The Impact of Shopbots on Electronic Markets

Internet shopbots are automated tools that allow customers to easily search for prices and product characteristics from online retailers. Some market observers have predicted that shopbots will benefit consumers at the expense of retailers. In this view, shopbots will radically reduce consumer search costs, reduce retailer opportunities to differentiate their products, and as a result will drive retailer margins toward zero. However, a review of the literature suggests that, while shopbots may place pressure on retailer margins in some circumstances, retailers retain numerous opportunities to differentiate their products, leverage brand names, set strategic prices, and reduce the effectiveness of consumer search at shopbots. The paper closes by identifying significant questions for future research.