Retail Bonanza Starts Online
Posted on 04.10.2006
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Can you imagine using online advertising to drive people to Sears to buy a wrench? Well, it’s happening today as marketers discover that a large amount of retail traffic comes from the Web.
“The Role of Search in Consumer Buying,” a new study by comScore (sponsored by Google) found that 63 percent of search-related purchases occur in offline retail stores. The results also indicate that 25 percent of searchers purchased an item directly related to their search query — of those buyers, just 37 percent completed their purchase online. The study examined the search behavior of 83 million Americans, conducting over 552 million searches within 11 product categories using one or more of 24 search engines.
What do people buy offline? Just about everything. Over 80 percent of conversions occurred offline in categories like video games, toys & hobbies, consumer electronics and music/movies/videos.
CLICK TO ENLARGE Graph:
Buyer Conversion For Select Product Categories (% of Buyers)
CLICK TO ENLARGE Graph:
Conversion For Select Ecommerce Categories (% of Buyers)
Shop and Compare
Most people don’t buy right away; they like to shop and compare. The study found that over half of online holiday buying activity occurred in subsequent Internet sessions. This shows a strong trend known as latent buying and the importance of search marketing.
True Buyers are Search Driven
The comScore study analyzed the search behavior of 83 million consumers during the 2005 holiday season. Of these, the 8.6 million who subsequently purchased items online were found to be intense users of search engines across all product categories. They performed nearly ten times as many searches as non-buyers.
Search marketing has become a line item in the marketing budget, but it hasn’t always been this way. I remember it being a tough sell back in the days when search represented less than 1 percent of the online advertising budget. Currently, that number is up to 34 percent.
Paid search spending has increased faster than any other online marketing channel. Search marketing revenues in North America totaled $5.75 billion in 2005 and are projected to reach $11 billion in 2010 (SEMPO).
The State of E-commerce
The Department of Commerce estimated total e-commerce sales for 2005 at $86.3 billion, an increase of 24.6 percent over 2004. Total retail sales in 2005 increased 7.2 percent over 2004, with e-commerce sales accounting for 2.3 percent of total sales. E-commerce sales projections from eMarketer predict $139 billion by 2008.
Based on Shop.org and Forrester Research estimates released last May, the four fastest growing online retail categories for 2005 were cosmetics and fragrances; over-the-counter medications and personal care; jewelry and luxury goods; and flowers, gifts and cards. An update to the Shop.org and Forrester Research will be released in May 2006.
Prepare for the Holiday Season
Holiday shoppers start early. The comScore study found that 60 percent of all searchers started their search process before November 15, 2005. The take-away for search advertisers is that holiday-season advertising budgets should be ample and released early enough to cover the aggressive search behavior of serious buyers.
Where do Retailers Rank?
Industry research indicates that, two years in a row (2004 and 2005), most e-commerce sites are not well optimized for organic rankings. OneupWeb’s 2005 study reported that 83 percent of Internet Retailer Magazine’s top 100 websites are not using basic search engine optimization principles to gain high rankings.
What are these basic principles? Your meta tags, site architecture, keywords and content. These are the factors that allow your website to be readily indexed by the search spiders for favorable positioning on the search engine results pages (SERPs).
The OneupWeb study reported that 89 percent of the well-optimized sites were indexed on pages one, two and three in the SERPs for their respective keyword queries, and 52 percent appeared on page one. In contrast, only four percent of the non-optimized sites fared as well.
SEO Vs. Paid Search Conversion
We’ve been talking about SEO for organic listings as a first step, but retailers can improve conversions even more by including paid search in the marketing mix. The advantage of sponsored listings is that they go live almost immediately and you can control costs with bid management. So how does paid search compare to organic listings?
When looking at conversion by campaign goal, MarketingSherpa compared paid search to SEO and found the following:
■ Average of all campaigns: SEO had higher conversion rates (4.2%) than paid search (3.6%)
■ Delayed e-commerce/service purchase campaigns: SEO had higher conversion rates (6.3%) than paid search (4.2%)
■ E-commerce product/service purchase campaigns, SEO had higher conversion rates (4.1%) than paid search (3.8%)
From Oct. - Dec. 2005, the search engine conversion rate at business-to-consumer (B2C) e-commerce websites was 2.3 percent. This was more than twice the conversion rate of banner ads, affiliate marketing links, shopping search engines and other referring links (0.96 percent), as reported by the WebSideStory Index.
However, anecdotal evidence shows that sites using both strategies increase conversion rates because traffic goes up dramatically with links in multiple positions. Users choose to click more frequently on an organic listing when they also see a sponsored listing. But when marketers experiment by removing the paid link, conversions drop precipitously. Put the paid link back, and conversions rise.
So, it seems that by utilizing both strategies, marketers can take a big step in adding to the bottom line.
Conversions from Site Search
Did you know that effective site search is becoming one of the most critical conversion drivers in online commerce?
A study by WebSideStory shows that site search, the ability to search within an individual website, provided a huge boost to e-commerce sites during the 2005 holiday shopping season. Site search helped convert visitors into buyers at nearly three times the rate of average site users.
During the last three months of 2005, the conversion rate for visitors using the search box on a website was 7.54 percent — 2.7 times higher than the conversion rate for average site users (2.79 percent). Site search conversion rates ranged from just under 6 percent in October to over 8 percent in December.
Keyword Bid Management
Keyword bid management enables more effective allocation of your marketing dollars when buying keywords or categories of keywords.
The integration of keyword bid management and Web analytics allows you to track keywords to determine which phrases work best for conversions. You can also determine the monetary value of those keywords, including cost per click, cost per acquisition, cost per initial sale and cost per lead. Analytics helps you manage the bidding process for optimum results.
It can also be fruitful to track misspellings and alternative names found from site search behavior in your Web analytics program. The analysis of visitor traffic from those external search results can reveal which keywords work best for turning prospects into customers. You can then buy only those keyword phrases that result in your targeted ROI or CPA.
The Future of E-commerce
E-commerce has survived 12 years on the Web, evolving considerably over that time. One of its biggest challenges and opportunities is the growing importance of search. With the huge number of purchases following Web searches, search engines like Google want retailers to add additional details online to enhance the search process. This might include continuous structured feeds of data such as SKU listings, daily inventory and hours of operation, which would be fed into public search engines.
Theoretically, this will allow more specific and relevant search results, along with increased e-commerce revenue for cooperating retailers.
For example, a consumer seeking a particular model of vacuum cleaner will see search results for local vendors who carry that model and have it in stock. This will improve the efficiency of in-store pickups. The in-store pickup option is not currently available on all e-commerce sites; however, it could help increase online sales. For this to work, inventories must be kept up to date — no small task.
The pressure will be on technology systems to accurately predict what is and is not in stock, which may require inventory data to be fed to search engines, along with POS (point-of-sale) and RFID (radio frequency identification) item-location information. The POS data could be critical during high volume purchasing periods like the year end holidays.
Such a system could take years to implement. Data sharing is one obstacle, which probably can be overcome with time as more and more retailers buy in. The major problem for retailers is accessing the data and transferring it to the search engines. In most cases, this involves changes in established processes. Nevertheless, e-commerce continues to evolve. And those that evolve along with it will see the best results and thrive in this fast paced environment. ■
About the Author:
Paul J. Bruemmer, Director of Search Marketing at Red Door Interactive, has provided search engine marketing expertise and consulting services to prominent American businesses since 1995.
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