• In theory, price comparison websites offer a great service: they help consumers compare prices for identical products.
  • But in reality, they are paid by a small selection of stores to display only their products.
  • At best they are a reasonable starting point for the online bargain hunter.

Price comparison websites allow users to easily compare the prices of identical products from multiple stores.

Their pitch to consumers is compelling: you get to compare thousands of products from multiple stores on a single website. But the reality of these sites are seldom as grand as they claim.

Price comparison websites cover a variety of industries including travel, insurance, and general products.

The most established product price comparison website in South Africa is PriceCheck, founded in 2006. According to the website, it is Africa’s largest “product and financial services platform”. This does not include Google’s price comparison offering, which launched in early 2017.

In recent years smaller players have also launched on the local market, including Kompare and ShopMania.

In theory, price comparison websites offer a great service. Budget-conscious shoppers can find the best store, selling the product they want, at the lowest prices.

But many consumers are not aware that these product price comparison sites are not impartial sources of information.

Shops are the customers

Most price comparison websites make money by generating leads for online stores. In doing so, their customers are in fact the individual stores, not the consumer.

Google Shopping, by way of a disclaimer, makes this clear, perhaps in light of the European Commission’s record-setting €2.4 billion fine against the company for breaching antitrust regulations.

The disclaimer makes little effort to hide the fact that users are essentially browsing an advertising catalogue. It points out that Google is compensated by merchants whose products appear in the search results.

The search giant also highlights that results are manipulated to favour paying merchants. “Payment is one of several factors used to rank these results. By default, ranking on Google Shopping is based on a combination of advertiser bids and relevance, such as your current search terms and your activity.”

PriceCheck is less transparent about its business policies. The site’s About Us page makes no mention of how merchants appear on the site. Instead, it chooses to mention that  PriceCheck is “a platform that allows you to compare millions of products from thousands of stores”.

The 32nd question on PriceCheck’s Frequently Asked Questions page reveals more about its revenue model. “There is absolutely no cost involved in simply listing your products on PriceCheck, you only pay a fee for every click that directs a user to your website,” it reads.

In an interview with Fin24 in 2015, founder Kevin Tucker, who sold the business to Naspers in 2010, and later bought it back, admitted that the PriceCheck had room to grow its revenue from consumers.

In the interview he said they will “…push more leads through the system [to merchants] to make more money from what we currently do.”

Small pool of stores

This price comparison business model presents a problem to end users, particularly in a small online market like South Africa.

According to both PriceCheck and Google’s terms and conditions they only feature those merchants willing to pay for referrals.

Although a website like PriceCheck claims to be a “platform that allows you to compare millions of products from thousands of stores”, the user experience is markedly different.

Online shopping still occupies a small sector of the retail market in South Africa. There are only a handful of online retailers in the country, and an even smaller pool of those willing to pay for referrals from the price comparison website. As such, the end selection available on product comparison sites often features just two or three stores.

For example, a search for flagship cellphones on PriceCheck typically reveals offers from a maximum of four shops. With the exception of Takealot and BidorBuy, many of these stores appear to be small, niche online stores. None of the top search results feature any offers from brick and mortar retailers.

PriceCheck told Business Insider SA that the company’s goal has always been to showcase as many retailers as possible, although there are some who are not featured - many of which are retailers they refer to as the “old guard”. In a statement they said: “While we try and make sure that we can monetise all our listings, we realised this is not always possible and we will still showcase merchants that offer a benefit to our users.”

Responding to a question regarding the featuring of small, unknown retailers, PriceCheck said they offer a platform for “smaller, lesser-funded sellers to compete on a level playing field”. They also run a “Trusted Shop” programme for stores that meet their “trust criteria”.

The Kompare website fared even worse. A search for a similar bracket of cellphone turned up options from three stores, and no leading retailers.

Other items, such as this Canon digital camera, revealed offers from a greater number of stores, including the likes of better known businesses like Takealot, Loot, and Makro. In cases like these, the service is more compelling. Kompare had no products listed under its photography category.

What you need to know:

With a business model that drives more leads to featured online stores, rather than to showcase as many deals from as many of the country’s stores as possible, price comparison sites in South Africa will remain unreliable.

At best, they can be considered a reasonable starting point for the online bargain hunter. 

Business Insider SA is part of 24.com, which along with Takealot. is in the Naspers stable. 

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