The new concept of online shopping is the use of Price Comparison sites. Price comparison sites cover a wide of consumer items, but well-known sites tend to specialize in financial products such as insurance, credit cards, personal loans and gas and electricity tariffs.
Billions of people across the globe use price comparison websites before they actually decide to buy a product; because they’re quick, convenient and save us a lot of time shopping around. But not many of us really know that we’re paying a huge sum a year in commission for this privilege.
Price comparison sites give the impression that they scour the whole market to find you the cheapest ‘best buy’ products. But that often isn’t the case. Most of us rely on comparison sites to find a better deal, but they can be confusing.
Confusing Facts you MUST know
Consumers using these sites assume they will be presented with the cheapest deals. In reality, however, the firms put up hurdles which make it more difficult to find cheap deals from small power firms that do not pay commission.
Price comparison websites have been accused of keeping customers in the dark about the cheapest energy deals. Householders are pushed away from rivals who are offering better value options
They are said to be pushing householders towards big energy firms that pay the sites millions of pounds in commission and screening out cheaper rivals that do not.
Many families are unaware the switching websites get a commission – generally £50-£70 – for each customer who moves their account.
Comparison sites can screen out cheaper deals by asking if you are interested in switching to a new energy supplier ‘today’. If you click ‘Yes’, it will flag up all those deals and tariffs which the site can connect you to. The website will generally be paid a commission – typically £50-£70 – by the energy firm you switch to.
If you click ‘No’ you will also be given a longer list of companies that could be cheaper, but with no direct link to their websites. Often these cheaper tariffs come from companies that do not pay commission to comparison sites.
The comparison sites do provide a link to explain how they make their money, but they talk about a ‘small commission’ rather than stating the exact figure.
How do they make money?
Comparison websites make their money in a number of ways.
- The simplest and most obvious is from advertising on the website.
- A second income stream comes from sponsored listings, whereby companies pay to have their products appear at the top of search results.
- The third revenue stream comes from click- through where the comparison site earns referral commission when a customer clicks through to a company’s website and buys a product.
- The sites also make a lot of money in commission from the companies that list products on their websites.
A recent survey found that consumers thought they paid between 5% and 10% in commission when they bought something through a comparison website; but in reality, the average commission is around 24%. If a Price comparison site can convert more people from lookers into buyers, the more income it will earn.
Can the issues be solved?
Is there anything we can do to avoid paying high levels of commission to comparison sites? The obvious answer would be to ‘buy direct’ from the product provider. But in the world of financial products you can actually end up paying more going down this route.
Consumer groups and the industry regulators have been concerned about these tactics and recently, the energy companies themselves have also attacked the way the Price comparison websites skew comparisons.
The Energy and Climate Change Committee, UK has called for compensation to be paid to customers if not given the lowest price on offer.
Price comparison websites should have to pay compensation when they act “like backstreet market traders” and “dupe” customers into switching to energy deals that are not the cheapest on the market, MPs have said.
So the bottom line is: never take a hasty decision, check for the best offer/ deal from other well-known Price comparison sites and then decide.