New Optimism for Online Retail Marketing Opportunities

This article by Hollis originally appeared in ClickZ on September 25, 2007.

Something has shifted in online retail marketing since I last attended an industry event earlier this year. Perhaps it’s the impending, all-important holiday shopping season, but at the Shop.org Annual Summit last week in Las Vegas, the attitude toward multifaceted online marketing was far more optimistic than it had been in January.

Retailers seemed much keener to embrace more marketing tactics than just PPC, like online advertising and social media marketing, particularly with respect to leveraging product reviews. Check out Buy.com’s Garage Sale Facebook application, which allows users to sell merchandise directly from their profile pages. Solution providers have also stepped up their game, providing new tool sets that allow retailers to more easily pinpoint and acquire new customers.

Five e-Commerce Truths

On day two of the conference, Forrester senior analyst Sucharita Mulpuru delivered a terrific reality check about e-commerce’s future. Unlike some of her peers who think e-commerce has already peaked since hitting the $220 billion mark in 2006, Mulpuru estimates that e-commerce could reach $350 billion by at least 2011. She sees this growth coming, however, not from the implementation of “whiz-bang technologies” but from online retailers doing a better job of mastering the basics and making the online shopping experience as easy as the offline one.

Mulpuru listed her “five truths about e-commerce”:

• Online shopping still isn’t easy. Sites don’t have 100 percent up time, and retailers, in their quest to improve their sites, have actually introduced too much friction.
• Online marketing is currently inefficient. Based on the top 100 e-commerce retailers, paid search dominates all marketing tactics with 41 percent of share (compared to other tactics, like display advertising, e-mail marketing, shopping comparison engines, and portal deals), primarily because retailers consider it an inexpensive marketing proposition. Mulpuru, however, criticized the percentage of paid search spent on branded terms (29 percent), theorizing that “branded terms don’t drive [sales] incrementally.” If you back out branded terms from your marketing acquisition costs, paid search becomes the third most expensive online tactic, behind display and e-mail list rental.
• We watch customers instead of listening to them. Everyone is using analytics, but few online retailers conduct surveys, focus groups, or polls, and of those who do, even fewer know what to do with this data. Mulpuru says most multichannel retailers are more likely to take cues from competitors instead of from their customers, a backward approach.
• Online retailers are not really good at managing their assortments.
• Retailers still have not truly embraced multiple channels. Online retail is growing eight times faster than the rest of the retail industry, but cross-channel marketing is underutilized. According to Mulpuru, offline should be the number one driver of online sales, but retailers continue to silo Web sales so the Web division has to incur continual costs to drive site traffic.

Interestingly, the day before Mulpuru’s talk, I spoke to a top electronics retailer whose philosophy seems to reinforce Mulpuru’s last point. He saw online’s role as strictly another “marketing tool to drive in-store sales.”

Mulpuru saw solutions like nailing the basics of product detail pages, using recommendation engines, and implementing RSS and readily available feedback links as retention tools to improve online sales. She says Internet pure-plays generally do everything better because they’re thinking ahead instead of trying to play “match the competition.”

New Ad Solutions

I was heartened to see new advertising solutions showcased at the event. For instance, many companies have jumped on the behavioral targeting bandwagon. Online retailers can now turn to aCerno, which targets ads by the user’s past e-commerce shopping behavior. iPost, an e-mail service provider, has launched Autotarget, which uses historical e-mail behavior to define customer personas and target future messages accordingly.

Sellpoint, a company that has created a syndication network of retailing sites, can deliver rich, informative product-specific content sold by minutes of viewing time. MyCoupons has relaunched with a cost-per-redemption model ($3.00 per) and a comparison shopping engine based on coupon offers, accepting free data feeds from merchants for inclusion.

Speaking of shopping engines, data feed management company Mercant has negotiated to be a single point of buy for over 40 shopping engines, which can help an agency buy immensely.

Mobile commerce attracted much interest but is still considered experimental. Still, let’s be grateful for the broadening open-mindedness of online retailers. It’ll make our job as strategists far more exciting.

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