Small Business

How the Hunt for Cheap Prices Is Hurting Retail Loyalty

Profiting From Big Boom in E-Commerce
Profiting From Big Boom in E-Commerce

With more consumers focused on sleuthing through the Internet to find the best online deals, the e-commerce space is exploding and morphing—often at the expense of traditional retailers.

More consumers are willing to let the cheapest prices drive their purchasing decisions, and abandoning any loyalty they may have to particular shops. Retailers, in turn, are forced to lower their prices to compete. And that's a business strategy destined for a short self life.

"There will be a lot less retailers on this planet in another decade than there is today," said Michael Rubin, chief executive of Kynetic, which owns three websites—Fanatics, Rue La La and ShopRunner—in the consumer Internet space. With so many tools available online, it's much easier to track the best prices. "Many retailers will go bankrupt," said Rubin on CNBC's "Squawk Box" Thursday.

Santa's High-Tech Helper
Startup Alerts You to Sales on Your Wish List

"Amazon will capture more share. Online will capture more share," Rubin said. "If you're selling third-party merchandise, you're in a battle to lose," he said.

(Read more: Unique Holiday Gift Ideas for Everyone on Your List)

Startup Hukkster: Santa's High-Tech Helper

In the pursuit of the lowest prices, a new social media app from startup Hukkster allows users to track the best prices for their favorite products. You're alerted to, for example, any coupon codes or promotions. "Anytime the price drops, we let you know about it," said Erica Bell, a Hukkster co-founder. She made the comments on CNBC's "Squawk Box" with co-founder Katie Finnegan.

The duo met while working at retailer J. Crew. (Read more: J. Crew & the Man Who Dressed America)

Some retailers already see the value of spreading deals through smartphones and technology. Select retailers are courting Hukkster.

"Right now we actually search the [retailers'] sites. But we're really excited to partner with retailers in the new year," Finnegan said. "They've started proactively reaching out to us because they find it as a way to actually get their interested parties' attention. Right now no one is opening their [deal] emails."

But not all retailers are devoted to e-commerce exclusively. Some e-commerce sites such as Warby Parker and Etsy are branching into brick-and-mortar locations. (Read more: Eyewear Maker Warby Parker on Growth, Innovation)

"I'm not a big believer in that" trend, said Rubin of Kynetic. His Fanatics website, for example, sells licensed sports merchandise. Rougly 43 percent of adults have tried a product in a store and then chosen to buy it online, according to a Harris Interactive poll fielded between Nov. 27 and Nov. 29.

—'s Heesun Wee with reporting by Matthew Belvedere