Israel's Me-Bay revolution
Individual and group sales are supplanting public auctions as the way to find cheap deals online.
Many consumers who want to buy home appliances have become accustomed to checking the Zap Web site to do their homework and check prices, even if they don't intend to purchase the product online. During the past year and a half, in addition to the range of prices and wide variety of stores found by searching on zap.co.il, new sales methods have cropped up on the Internet: individual sales and group sales. The final price in these sales is usually lower than what consumers will find anywhere else. Occasionally a product that costs hundreds or thousands of shekels is offered for individual sale "starting from one shekel."
We checked what lies behind individual sales and at what prices the items are really offered. Our investigation indicates that even if individual and group sales are not problem-free, in the final analysis the consumer can save up to thousands of shekels by shopping this way.
The individual sale is an Israeli invention that began at the end of 2007, when a class action suit was filed against the five largest Internet shopping sites in Israel, and against dozens of suppliers who offered their wares for sale on these sites.
The claim was that the sites enabled the suppliers to use fictitious participants in public auctions to increase the winning prices.
"This practice was so widespread that in an examination of the seven main suppliers over three months we discovered that fictitious participants were used in 96 percent of the sales," said Asaf Renzler, one of the lawyers representing the plaintiffs. "Since the lawsuit was submitted, public auctions have almost disappeared and have been replaced by individual sales."
In individual sales the consumer still has to make several price offers, but as opposed to public auctions, there are no other participants competing against him. Instead, many times he must bid without knowing a preset minimum price.
The seller decides in advance on the minimum price, and unless buyer's offers cross that threshold, the system will not approve the purchase.
The interesting question concerns the seller's target price and whether it is low enough to make it worthwhile to participate in the game. In most cases the answer is yes.
For example, a Bosch dishwasher whose price on Zap ranges from NIS 3,500 to NIS 4,190 is available by individual sale on the Olsale Web site for NIS 3,450; a set of Russell Hobbs grinders, whose starting price on Zap is NIS 299, is sold through individual sale at about NIS 230; and a Siemens washing machine, whose price on Zap ranges from NIS 2,640 to NIS 3,870, costs NIS 2,590 through individual sale on Walla!Shops.
It should be noted that the low prices presented on Zap are for the most part significantly lower than the prices in the physical chain stores. The large shopping sites, such as Walla! Shops, P1000 and GetIt, declare that the target price in most of the individual sales is up to 20 percent lower than the lowest prices on Zap.
The individual sales are usually run by the large sites, which provide credibility that small and unknown stores sometimes do not provide.
"In effect, it's as though there were a curtain in the supermarket behind which you can buy items at a cheaper price than on the shelf," said Eitan Singer, the CEO of Zap.
Eran Fishman, the CEO of WiseBuy, which also offers comparisons of prices among stores, agrees. "A consumer who doesn't get rattled and doesn't make high offers in the individual sales almost always comes out ahead."
Eli Siman-Tov owner of Pompa, one of the stores represented on Zap, says importers are looking to keep prices close to what's found in physical shops.
"When a wayward store reduces prices it gets reprimanded by the importer, who wants to protect the price of his product in the market place in general and in the retail stores in particular."
Individual sales began in order to enable an especially low price without everyone knowing about it. Ironically, not only the stores use this sales method, but so do the importers themselves, who sell directly to the consumer at rock-bottom prices via various shopping sites.
Although the consumer usually comes out ahead, there are some who claim that the system is problematic.
"In terms of marketing, there's something fishy about it," said attorney Einat Bracha, the vice president of Emun Hatzibur, the leading Israeli consumer rights organization. "The fact that in order to participate in an individual sale you have to provide all the customer's particulars, including his credit card number and phone number, is problematic in terms of privacy." Most of the time when the customer does not win in a sale, he can expect to receive a phone call from the site's customer service hot line, trying to convince him to buy anyway.
Fishman recommends buying via individual sales from the large and well known sites. He says that "today every small and anonymous store can use the platform of individual sales in order to gather information about consumers and to make marketing calls."
Another relatively new sales method is group sales where, as opposed to individual sales, the price is stated. For the most part these are relatively nice prices, but it is still a good idea to compare and to pay attention to the fact that the name can be misleading.
"The original idea of group sales was that the price goes down on condition that a group gets together and purchases a certain quantity of items," said Sigal Caspi, vice president of marketing and trade on Walla! Shops. "But today the word group is of no significance, and every request to buy is accepted and handled."
Some of the sites mention how many items remain until the end of the group sale, but Caspi says that has no connection to the price.
Just as individual sales are used by the importers and the stores to conceal the low price, the same thing sometimes happens in group sales. Because the price there is stated, it happens mainly in group sales that combine two items.
For example, in a group sale on the P1000 site one can purchase a set of Onkyo receivers with a pair of Polk Audio loudspeakers for NIS 5,390, whereas if you buy the two items separately from the cheap stores on Zap, the price will be about NIS 6,000.
As a result of the class action suit, most of the sites now prefer to focus on individual sales. But public auctions still take place occasionally, and there is also a risk that the supplier will use fictitious players who will raise the price.
Renzler says that in the wake of complaints received recently, they discovered two suppliers who used inside men to control public auctions on the Olsale site. Olsale said in response that it would stop the activity of the two suppliers in public auctions held on its site.
"There's nothing wrong with public auctions," said Renzler, "but the sites are responsible for making sure the suppliers don't interfere in the sale, and they can keep track of that. In rare instances it's discovered by the consumers themselves."