full of “tastes” that would probably annoy everyone: Holding money for a long time for a paid but subsequently canceled order. Rejected claim. Significant delay in delivery of paid order without notification. Selling goods that someone probably already had at home. And hidden fees from 20 crowns upwards, which the e-shop will introduce us to in the basket. Skokan (by one whole star) is, by the way, “overpriced e-shop” – i.e. when I find identical goods significantly cheaper elsewhere.

After all, we already see today that e-shops will target precisely these weaknesses. One of the big cases that swept through Czech e-commerce revolved around the mentioned complaints (Alza offered customers to handle complaints about goods bought on Malla and CZC, but had to stop because of the court – note. ed.). Similar frictions are likely to increase. Because this is where the dividing line between e-shops with quality services, in which they have invested for the last decade, and marketplaces, whose main proposition is price, leads.

E-shops then fortify and defend their positions even more for logical reasons. And they don’t stop innovating. For example, they look for an answer to the Czechs’ greater concern for their own money in deferred payment. A year ago, I would have considered it impossible that one of the largest e-shops would want to promote us as a key benefit. They step into simpler returns or invent ways to inform the customer as transparently as possible about the quality and reliability of the purchased goods.

No one wants a real fight, but sobering up can be

At the same time, it is interesting to see how the mood among managers changes. The latest numbers on the market’s performance have probably put even the most die-hard back into tuning into the Christmas proposition. And it’s an open secret that prices will be pushed to the last minute this year. Nevertheless, cautious optimism still reigns throughout e-commerce, and I hear from all sides: “It will work out somehow”.

But this is exactly the moment when I recommend to sharpen your skills. In the peloton, which is currently moving at its usual pace, the fighters who will “take it this year” can be preparing right now. They studied the customer well. They clarified their proposition this year. And unlike the others, they innovated. When they lean into all these preparatory steps in the campaign, the competition will just stare open-mouthed.

Nobody really wants a price war between Czech e-shops. We have a common enemy here. But with the “quality war”, that’s where the gloves are already being put on, I think. I dare say that this year the “guy nudges” can turn into a real fight. However, winning it is not as difficult as it might seem – often it is enough to do something while others stand and rely on collective success like last year.

How customers currently rate the missteps of e-shops

* Scale 1 to 5 stars

1.09: The e-shop does not refund money for canceled orders for more than 48 hours

1.21: The e-shop rejects the complaint, which I consider justified

1.52: The e-shop is unexpectedly delayed with a paid order by more than 48 hours

1.72: The e-shop will send goods already unpacked and apparently returned by someone

1.93: The e-shop hides extra fees (20 crowns and more), which they present to me only in the basket

2.31: The e-shop has significantly more expensive identical goods than the competition (down by 1.09 stars)

2.92: The e-shop does not have the payment method I want

3.11: The e-shop is unable to continuously inform me about the status of the order

3.12: The e-shop does not respond to my important question for more than 48 hours

3.36: The e-shop is delayed with an unpaid order for more than 48 hours

3.42: The e-shop does not have the carrier I want, I had to choose a non-preferred one

3.51: The e-shop has complicated returns

3.59: The e-shop does not deliver until the second day after the order, but later

3.74: The e-shop does not have the promised product in stock

Source: Skip Pay

The article is in Czech

Tags: price war eshops writes David Filippov Skip Pay


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