eMarketer estimates that US retail e-commerce sales (excluding travel) will reach $131 billion this year. They also predict that the average amount spent online by Internet shoppers will increase from US$1,000 this year to US$1,295 by 2009. The sales leads will also increase accordingly. Which is why users tend to choose one website over another. These sales leads are an effective way through which you can determine how well any shopping website is doing and what are its future prospects.
Growing online shopping figures are attracting more and more retailers to the Internet. The promise of millions of shoppers looking for 24-hour shopping is simply too tempting. But what do you do once you’ve set up your online store? How do you attract visitors to your site and how do you encourage them to purchase your products and services?
Just like ‘brick and mortar’ retailers use marketing strategies and channels to reach their customers, the online world has its channels. Online marketing tactics have evolved beyond banner and pop-up ads. In this article, we’re introducing you to our world, online comparison shopping, and tell you how merchants are already taking advantage of the millions of primed shoppers that visit product-specific search engines, called comparison shopping sites.
Let’s start at the beginning. What are the comparison shopping sites? On the Internet, a comparison shopping site helps individuals search for specific products and list prices available from retailers that sell online. The majority of comparison shopping sites do not sell products themselves, but source prices from retailers from whom users can buy. For example at HealthPricer.com, shoppers can search among 300,000 health products from 100 health merchants. A search for Acuvue Advance contact lenses displays the product from 29 competing online merchants.
‘Location, location, location’ in the ‘brick and mortar’ world equates to eyeballs, eyeballs, eyeballs on the Internet. However, walk-by traffic, or wandering eyes, don’t sell products. Comparison shopping sites, by their very nature of appealing to shoppers, bring relevant eyeballs to merchants that display their products within the site.
How do comparison shopping sites work and why should a merchant be interested in partnering with such a site? Let’s deal with the initial part of the question first. Comparison shopping engines break into two groups – first generation and second generation. First-generation comparison shopping companies gain product information from data feeds, provided by companies that specialize in bundling product information from several merchants. Engaging in a Pay Per Click (PPC) model, the first generation comparison shopping sites and the merchants make money when a shopper clicks on a specific product on the comparison shopping site and is led to the merchant to buy the product. The biggest criticism of this model is that merchants will only place products that sell well on the comparison shopping site and they won’t represent their entire inventory for shoppers to view. Examples of first-generation comparison shopping sites are shopzilla.com; shopping.com and pricegrabber.com.
Second generation comparison shopping sites crawl the Internet and grab entire inventories of products direct from the merchant sites. Their business model is geared towards Pay Per Action (PPA), meaning every time a shopper referred from the site to an online merchant buys a product, the comparison shopping company gets paid a percentage. This model encourages merchants to display their entire inventory of products as they will not lose money in providing a wide range of products to consumers to view on the comparison shopping site. Examples of second-generation comparison shopping sites are become.com, healthpricer.com, thefind.com, and mytriggers.com.
Further, there are vertical comparison shopping sites that focus on specific product categories. Best known among those are CNet, that focuses on electronic products, and Expedia, which focuses on travel, but there is a growing array of other category sites, such as HealthPricer.com, that focuses on health products, and gifts.com, that obviously focuses on gift products.
So, why do online merchants partner with comparison shopping sites? Most important, comparison shopping sites attract ‘traffic’, or visitors, that are highly motivated to shop for specific products online. Comparison shopping sites are visited by millions of people every month, so merchants view comparison shopping sites as a considerable marketing channel.
As a business, comparison shopping companies make their revenues in one of two ways: Pay Per Click (PPC) or Pay Per Action (PPA). As such, it is in their best interest to be as visible as possible on the Internet. These companies engage in and invest significant resources to, sophisticated online ranking tactics, such as Search Engine Optimization.
Reputable comparison shopping sites gain loyal customers and in effect bring multiple orders for products to merchants. Many comparison shopping sites realize this and work at building a community for shoppers to share their insights on the merchants available via the site. Most comparison shopping sites allow customers to rate the merchants to help other shoppers choose those that provide the best shopping experience. Merchants, in turn, realize the potential of brand exposure coupled with customer feedback. They see how they perform compared to industry peers and can, in turn, improve on features that aren’t well-received by shoppers.
Given these benefits, more and more merchants venture into partnerships with comparison shopping sites. There are many comparison shopping sites to choose from, both in terms of categories as well as business models. Many merchants settle on partnerships with general comparison shopping engines, but if you are a specific online merchant and there is a comparison shopping site available for your category, you may want to consider partnering with a vertical comparison shopping company. Further, as mentioned, first-generation and second-generation shopping engines engage in PPC and PPA business models respectively. The effect on the merchant is a dedicated marketing budget and planning for products to display versus a post-sales expense. The choice is yours.